Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ¨    No  x

Indicate by a 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 reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in PART III of this Form 10-K, or any amendment to this Form 10-K.x

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Exchange Act Rule 12b-2). (Check one):

Indicate by a check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sale price of the Common Stock on June 30, 20072008 as reported on the NASDAQ Global Select Market, was approximately $1,590,000,000.$3,780,000,000. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of the Registrant’s Common Stock, par value $.01 per share, outstanding as of February 22, 200820, 2009 was 78,336,59489,441,607 shares.

ANSYS, Inc.

ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 20072008

Table of Contents

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant’s 20082009 Annual Meeting of Stockholders are incorporated by reference into Part III.

Important Factors Regarding Future Results

Information provided by ANSYS, Inc. (hereafter the “Company” or “ANSYS”), in this Annual Report on Form 10-K, may contain forward-looking statements concerning such matters as projected financial performance, market and industry segment growth, product development and commercialization, acquisitions or other aspects of future operations. Such statements, made pursuant to the safe harbor established by the securities laws, are based on the assumptions and expectations of the Company’s management at the time such statements are made. The Company cautions investors that its performance (and, therefore, any forward-looking statement) is subject to risks and uncertainties. Various important factors including, but not limited to, those discussed in Item 1A “Risk Factors”, may cause the Company’s future results to differ materially from those projected in any forward-looking statement. All information presented is as of December 31, 2007,2008, unless otherwise indicated.

PART I

ANSYS develops and globally markets engineering simulation software and services widely used by engineers and designers across a broad spectrum of industries, including aerospace, automotive, manufacturing, electronics, biomedical, energy and defense. Headquartered at Southpointe in Canonsburg, Pennsylvania, the Company and its subsidiaries employ approximately 1,4001,750 people as of December 31, 20072008 and focus on the development of open and flexible solutions that enable users to analyze designs directly on the desktop, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing and validation. The Company distributes its ANSYS^® suite of simulation technologies including ANSYS Workbench™, ANSYS CFX^®, ANSYS ICEM CFD™, ANSYS AUTODYN^®, and ANSYS FLUENT^® products, through a global network of resellers and distributors (collectively, channel partnerspartners) and direct sales offices in strategic, global locations. It is the Company’s intention to continue to maintain this mixed sales and distribution model.

TheAs a result of the July 31, 2008 acquisition of Ansoft Corporation (“Ansoft”), the Company operates as one segment, as defined byhas reviewed the criteria outlined in Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“Statement No. 131”).” As defined by paragraphs 10-15 of Statement No. 131, the Company operates as two segments. However, the Company determined that its two operating segments may be aggregated under the criteria provided in paragraph 17 of Statement No. 131. Given the integrated approach to the multi-discipline problem-solving needs of the Company’s customers, a single sale of software may contain components from multiple product areas and include combined technologies. The chief operating decision maker reviews operating results onAs a consolidated basis and thereresult, it is no means by whichimpracticable for the Company canto provide accurate historical or current reporting among its various product-line segmentations.product-lines.

The Company’s product lines are used to produce solutions in the following primary areas:

ANSYS Multiphysics™Multiphysics^™ Solutions

ANSYS Multiphysics solutions provide advanced coupled physics technology, combining structural, thermal, computational fluid dynamics (“CFD”), acoustic and electromagnetic simulation capabilities in a single software product. With the ANSYS Multiphysics solutions, users receive the core physics of the entire ANSYS simulation suite in one package. As an example, fluid structure interaction (“FSI”) solutions provide a flexible and advanced coupled structural–fluid physics analysis tool. Fluid-structure interaction (“FSI”)FSI is required for many industry applications such as biomedical (e.g. elastic artery modeling for stent design), and aerofoil flutter and civil engineering (e.g. wind loading of structures). Other multiphysics solutions include applications involve everything fromfor rotating machines (motors and alternators), sensors and actuators, power generators and transformer systems, and micro electro mechanical systems (“MEMS”).systems. Advanced multiphysics analysis uses the ANSYS Multi-field solver for time transient or steady state analysis with moving/deforming geometry.

ANSYS Mechanical™ Solutions

ANSYS Mechanical solutions offer simulation tools for product design and optimization that increase productivity, minimize physical prototyping and help deliver better and innovative products in less time. These solutions are used by engineers to tackle real world analysis problems and make product development less costly and more reliable. ANSYS Mechanical solutions offer analysis tools from concept simulation to advanced analysis, and simulation capabilities from linear to nonlinear coupled physics analysis.

ANSYS Fluid Dynamics Solutions

Computational fluid dynamics has become an integral part of the engineering design and analysis environment of many companies that desire the ability to predict the performance of new designs or processes before they are ever manufactured or implemented. CFD solutions from ANSYS include ANSYS CFX^® and ANSYS FLUENT software.^® software, and several industry-specific software solutions. Fluid dynamics is used in industries including aerospace, automotive, chemical processing, power generation, heating, ventilation, air conditioning, biomedical, oil and gas, marine and many others. From ventilation comfort in large buildings to the tiniest scale in micro-pumps and nanotechnology, a wide range of problems can be addressed with the diverse nature of fluid dynamics. Expertise in assisting customers to increase performance through simulation-drivensimulation driven design for pumps, fans, turbines, compressors and other rotating machinery has been incorporated in ANSYS CFX and ANSYS FLUENTfluid dynamics software. Variations for combustion, reacting flows and radiation, among others, help provide the insight into equipment and processes required to increase production, improve longevity and decrease waste.

ANSYS Explicit Dynamics Solutions

Simulations within ANSYS Explicit Dynamics solutions involve extremely short time durations, high deformations, large strains, and fracture or complete material failure. ANSYS Explicit Dynamics solutions are addressed by ANSYS AUTODYN^® and ANSYS LS-DYNA^®. Applications of explicit dynamics using ANSYS AUTODYN include defense, homeland security, space (hypervelocity impact) and other fast transient FSI. Applications for ANSYS LS-DYNA include metal forming, drop testing and other consumer product testing.

ANSYS Electronics and Electromagnetics Solutions

Ansoft’s high-performance radio frequency (“RF”) and microwave solution serves a prime segment of the high-performance electronics market and includes full-system verification, multi-chip simulation and package interconnect parasitic extraction, ensuring successful development of next-generation RF & microwave designs. These applications include the design of high-frequency components and circuits found in the transmitter and receiver portions of communication systems, radar systems, satellites and cellular telephones. Ansoft’s signal and power integrity solutions allow engineers to solve GHz-speed and power integrity design challenges. Engineers apply full-wave electromagnetic field simulation to precisely analyze power nets and planes using layout geometry. Ansoft products providing these solutions include HFSS™, Nexxim^® and SIwave™, among others. The ANSYS ICE product line enables the electronics design engineer to create and assess the performance characteristics of alternative approaches to ensure that high density packages are thermally and structurally viable. For electromagnetics, ANSYS Emag solutions address the analysis needs of electromechanical device applications with an emphasis on motors.

ANSYS Design for Six SigmaElectromechanical Systems Solutions

Design for Six Sigma (“DFSS”) is an analysis techniqueElectromechanical systems are used to determine the extent to which uncertainties in the automotive, aerospace and industrial automation industries and are created by integrating mechanical, electronics and control technology to create synergistic physical systems. The Company’s electromechanical design solutions capture the interactions between electromechanical components, electronic circuits and control logic. This multi-domain approach to design captures the underlying physics that govern all electrical behavior allowing engineers to accurately model, affectsimulate and validate the results of an analysis. Based on a probabilistic characterization, DFSS enables users to quantify the quality of their product, addressing issues such as minimizing warranty costscomponent, circuit and quantifying the reliability of the product.system level performance required for electromechanical system design. Ansoft products providing these solutions include Maxwell^®, Simplorer^® and PExprt™, among others.

ANSYS Meshing Solutions

Meshing is an integral part of the computer-aided engineering analysis process. The mesh influences the accuracy, convergence and speed of the solution. From automatic to highly crafted meshing, ANSYS ICEM CFD providesmeshing solutions provide powerful pre- and post-processing tools for mesh generation from any geometry source. In addition, ANSYS DesignModeler™ provides an integrated set of geometry modeling tools that are tailored for computer-aided engineering.

ANSYS Explicit DynamicsEngineering Knowledge Manager™ Solutions

ANSYS Explicit Dynamics solutions are addressed by ANSYS AUTODYNEngineering Knowledge Manager is a simulation process and ANSYS LS-DYNA. Simulations within these solutions involve extremely short time durations, high deformations, large strains,data management software system that allows engineers and fracture or complete material failure. Applicationsengineering teams to effectively manage data and processes created through their design, simulation, and analysis activities. It includes features such as object lifecycle management, configuration management and collaboration capabilities that provide effective management of explicit dynamics using ANSYS AUTODYN include defense, homeland security, space (hypervelocity impact)file transfers and other fast transient fluid-structure interactions. Applications for ANSYS LS-DYNA include metal forming, drop testing and other consumer product testing.execution of simulation jobs on remote systems.

ANSYS HPC Solutions

In today’s complex analysis world, solution times can become an obstacle when simulating complete fields, transient events, entire structural assemblies or multiple physics. High-performance computing (“HPC”) refers to the use of high-speed processors and related technologies to solve computationally intensive problems. The increasing availability and affordability of HPC systems is enabling important trends in engineering simulation, including larger, more complete simulation models that include greater geometric detail and more realistic treatment of physical phenomena. HPC systems, equipped with multicore processors, large memory and high-speed input/output, make these higher fidelity simulations practical. A second important trend is toward more simulations that enable engineers to consider multiple design ideas, conduct parametric studies and even perform automated design optimization. HPC systems provide the throughput required for completing multiple simulations simultaneously, thus making Simulation Driven Product Development a form of parallel processing that dramatically reduces solution times, making simulation driven product development a reality, even for the most complex analyses. Whether it is computational fluid dynamics, explicit dynamics or nonlinear structural analysis, ANSYS builds upon its world leading solver technologies by providing state-of-the-art parallel solutions.

ANSYS Professional Services

The Company provides consulting, implementation and training services through both its services organization and through its network of independent channel partners. This broad range of professional services is intended to aid customers in the adoption of simulation technology and the evolution of engineering processes.

BUSINESS ACQUISITIONS

On May 1, 2006, ANSYS completed its acquisition of Fluent Inc. (“Fluent”), a global provider of CFD-based computer-aided engineering software and services. Under the terms of the merger agreement, ANSYS issued 11,999,896 shares of its common stock, valued at approximately $274 million based on the average closing market price on the two days preceding and the two days following the announcement of the acquisition (February 16, 2006), and paid approximately $315 million in cash to acquire Fluent.cash. The total purchase price of approximately $598 million includes approximately $9 million in transaction fees. The Company used a combination of existing cash and $198 million from committed bank financing to fund the transaction. In addition to the $9 million in transaction-related costs, the Company incurred financing costs of $1.9 million related to the long-term debt utilized to fund the acquisition.

On July 31, 2008, ANSYS completed its acquisition of Ansoft, a global provider of electronic design automation (“EDA”) software. Under the terms of the merger agreement, Ansoft stockholders received $16.25 in cash and 0.431882 shares of ANSYS common stock for each outstanding Ansoft share held on July 31, 2008. ANSYS issued an aggregate of 12.24 million shares of its common stock, including 1.95 million shares pursuant to assumed stock options, valued at approximately $432.6 million based on the average closing market price on the two days preceding and the two days following the announcement of the acquisition, and paid approximately

$387.3 million in cash. The total purchase price of approximately $823.9 million includes approximately $4.0 million in transaction fees. The Company used a combination of existing cash and proceeds from a $355.0 million unsecured senior term loan credit facility to fund the transaction. In addition to the $4.0 million in transaction-related costs, the Company incurred financing costs of approximately $4.6 million related to the credit facility.

PRODUCT DEVELOPMENT

The Company makes significant investments in research and development and emphasizes accelerated new integrated product releases. The Company’s product development strategy centers on ongoing development and innovation of new technologies to increase productivity and to provide engineering simulation solutions that customers can integrate into enterprise-wide product lifecycle management systems. The Company’s product development efforts focus on extensions of the full product line with new functional modules, further integration with computer-aided design (“CAD”) and product lifecycle management (“PLM”) products, and the development of new products. The Company’s products run on the most widely used engineering computing platforms and operating systems, including Windows, Linux and most UNIX workstations.

During 2007,2008, the Company completed the following major product development activities and releases (in chronological order):

The Company’s total research and development expenses were $71.6 million, $56.5 million and $49.4 million in 2008, 2007 and $30.7 million in 2007, 2006, and 2005, respectively, or 14.7%15.0%, 18.7%14.7% and 19.4%18.7% of total revenue, respectively. As a percentage of revenue, research and development expenses declined during the year ended December 31, 2007 as compared to 2006. This decline can primarily be attributed to two items. The first is that research and development expenditures as a percentage of revenue have historically been lower for the Fluent business than they have for the ANSYS business. Because the 2007 period contains more Fluent operational activity than the 2006 period, there is a reduction in the 2007 research and development expenditures as a percentage of revenue. Additionally, there were certain development activities that existed in both the former ANSYS and Fluent development organizations that were duplicative and through the integration efforts have been rationalized in line with the future product direction. During this rationalization process, certain personnel that formerly existed in the research and development function were reassigned to other functions to maximize both efficiency and the related contribution to the strategy of the combined organization. As of December 31, 2007,2008, the Company’s product development staff consisted of approximately 410520 full time employees, most of whom hold advanced degrees and have industry experience in engineering, mathematics, computer science or related disciplines. The Company has traditionally invested significant resources in research and development activities and intends to continue to make significant investments in this area, particularly as it relates to ongoing integration and evolution of its portfolio of software technologies.

PRODUCT QUALITY

The Company’s employees generally perform product development tasks according to predefined quality plans, procedures and work instructions. Certain technical support tasks are also subject to a quality process. These plans define for each project the methods to be used, the responsibilities of project participants and the quality objectives to be met. The majority of software products are developed under a quality system which is certified to the ISO 9001:2000 standard. The Company establishes quality plans for its products and services and subjects product designs to multiple levels of testing and verification in accordance with processes established under the Company’s quality system.

SALES AND MARKETING

The Company distributes and supports its products through a global network of independent channel partners, as well as through its own direct sales offices. This network provides the Company with a cost-effective, highly specialized channel of distribution and technical support. Approximately 30% of the Company’s total revenue in 20072008 was derived through the indirect sales channel.

The channel partners sell ANSYS products to new customers, expand installations within the existing customer base, offer training and consulting services and provide the first line of ANSYS technical support. The Company’s channel partner certification process helps to ensure that each channel partner has the ongoing capacity to adequately represent the Company’s expanding product lines and to provide an acceptable level of training, consultation and customer support.

The Company also has a direct sales management organization in place to develop an enterprise-wide, focused sales approach and to implement a worldwide major account strategy. The sales management organization also functions as a focal point for requests to ANSYS from the independent channel partners and provides additional support in strategic locations through the presence of direct sales offices. A Vice President of Worldwide Sales and Support heads the Company’s sales management organization.

During 2007,2008, the Company continued to invest in its existing domestic and international strategic sales offices. In total, the Company’s direct sales offices employ approximately 300470 people who are responsible for the sales, marketing initiatives and administrative activities in those geographic areas designed to support the Company’s overall revenue growth and expansion strategies.

During 2007,2008, the Company also maintained its significant independent channel partner network, including its reseller network. The reseller network complements the larger ANSYS channel partners by establishing a broader user base for the Company’s products and services. The resellers are required to have appropriately trained marketing, sales and technical personnel.

The Company’s products are utilized by organizations ranging in size from small consulting firms to the world’s largest industrial companies. No single customer accounted for more than 10% of the Company’s revenue in 2007.2008.

Information with respect to foreign and domestic revenue may be found in Note 17 to the consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K and in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report on Form 10-K.

STRATEGIC ALLIANCES AND MARKETING RELATIONSHIPS

The Company has established and continues to pursue strategic alliances with advanced technology suppliers, and marketing relationships with hardware vendors, specialized application developers, and CADcomputer-aided design (“CAD”) and PLM providers. The Company believes that these relationships allowfacilitate accelerated incorporation of advanced technology into the Company’s products, provide access to new customers, expand the Company’s sales channels, develop specialized product applications and provide direct integration with leading CAD, electronic design automation (“EDA”), product data management (“PDM”) and PLM systems.

The Company has technical and marketing relationships with leading CAD vendors, such as Autodesk, Dassault Systemes,Systèmes, Parametric Technology Corporation, Solid Edge, Solid Works, and UGS Corporation,Siemens Product Lifecycle Management Software Inc., to provide direct links between products. These links facilitate the transfer of electronic data models between the CAD systems and ANSYS products. In addition, the Company has an agreement with Dassault Systèmes under which ANSYS fluid flow modeling technology is embedded in the CATIA V5 product lifecycle management environment. This fully integrated product, FLUENT for CATIA V5, enables model building, computation, post-processing and data management within the analysis infrastructure of CATIA V5. The Company also has an agreement with Autodesk under which Autodesk licenses ANSYS part-level stress and resonant frequency simulation technologies and packages them as an integral part of the Autodesk Inventor Professional product.

Similarly, the Company maintains marketing and software development relationships with leading software companies in the EDA market, including Cadence, Synopsys and Mentor Graphics. These relationships support transfer of data between electronics design and layout packages and the ANSYS and Ansoft electronics simulation portfolio.

The Company has established relationships with leading suppliers of computer hardware, including Intel, AMD, Microsoft, Hewlett-Packard, SGI, Sun Microsystems, IBM, Dell, Intel, Fujitsu AmericaCray, Panasas, QLogic, Mellanox and various graphics card vendors.other leading regional channel partner and system integrators. These relationships typically provide the Company with joint marketing opportunities such as advertising, eventspublic relations, editorial coverage and Internet links with the hardware partner’s home page.customer events. In addition, these alliances provide the Company receives reduced equipment costswith early access and software porting support to ensuretechnical collaboration on new processors and related computing technologies, ensuring that the Company’s software products are certified to run effectively on variousthe most current hardware platforms. Key 2008 milestones include support for updated multicore processors from Intel and AMD, adoption of Intel software development tools for code profiling and optimization and porting to the Microsoft HPC Server 2008 operating system.

The Company’s Enhanced Solution Partner Program actively encourages specialized developers of niche software solutions to use ANSYS technology as a development platform for their applications. In most cases, the sale of the Enhanced Solution Partners’enhanced solution partners’ products is accompanied by the sale of an ANSYS product. In the past year, the Company collaborated with material database companies Matereality, Matwebinitiated more than 25 new enhanced solution partnerships, spanning a wide range of technologies, including electronics, turbomachinery, CAD and GRANTA MI to create integrated ANSYS Workbench solutions, responding to user requests for easier access to material property data. These solutions improved the accuracy of simulations that ANSYS users can perform by expanding and simplifying access to relevant material property data from each of the partner applications. The Company also announced ANSYS 11.0 and ANSYS FLUENT 6.3 support for Microsoft Windows Compute Cluster Server 2003, enabling users to decrease the time required for simulations and increase accuracy of resultsacoustics. Partnerships focusing on the Microsoft Windows platform. The Company also worked withintroduction of simulation technology to the Workbench environment remained a priority in 2008. Of particular significance was the introduction by SpaceClaim Corporation of a new, fully associative interface between the 3D direct modeling

Intelpackage, SpaceClaim Professional, and Advanced Micro Devices on their introductionsWorkbench. Other examples include the development of dual-corea new simulation capability for the turbomachinery sector, working with PCA Engineers Limited, and quad-core technology, and expanded support for high speed interconnect technologiesthe development of a new fatigue simulation capability through partnershipscollaboration with Intel and HP. nCode International.

The Company has a software license agreement with Livermore Software Technology Corporation (“LSTC”) under which LSTC has provided LS-DYNA software for explicit dynamics solutions used in applications such as crash test simulations in the automotive and other industries. Under this arrangement, LSTC assists in the integration of the LS-DYNA software with the Company’s pre- and post-processing capabilities and provides updates and problem resolution in return for a share of revenue from sales of the ANSYS/LS-DYNA combined product.

The Company has an agreement with Autodesk under which Autodesk licenses ANSYS part-level stress and resonant frequency simulation technologies and packages them as an integral part of the Autodesk Inventor Professional product.

The Company has an agreement with Dassault Systemes whereby FLUENT for CATIA V5 brings fluid flow and heat transfer analysis into the CATIA V5 product lifecycle management environment. It fully integrates Fluent’s rapid flow modeling technology into the CATIA PLM process. Because FLUENT for CATIA V5 is fully integrated into the analysis infrastructure of CATIA V5, flow volume extraction, simulation, post-processing, data and knowledge management occur within the CATIA V5 system.

The Company has an agreement with Le Centre Technique des Industries Mecaniques (“CETIM”) of Senlis, France, under which CETIM licenses ANSYS Workbench and simulation technologies and packages them as an integral part of its current DesignSpace PE products and future releases.

COMPETITION

The Company believes that the principal factors affecting sales of its software include ease of use, breadth and depth of functionality, flexibility, quality, ease of integration with other software systems, file compatibility across computer platforms, range of supported computer platforms, performance, price and cost of ownership, customer service and support, company reputation and financial viability, and effectiveness of sales and marketing efforts.

The Company continues to experience intense competition across all markets for its products and services. Some of the Company’s current and possible future competitors have greater financial, technical, marketing and other resources than the Company, and some have well established relationships with current and potential customers of the Company. These competitive pressures may result in decreased sales volumes, price reductions and/or increased operating costs, and could result in lower revenues, margins and net income.

PROPRIETARY RIGHTS AND LICENSES

The Company regards its software as proprietary and relies on a combination of trade secret, copyright, patent and trademark laws, license agreements, nondisclosure and other contractual provisions, and technical measures to protect its proprietary rights in its products. The Company distributes its software products under software license agreements that grant customers nonexclusive licenses for the use of the Company’s products, which are typically nontransferable. License agreements for the Company’s products are directly between the Company and end users. Use of the licensed software product is restricted to specified sites unless the customer obtains a multi-site license for its use of the software product. Software security measures are also employed to prevent unauthorized use of the Company’s software products and the licensed software is subject to terms and conditions prohibiting unauthorized reproduction of the software. Customers may purchase a perpetual license of the technology with the right to annually purchase ongoing maintenance, technical support and updates, or may lease the product on a fixed term basis for a fee that includes the license, maintenance, technical support and upgrades.

The Company licenses its software products utilizing a combination of web-based and hardcopyhard copy license terms and forms. For certain software products, the Company primarily relies on “click-wrapped” licenses. The enforceability of these types of agreements under the laws of some jurisdictions is uncertain.

The Company also seeks to protect the source code of its software as a trade secret and as unpublished copyrighted work. The Company has obtained federal trademark registration protection for ANSYS, ANSYS Workbench, AUTODYN, CFX, FLUENT, DesignSpace, AUTODYN,Maxwell, and other marks in the U.S. and in foreign countries. Additionally, the Company was awarded a patent by the U.S. Patent and Trademark Office for its Web-based reporting technology.

Employees of the Company have signed agreements under which they have agreed not to disclose trade secrets or confidential information and, where legally permitted, that restrict engagement in or connection with any business that is competitive with the Company anywhere in the world while employed by the Company (and,

in some cases, for specified periods thereafter), and that any products or technology created by them during their term of employment are the property of the Company. In addition, the Company requires all channel partners and resellers to enter into agreements not to disclose the Company’s trade secrets and other proprietary information.

Despite these precautions, there can be no assurance that misappropriation of the Company’s technology and proprietary information will not occur. Further, there can be no assurance that copyright, trademark, patent and trade secret protection will be available for the Company’s products in certain countries, or that restrictions on the ability of employees and channel partners to engage in activities competitive with the Company will be enforceable.

The software development industry is characterized by rapid technological change. Therefore, the Company believes that factors such as the technological and creative skills of its personnel, new product developments, frequent product enhancements, name recognition and reliable product maintenance are also important to establishing and maintaining technology leadership in addition to the various legal protections of its technology that may be available.

The Company does not believe that any of its products infringe upon the proprietary rights of third parties. There can be no assurance, however, that third parties will not claim such infringement by the Company or its licensors or licensees with respect to current or future products. The Company expects that software suppliers will increasingly be subject to the risk of such claims as the number of products and suppliers continues to expand and the functionality of products continues to increase. Any such claims, with or without merit, could be time consuming, result in costly litigation, cause product shipment delays or require the Company to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to the Company.

SEASONAL VARIATIONS

The Company’s business has experienced seasonality, including quarterly reductions in software sales resulting from the slowdown during the summer months, particularly in Europe, as well as from the seasonal purchasing and budgeting patterns of the Company’s global customers.

BACKLOG

The Company generally ships its products within 30 days after acceptance of an order and execution of a software license agreement. Accordingly, the Company does not believe that its backlog at any particular point in time is indicative of future sales levels.

EMPLOYEES

As of December 31, 2007,2008, the Company and its subsidiaries had approximately 1,4001,750 full-time employees. At that date, there were also contract personnel and co-op students providing ongoing development services and technical support. The Company believes that its relationship with its employees is good.

AVAILABLE INFORMATION

The Company’s website iswww.ansys.com. The Company makes available on its website, free of charge, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, reports filed pursuant to Section 16 and amendments to those reports as soon as reasonably practicable after such materials are electronically filed or furnished to the Securities and Exchange Commission. In addition, the Company has posted the charters for its Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, as well as the Company’s Code of Business Conduct and Ethics, Standard Business Practices and Corporate Governance Guidelines on its website. Information posted on the Company’s website is not incorporated by reference in this Annual Report on Form 10-K.

ITEM 1A:

RISK FACTORS

Information provided by the Company or its spokespersons, including information contained in this Annual Report on Form 10-K, may from time to time contain forward-looking statements concerning projected financial performance, market and industry sector growth, product development and commercialization or other aspects of future operations. Such statements will be based on the assumptions and expectations of the Company’s management at the time such statements are made. The Company cautions investors that its performance (and, therefore, any forward-looking statement) is subject to risks and uncertainties. Various important factors including, but not limited to, the following may cause the Company’s future results to differ materially from those projected in any forward-looking statement.

Potential FluctuationsAdverse Conditions in Operating Results.the Global Economy and Disruption in Financial Markets.As widely reported, financial markets in the United States, Europe and Asia have been experiencing extreme disruption in recent months, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. While currently these conditions have not impaired the Company’s ability to access credit markets and finance operations, there can be no assurance that there will not be a further deterioration in financial markets and confidence in major economies. The Company may experience significant fluctuationsis impacted by these economic developments, both domestically and globally, in future quarterly operating results. Fluctuations may be caused by many factors including, but not limited to,that the timingcurrent tightening of new product releases or product enhancements by the Company or its competitors; the size and timing of individual orders, including a fluctuationcredit in the demand for andfinancial markets adversely affects the ability of its customers and suppliers to complete large contracts; software errors or other product quality problems; competitionobtain financing for significant purchases and pricing changes; customer order deferralsoperations, and could result in anticipation of new products or product enhancements; changesa decrease in demandorders for the Company’s products; changes in operating expenses; changes inproducts and services. These economic conditions may negatively impact the mixCompany as some of software license and maintenance and service revenue; personnel changes; and general economic conditions. A substantial portionits customers defer purchasing decisions, thereby lengthening the Company’s sales cycles. In addition, certain of the Company’s operating expenses is relatedcustomers’ budgets may be constrained and they may be unable to personnel, facilities and marketing programs.purchase our products at the same level. The level of personnel and related expenses cannot be adjusted quickly and is based, in significant part, onCompany’s customers’ ability to pay for the Company’s expectationproducts and services may also be impaired, which may lead to an increase in the Company’s allowance for future revenue.doubtful accounts and write-offs of accounts receivable. The Company does not typically experience significant order backlog. Further,is unable to predict the likely duration and severity of the current disruption in financial markets and adverse economic conditions in the U.S. and other countries. Should these economic conditions result in the Company has often recognized a substantial portion ofnot meeting its revenue in the last month of a quarter, with this revenue frequently concentrated in the last weeks or days of a quarter. During certain quarterly periods, the Company has been dependent upon receiving large orders of perpetual licenses involving the payment of a single up-front fee, and has shifted the business emphasis of its products to provide a collaborative solution togrowth objectives, the Company’s customers. This emphasis has increased the Company’s average order sizeoperating results and the related sales cycle time for the larger orders. This shift may have the effect of increasing the volatility of the Company’s revenue and profit from period to period. As a result, product revenue in any quarter is substantially dependent upon sales completed in the latter part of that quarter, and revenue for any future quarter is not predictable with any significant degree of accuracy.financial condition could be adversely affected.

Seasonal Variations.Decline in Customers’ Business. The Company’s business has experienced seasonality, including quarterly reductions in software sales resulting from the slowdown during the summer months throughout the world, particularly in Europe, as well as from the seasonal purchasing and budgeting patterns of the Company’s global customers.

Economic Slowdown in Certain Sectors.The Company’s sales are based significantly on end user demand for products in key industrial sectors. Many of these sectors periodically experience economic declines. These economic declines, which may be exacerbated by other economic factors, such asincluding the recent increase incurrent global energy prices.economic disruptions. These economic factors may adversely affect the Company’s business by extending sales cycles and reducing revenue. These economic factors may cause the Company’s customers to reduce the size of their workforce or cut back on operations which may lead to a reduction in license renewals or ongoing maintenance contracts with the Company. The Company’s customers may also request discounts or extended payment terms on new products or seek to extend payment terms on existing contracts, all of which may cause fluctuations in the Company’s future operating results. The Company may not be able to adjust its operating expenses to offset such fluctuations because a substantial portion of the Company’s operating expenses is related to personnel, facilities and marketing programs. The level of personnel and related expenses may not be able to be adjusted quickly enough and is based, in significant part, on the Company’s expectation for future revenue.

TheRisks Associated with International Activities. A majority of the Company’s business comes from outside the United States and the Company has customers that supply a wide spectrum of goods and services in virtually all of the world’s major economic regions. As the Company continues to expand its direct sales presence in international regions, the portion of its revenue, expenses, cash, accounts receivable and payment obligations denominated in foreign currencies continues to increase. The Company’s performancerevenues and operating results are adversely affected when the U.S. Dollar strengthens relative to other currencies and are positively affected when the U.S. Dollar weakens. As a result, changes in currency exchange rates from time to time may affect the Company’s financial position, results of operations and cash flows. In the event that there are economic declines in countries in which the Company conducts transactions, the resulting changes in currency exchange rates, may from time to time affect the Company’s financial position, results of operations and cash flows. The Company is materially

most impacted by general economic conditionsmovements in and among the British Pound, Euro, Japanese Yen, Canadian Dollar, Indian Rupee, Swedish Krona, Chinese Renminbi, Korean Won, Taiwan Dollar and the performanceU.S. Dollar. The Company seeks to reduce these risks primarily through its normal operating and treasury activities, but there can be no assurances it will be successful in reducing these risks.

In addition, the Company’s new subsidiary, Ansoft, derives a significant portion of its customers.total revenue from sales in Asia, and Ansoft accounts for approximately 20% of the Company’s total business. Prior to acquiring Ansoft, the Company had less exposure to Asia. If Asian economies, and the Company’s new Asia-based clients, experience downturns in performance, the results of operations of Ansoft may be adversely affected, which may have an adverse affect on the Company’s combined business, results of operation and cash flows. The acquisition has also significantly increased the Company’s management team forecasts macroeconomic trendsexposure to Asian currencies and developmentsexchange rates. Changes in currency exchange rates in Asian nations from which a significant portion of Ansoft’s revenue is derived may affect the Company’s financial position, results of operations and integrates them through long-range planning into budgets, researchcash flows.

Additional risks inherent in the Company’s international business activities include imposition of government controls, export license requirements, restrictions on the export of critical technology, products and development strategiesservices, political and economic instability, trade restrictions, changes in tariffs and taxes, difficulties in staffing and managing international operations, longer accounts receivable payment cycles and the burdens of complying with a wide variety of general management duties. When forecasting future economic trendsforeign laws and technological developments, management doesregulations. Effective patent, copyright, trademark and trade secret protection may not have a comparative advantage. Tobe available in every foreign country in which the extent that theCompany sells its products and services. The Company’s forecasts are in errorbusiness, financial position, results of operations and cash flows could be materially adversely affected by being overly optimistic or overly pessimistic about the performanceany of an economy or sector, the Company’s performance may be hindered because of a failure to properly match corporate strategy with economic conditions.

Terrorist attacks, other increased global hostilities and natural disasters have, at times, contributed to widespread uncertainty and speculation in the world financial markets. This uncertainty and speculation may result in economic contraction and a related suspension or delay of purchasing by the Company’s customers.these risks.

Stock Market and Stock Price Volatility. Market prices for securities of software companies have generally been volatile. In particular, the market price of the Company’s common stock has been, and may continue to be, subject to significant fluctuations as a result of factors affecting the Company, the software industry or the securities markets in general. Such factors include, but are not limited to, declines in trading price that may be triggered by the Company’s failure to meet the expectations of securities analysts and investors. In light of current economic conditions in the United States and abroad, the market for securities on the NASDAQ Stock Market has seen significant increases in price and volume volatility, in many cases unrelated or disproportionate to the operating performance of the affected companies. The price of the Company’s common stock has decreased approximately 32.7% from January 1, 2008 to December 31, 2008. The Company cannot provide assurance that in such circumstances the trading price of the Company’s common stock will recover or that it will not experience a further decline. Moreover, the trading price could be subject to additional fluctuations in response to quarter-to-quarter variations in the Company’s operating results, material announcements made by the Company or its competitors, conditions in the financial markets or the software industry generally or other events and factors, many of which are beyond the Company’s control.

Rapidly Changing Technology; New Products; Risk of Product Defects.The Company operates in an industry generally characterized by rapidly changing technology and frequent new product introductions that can render existing products obsolete or unmarketable. A major factor in the Company’s future success will be its ability to anticipate technological changes and to develop and introduce, in a timely manner, enhancements to its existing products, products acquired in acquisitions and new products to meet those changes.changes including in particular the upcoming release of ANSYS 12.0. If the Company is unable to introduce new products and to respond quickly to industry changes, its business, financial position, results of operations and cash flows could be materially adversely affected.

The introduction and marketing of new or enhanced products require the Company to manage the transition from existing products in order to minimize disruption in customer purchasing patterns. There can be no assurance that the Company will be successful in developing and marketing, on a timely basis, new products or product enhancements, that its new products will adequately address the changing needs of the marketplace or that it will successfully manage the transition from existing products. Software products as complex as those

offered by the Company may contain undetected errors or failures when first introduced or as new versions are released, and the likelihood of errors is increased as a result of the Company’s commitment to accelerating the frequency of its product releases. There can be no assurance that errors will not be found in any new or enhanced products after commencement of commercial shipments. AnyCertain of these problemsproducts require a higher level of sales and support expertise. The ability of the Company’s sales channel, particularly the indirect channel, to obtain this expertise and to sell the new product offerings effectively could have an adverse impact on the Company’s sales in future periods.

In particular, the Company intends to release ANSYS 12.0 software in 2009, and expects it to be a significant driver of the Company’s future revenue. There can be no assurance that the Company will be successful in marketing the ANSYS 12.0 software or that these products will be accepted by the marketplace. If the release of ANSYS 12.0 software is not as successful as management currently anticipates, if the product contains undetected errors or failures upon release, if the Company experiences delays in the release or if the Company experiences difficulties in providing sales and support expertise for the suite, the Company may result in theexperience a loss of or delay in customer acceptance, diversion of development resources, damage to the Company’s reputation or increased service and warranty costs, any of which could have a material, adverse effect on the Company’s business, financial position, results of operations and cash flows.

Sales of New Products. The Company continues to develop and introduce new software products. Certain of these products require a higher level of sales and support expertise. The ability of the Company’s sales channel, particularly the indirect channel, to obtain this expertise and to sell the new product offerings effectively could have an impact on the Company’s sales in future periods. Additionally, royalties and engineering service engagements associated with the new software products may result in the Company’s cost of sales increasing as a percentage of revenue in future periods.

Dependence on Channel Partners. The Company continues to distribute a meaningful portion of its products through its global network of independent, regional channel partners. The channel partners sell the Company’s software products to new and existing customers, expand installations within the existing customer base, offer consulting services and provide the first line of technical support. Consequently, in certain geographies, the Company is highly dependent upon the efforts of the channel partners. Difficulties in ongoing relationships with channel partners, such as failure to meet performance criteria or to promote the Company’s products as aggressively as the Company expects, and differences in the handling of customer relationships could adversely affect the Company’s performance. Additionally, the loss of any major channel partner for any reason, including a channel partner’s decision to sell competing products rather than the Company’s products, could have a material, adverse effect on the Company. Moreover, the Company’s future success will depend substantially on the ability and willingness of its channel partners to continue to dedicate the resources necessary to promote the Company’s portfolio of products and to support a larger installed base of the Company’s products. If the channel partners are unable or unwilling to do so, the Company may be unable to sustain revenue growth.

CurrentlyDuring times of significant fluctuations in world currencies, certain channel partners may have solvency issues to the Companyextent that effective hedge transactions are not employed or there is partially protected from exchange rate fluctuations amongnot sufficient working capital. In particular, if the U.S. Dollar andstrengthens relative to other currencies, as a result of its indirect third-party salescertain channel which generally payspartners who pay the Company in U.S. Dollars. The revenues and expenses associated withDollars may have trouble paying the Company on time or may have trouble distributing the Company’s international direct third-party sales channel are subjectproducts due to foreignthe impact of the currency exchange fluctuations and, as a result, the Company’s future financial resultsfluctuation on such channel partner’s cash flows. This may be impacted by fluctuations in exchange rates. Additionally, any future changes to the Company’s sales channel involving proportionally higher direct sales from international locations could result in additional exposure to the foreign currency exchange fluctuations. This exposure could adversely impact the Company’s financial positionability to distribute its products into certain regions and markets which may have an adverse affect on the Company’s results of operations in future periods.and cash flows.

Competition. The Company continues to experience intense competition across all markets for its products and services. Some of the Company’s current and possible future competitors have greater financial, technical, marketing and other resources than the Company, and some have well established relationships with current and potential customers of the Company. These competitive pressures may result in decreased sales volumes, price reductions and/or increased operating costs, and could result in lower revenues, margins and net income.

Dependence on Senior Management and Key Technical Personnel.The Company is highly dependentCompany’s success depends upon the ability and experiencecontinued services of itsthe Company’s senior executives, and its key technical employees and other management employees. Each of the Company’s executive officers, key technical personnel and other employees could terminate his or her relationship with the Company at any time. The loss of these employees could adversely affect the Company’s ability to conduct its operations.

Risks Associated with International Activities. A majorityany of the Company’s senior executives might significantly delay or prevent the achievement of our business comes from outsideobjectives and could materially harm our business

and customer relationships. In addition, because of the United States. Risks inherent in the Company’s international business activities include impositionhighly technical nature of government controls, export license requirements, restrictions on the export of critical technology, products and services, political and economic instability, trade restrictions, changes in tariffs and taxes, difficulties in staffing and managing international operations, longer accounts receivable payment cycles and the burdens of complying with a wide variety of foreign laws and regulations. Effective patent, copyright, trademark and trade secret protection may not be available in every foreign country in which the Company sells its products and services. The Company’s business, financial position, results of operations and cash flows could be materially adversely affected by any of these risks.

As the Company continues to expand its direct sales presence in international regions, the portion of its revenue, expenses, cash, accounts receivable and payment obligations denominated in foreign currencies continues to increase. As a result, changes in currency exchange rates from time to time may affect the Company’s financial position, results of operations and cash flows.

Additionally, countries in certain international regions have periodically experienced weaknesses in their currency, banking and equity markets. These weaknesses could adversely affect consumer demand for the Company’s products, the loss of any significant number of our existing engineering and ultimately the Company’s financial condition, results of operationsdevelopment personnel could have a material adverse effect on our business and cash flows.operating results.

As the Company has grown, it has become increasingly subject to the risks arising from adverse changes in domestic and global economic conditions. An economic slowdown, globally or regionally, could cause many companies to delay or reduce technology purchases, which could impact the Company’s visibility into the closing of new business, as opposed to its recurring business. A slowdown could also contribute to reductions in sales, longer sales cycles and increased price pressure. Each of these items could adversely affect the Company’s sales in future periods.

The Company has historically received significant tax benefits related to its export activities. In October 2004, the American Jobs Creation Act of 2004 was signed into law and included replacement legislation for existing export benefits. The phase-out of the existing export benefits associated with the legislation is summarized as follows:

Export Benefit Phase-out

In addition to repealing the export tax benefits, the American Jobs Creation Act of 2004 provides significant tax relief for domestic manufacturers. Effective for taxable years beginning after December 31, 2004, qualifying entities may deduct a certain percentage (as defined below) of the lesser of their qualified production activities income or their taxable income for a taxable year. The deduction, however, is limited to 50% of an employer’s W-2 wages for the tax year. Beginning in 2010, when the 9% deduction is fully phased in, corporations facing a marginal tax rate of 35% will be subject to an effective tax rate of 31.85% on qualifying income.

Manufacturing Income Deduction Phase-in

In 2007, export benefits were fully phased out. In 2006, export benefits reduced the Company’s effective tax rate by 4.5%. The loss in export benefits during 2007 was partially replaced with an increased benefit for domestic production activities. Any other prospective changes regarding tax benefits associated with the Company’s export sales or other federal and state tax planning vehicles may adversely impact the Company’s effective tax rate and decrease its net income in future periods.

Dependence on Proprietary Technology. The Company’s success is highly dependent upon its proprietary technology. The Company generally relies on contracts and the laws of copyright and trade secrets to protect its technology. The Company maintains a trade secrets program, enters into confidentiality agreements with its employees and distributors,channel partners, and limits access to and distribution of its software, documentation and other proprietary information. There can be no assurance that the steps taken by the Company to protect its proprietary technology will be adequate to prevent misappropriation of its technology by third parties, or that third parties will not be able to develop similar technology independently. Although the Company is not aware that any of its technology infringes upon the rights of third parties, there can be no assurance that other parties will not assert technology infringement claims against the Company or that, if asserted, such claims will not prevail.

Reliance on Perpetual Licenses. Although the Company has historically maintained stable recurring revenue from the sale of software lease licenses, software maintenance subscriptions and third party royalties, it also has relied on sales of perpetual licenses that involve payment of a single, up-front fee and that are more typical in the computer software industry. Additionally, the acquisition of Ansoft has resulted in an increase in the Company’s perpetual license revenue as compared to its total revenue. While revenue generated from software lease licenses, software maintenance subscriptions and third party royalties currently represents a portion of the Company’s revenue, to the extent that perpetual license revenue continues to represent a significant percentage of total revenue, the Company’s revenue in any period will depend increasingly on sales completed during that period.

Risks Associated with Significant Sales to Existing Customers. A significant portion of the Company’s sales includes follow-on sales to existing customers that invest in the Company’s broad suite of engineering simulation software and services. If a significant number of current customers were to become dissatisfied with the Company’s products and services, or choose to license or utilize competitive offerings, the Company’s follow-on sales, and recurring lease and maintenance revenues, could be materially, adversely impacted, resulting in lower revenue, operating margins, net income and cash flows.

Risks Associated with Acquisitions. TheHistorically, the Company has consummated and may continue to consummate certain acquisitions including the 2006 acquisition of Fluent, in order to support the Company’s long-term strategic direction, expand its customer base, provide greater scale to increase its investments in research and development to accelerate innovation, provide increased capabilities to its existing products and supply new products and services, expand its customer base or enhance its distribution channels.channels, including the 2006 acquisition of Fluent and the 2008 acquisition of Ansoft. In the future, the Company may not be able to identify suitable acquisition candidates or, if suitable candidates are identified, the Company may not be able to complete the business combination on commercially acceptable terms. Business acquisitionsThe process of exploring and pursuing acquisition opportunities may result in devotion of significant management and financial resources.

Even if the Company is able to consummate acquisitions that it believes will be successful, such transactions present many risks. Significant risks to such acquisitions include, among others: failing to achieve anticipated synergies and revenue increases; difficulty incorporating and integrating the acquired technologies or products with the Company’s existing product lines; coordinating, establishing or expanding sales, distribution and marketing functions, as necessary; disruption of the Company’s ongoing business and diversion of management’s attention to transition or integration issues; unanticipated and unknown liabilities; the loss of key employees, customers, partners and channel partners of the Company or of the acquired company; and difficulties implementing and maintaining sufficient controls, policies and procedures over the systems, products and processes of the acquired company. If we do not achieve the anticipated benefits of our acquisitions as rapidly or to the extent anticipated by our management and financial or industry analysts, or if others do not perceive the same benefits of the acquisition as we do, there could be a material, adverse effect on the Company’s business, financial position, results of operations or cash flows.

In addition, for companies acquired, limited experience will exist for several quarters following the acquisition relating to how the acquired company’s sales pipelines will convert into sales or revenues and the conversion rate post-acquisition may be quite different than the historical conversion rate. Because a substantial portion of the Company’s software license revenue is completed in the latter part of a quarter, and its cost structure is largely fixed in the short term, revenue shortfalls may have a negative impact on the Company’s profitability. A delay in a small number of large new software license transactions could cause the Company’s quarterly software license revenues to fall significantly short of its predictions.

Acquisitions present many risks, and

Risks Associated with the Ansoft Acquisition.On July 31, 2008, the Company may notcompleted its acquisition of Ansoft for a total purchase price of approximately $823.9 million. The Company used a combination of existing cash and proceeds from a $355.0 million unsecured senior term loan credit facility to fund the transaction. While the acquisition of Ansoft is expected to increase operational efficiency, lower design and engineering costs for customers, and accelerate development and delivery of new innovative products to the marketplace, the Company will need to meet significant challenges to realize the financialexpected benefits and strategic goals that were contemplated at the time of any transaction. An acquisition program is an important elementsynergies of the Company’s corporate strategy. The difficulties of integrating companies and acquired assetsacquisition. These significant challenges include, among others:

The Company expects to continue to acquire companies, products, services and technologies. Risks thatoperations and distraction of their respective management teams. Moreover, there may be encounteredsignificant challenges in acquisitions include:

These factors could have a material,an adverse effect on the Company’s business, financial position results of operations or cash flows, particularly in the case of a larger acquisition or number of acquisitions.and reputation.

Disruption of Operations or Infrastructure Failures. A significant portion of the Company’s software development personnel, source code and computer equipment is located at operating facilities in the United States, Canada, India and throughout Europe. The occurrence of a natural disaster or other unforeseen catastrophe at any of these facilities could cause interruptions in the Company’s operations, services and product development activities. Additionally, if the Company experiences problems that impair its business infrastructure, such as a computer virus, telephone system failure or an intentional disruption of its information technology systems by a third party, these interruptions could have a material, adverse effect on the Company’s business, financial position, results of operations, cash flows and the ability to meet financial reporting timelines. Further, because the Company’s sales are not generally linear during any quarterly period, the potential adverse effects resulting from any of the events described above or any other disruption of the Company’s business could be accentuated if it occurs close to the end of a fiscal quarter.

Indebtedness Incurred in Connection with the Acquisition of Fluent Inc.Ansoft. In partial consideration for the Company’s 2008 acquisition of Fluent,Ansoft, the Company incurred long-term debt from committed bank financing of approximately $198$355.0 million. As of December 31, 2007,2008, remaining outstanding borrowings totaled $59.5$279.0 million. This indebtedness is material in relation to prior levels of indebtedness as the Company did not have any prior outstanding debt. The incurrence of indebtedness, among other things, could:

business. If the Company incurs new indebtedness in the future, the related risks that it now faces could intensify. Whether the Company is able to make required payments on its outstanding indebtedness and to satisfy any other future debt obligations will depend on its future operating performance and its ability to obtain additional debt or equity financing.

Periodic Reorganization of Sales Force. The Company relies heavily on its direct sales force. From time to time, the Company reorganizes and makes adjustments to its sales force in response to such factors as management changes, performance issues, market opportunities and other considerations. These changes may result in a temporary lack of sales production and may adversely impact revenue in future quarters. There can be no assurance that the Company will not restructure its sales force in future periods or that the transition issues associated with such a restructuring will not recur.

Third Party Royalty Agreements. The Company has agreements with third parties whereby it receives royalty revenues in return for the right of the third party to utilize the Company’s technology or embed the Company’s technology in the third party’s products. To the extent that the Company is unable to maintain these third party relationships, or that the third party is unsuccessful in selling the embedded products, there could be a material, adverse impact on the Company’s business, financial position, results of operations and cash flows.

Sales Forecasts. The Company makes many operational and strategic decisions based upon short- and long-term sales forecasts. The Company’s sales personnel continually monitor the status of all proposals, including the estimated closing date and the value of the sale, in order to forecast quarterly sales. These forecasts are subject to significant estimation and are impacted by many external factors. For example, a slowdown in information technology spending orfactors, including global economic factors could cause purchasing decisions to be delayed.conditions and the performance of its customers. A variation in actual sales activity from that forecasted could cause the Company to plan or to budget incorrectly and, therefore, could adversely affect the Company’s business, financial position, results of operations and cash flows. The Company’s management team forecasts macroeconomic trends and developments and integrates them through long-range planning into budgets, research and development strategies

and a wide variety of general management duties. The current global economic conditions, and the effect those conditions and the related disruptions in global credit markets have on the Company’s customers, may have a significant impact on the accuracy of the Company’s sales forecasts. These conditions may increase the likelihood or the magnitude of variations between actual sales activity and the Company’s sales forecasts, and, as a result, the Company’s performance may be hindered because of a failure to properly match corporate strategy with economic conditions. This in turn may adversely affect the Company’s business, financial position, results of operations and cash flows.

Income Tax Estimates. The Company makes significant estimates in determining its worldwide income tax provision. These estimates involve complex tax regulations in a number of jurisdictions across the Company’s global operations and are subject to many transactions and calculations in which the ultimate tax outcome is uncertain. The final outcome of tax matters could be different than the estimates reflected in the historical income tax provision and related accruals. Such differences could have a material impact on income tax expense and net income in the period in which such determination is made.

The amount of income tax paid by the Company is subject to ongoing audits by federal, state and foreign tax authorities. These audits often result in proposed assessments. The Company’s estimate for liabilities associated with uncertain tax positions is highly judgmental and actual future results may result in favorable or unfavorable adjustments to the Company’s estimated tax liabilities, including estimates for uncertain tax positions, in the period the assessments are made or resolved, audits are closed or when statutes of limitations on potential assessments expire. As a result, the Company’s effective tax rate may fluctuate significantly on a quarterly basis.

The Company allocates a portion of its purchase price to goodwill and intangible assets. Impairment charges associated with goodwill are generally not tax deductible and will result in an increased effective income tax rate in the period the impairment is recorded. The Company has recorded significant deferred tax liabilities related to acquired intangible assets that are not deductible for tax purposes. These deferred tax liabilities are based on future statutory tax rates in the locations in which the intangible assets are recorded. Any future changes in statutory tax rates would be recorded as an adjustment to the deferred tax liabilities in the period the change is announced, and could have a material impact on the Company’s effective tax rate during that period.

Non-Income Based Taxes.Periodic Reorganization of Sales Force. As a multinational corporation,The Company relies heavily on its direct sales force. From time to time, the Company is subjectreorganizes and makes adjustments to non-income based taxes,its sales force in response to such factors as payroll,management changes, performance issues, market opportunities and other considerations. These changes may result in a temporary lack of sales use, value-added, withholding, net worth, property and goods and services taxes, in both the United States and various foreign jurisdictions. The Company is regularly under audit by tax authorities with respect to these non-income taxesproduction and may have exposure to additional non-income tax liabilities relating to the underlying tax as well as potential interest and penalties ifadversely impact revenue in future quarters. There can be no assurance that the Company doeswill not maintain compliancerestructure its sales force in future periods or that the transition issues associated with the continuously changing rules and regulations. Acquisition activities increase the Company’s non-income tax exposures.such a restructuring will not recur.

Regulatory Compliance. Like all other public companies, the Company is subject to the rules and regulations of the Securities and Exchange Commission (“SEC”), including those that require the Company to report on and receive a certificationan attestation from its independent registered public accounting firm regarding the Company’s internal controls.control over financial reporting. Compliance with these requirements causes the Company to incur additional expenses and causes management to divert time from the day-to-day operations of the Company. While the Company anticipates being able to fully comply with these internal control requirements, if it is not able to comply with the Sarbanes-Oxley reporting or certificationattestation requirements relating to internal controls,control over financial reporting, the Company may be subject to sanction by the SEC or NASDAQ. Such sanctions could divert the attention of the Company’s management from implementing its business plan and could have an adverse effect on the Company’s business and results of operation.

TheAs the Company’s stock is listed on Thethe NASDAQ Global Select Market; thus, the Company is subject to the ongoing financial and corporate governance requirements of NASDAQ. While the Company anticipates being able to fully comply with these requirements, if it is not able to comply, the Company’s name may be published on NASDAQ’s daily Non-Compliant Companies list until NASDAQ determines that it has regained compliance

or the Company no longer trades on NASDAQ. If the Company were unable to return to compliance with the governance requirements of NASDAQ, the Company may be delisted from the NASDAQ Global Select Market, which could have an adverse effect on the Company’s ability to raise additional capital.

Governmental Revenue Sources. The Company’s sales to the United States Government must comply with the regulations set forth in the Federal Acquisition Regulations. Failure to comply with these regulations could result in penalties being assessed against the Company or an order preventing the Company from making future sales to the United States Government. Further, the Company’s international activities must comply with the export control laws of the United States, the Foreign Corrupt Practices Act and a variety of other laws and regulations of the United States and other countries in which the Company operates. Failure to comply with any of these laws and regulations could adversely affect the Company’s business, financial position, results of operations and cash flows.

In certain circumstances the United States government, state and local governments and their respective agencies and certain foreign governments may have the right to terminate these engagements at any time, without cause. There is increased pressure for governments and their agencies, both domestically and internationally, to reduce spending. The United States, European Union and certain other government contracts, as well as our state and local level contracts, are subject to the approval of appropriations. Similarly, our contracts at the state and local levels are subject to governmentappropriations or funding authorizations. Additionally, governmentCertain of these contracts may contain rights to audit and permit the imposition of various civil and criminal penalties and administrative sanctions, including, but not limited to, termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business.business, any of which could have an adverse effect on the Company’s results of operations and cash flows.

Risks Associated with Significant Sales to Existing Customers. A significant portion of the Company’s sales includes follow-on sales to existing customers that invest in the Company’s broad suite of engineering simulation software and services. If a significant number of current customers were to become dissatisfied with the Company’s products and services, or choose to license or utilize competitive offerings, the Company’s follow-on sales, and recurring lease and maintenance revenues, could be materially, adversely impacted, resulting in lower revenue, operating margins, net income and cash flows.

Contingencies. The Company is involved in various investigations, claims and legal proceedings from time to time that arise in the ordinary course of its business activities. These proceedings currently include customary audit activities, by various government authorities amongincluding alleged infringement of intellectual property rights, commercial disputes, employment matters, tax audits and other matters. Each of these matters is subject to various uncertainties, and it is possible that somean unfavorable resolution of one or more of these matters may be resolved unfavorably tocould in the Company.future materially affect the Company’s results of operations, cash flows or financial position.

Changes in Existing Financial Accounting Standards or Taxation Rules.Changes in existing accounting or taxation rules or practices, new accounting pronouncements or taxation rules, or varying interpretations of current accounting pronouncements or taxation practices could have a significant, adverse effect on the Company’s results of operations or the manner in which the Company conducts its business. Further, such changes could potentially affect the Company’s reporting of transactions completed before such changes are effective. For example, the Company was not previously required to record stock-based compensation charges to earnings in connection with stock option grants to its employees. However, the FASB issued a revised version of FASB Statement No. 123, “Share-Based Payment” (“Statement No. 123R”) that requires the Company to record stock-based compensation charges to earnings as of January 1, 2006. Such charges negatively impacted the Company’s earnings.

Quantitative and Qualitative Disclosures About Market Risk. The Company is exposed to certain market risks, primarily foreign currency exchange rates, that arise from transactions occurring in the normal course of business. The Company seeks to reduce these risks primarily through its normal operating and financing activities.

Financial Market Risk. Recently, the financial markets have experienced a decline as a result of the U.S. subprime mortgage market crisis. While the Company is not directly exposed to the credit and liquidity risks associated with subprime lending, adjustable rate mortgages or securities backed by these mortgages, a decline in the financial stability across a significant component of the Company’s customer base could hinder its ability to collect amounts due from customers and could result in lower demand for the Company’s products. In addition, the state of the financial markets could impact the Company’s ability to obtain future funding.

The Company has received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of our fiscal year 20072008 that remain unresolved.

The Company’s executive offices and those related to certain domestic product development, marketing, production and administration are located in a 107,000 square foot office facility in Canonsburg, Pennsylvania. In May 2004, the Company entered into the first amendment to its existing lease agreement, effective January 1, 2004. The lease was extended from anits original period through 2006, with an option to extend through 2011, to a period through 2014, with an option to extend through 2019.

As part of the acquisition of Ansoft on July 31, 2008, the Company acquired certain leased office property, including executive offices, which comprise a 28,000 square foot office facility in Pittsburgh, Pennsylvania. In January 2008, Ansoft entered into the fourth amendment to its existing lease agreement, effective February 15, 1999. The lease term was extended from the previously amended period to February 2011.

As part of the acquisition of Fluent on May 1, 2006, the Company acquired certain office property, including executive offices, which comprise a 94,000 square foot office facility in Lebanon, New Hampshire. The offices were originally constructed in 1991 with several later additions. In addition, the Company acquired a 40,000 square foot facility in Pune, India. This facility supports worldwide product development, marketing and sales activities. The facility was originally built in 2004 and expanded in 2006.

The Company and its subsidiaries also lease office space in various locations throughout the world. The Company owns substantially all equipment used in its facilities. Management believes that its facilities allow for sufficient space to support not only its present needs, but also allow for expansion and growth as the business may require in the foreseeable future.

In the opinion of management, the Company’s properties and its equipment are in good operating condition and are adequate for the Company’s current needs. The Company does not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.

The Company is subject to various legal proceedings from time to time that arise in the ordinary course of business. These proceedings currently include customary audit activities by various taxing authorities amongbusiness, including alleged infringement of intellectual property rights, commercial disputes, employment matters, tax audits and other matters. EachIn the opinion of the Company, the resolution of pending matters is not expected to have a material adverse effect on the Company’s consolidated results of operations, cash flows or financial position. However, each of these matters is subject to various uncertainties and it is possible that an unfavorable resolution of one or more of these matters may be resolved unfavorably toproceedings could in the Company. Management believes, after consulting with legal counsel, that the ultimate liabilities, if any, resulting from such legal proceedings will notfuture materially affect the Company’s financial position, liquidity or results of operations.operations, cash flows or financial position.

No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2007.2008.

PART II

Market Information

The Company’s common stock trades on the NASDAQ Global Select Market tier of the NASDAQ Stock Market under the symbol: “ANSS.” The common stock prices shown below are based on the NASDAQ daily closing stock price.

On February 1, 2008,January 30, 2009, there were 290335 stockholders of record and approximately 53,50073,200 beneficial holders of the Company’s common stock.

The Company has not paid cash dividends on its common stock as it has retained earnings for use in its business. The Company reviews its policy with respect to the payment of dividends from time to time; however, there can be no assurance that any dividends will be paid in the future.

Performance Graph

Set forth below is a line graph comparing the yearly percentage change in the cumulative total stockholder return on the Company’s Common Stock,common stock, based on the market price of the Company’s Common Stock,common stock, with the total return of companies included within the Russell 1000 Index, the Russell 2000 Index, the NASDAQ Stock Market Index and a peer group of three companies (Autodesk, Inc., MSC Software Corporation and Parametric Technology Corporation) selected by the Company, for the period commencing December 31, 20022003 and ending December 31, 2007.2008. On June 30, 2008, the Company was added to the Russell 1000 Index, which includes 1,000 of the largest securities based on a combination of market cap and current index membership. The Company had been previously listed on the Russell 2000 Index since 2001. The calculation of total cumulative returns assumes a $100 investment in the Company’s Common Stock,common stock, the Russell 1000 Index, the Russell 2000 Index, the NASDAQ Stock Market Index and the Peer Group Index on January 1, 2003,2004, and the reinvestment of all dividends, and accounts for all stock splits. The historical information set forth below is not necessarily indicative of future performance.

Equity Compensation Plan Information as of December 31, 20072008

Unregistered Sale of Equity Securities and Use of Proceeds

None.

Issuer Purchases of Equity Securities

In February 2000, the Board of Directors approved a program to repurchase shares of the Company’s common stock. In October 2001, the Company announced that its Board of Directors had amended its common stock repurchase program to acquire up to an additional four million shares, or 16 million shares in total under a program.total. Under this program, ANSYS repurchased 250,000 shares in 2007.2007 and 368,406 shares in 2008. As of December 31, 2007, 3.82008, 3.4 million shares remained authorized for repurchase under the program. Future stock repurchases will depend on factors such as the Company’s working capital needs, cash requirements for other acquisitions, debt repayment obligations, the Company’s stock price and economic and market conditions.

ITEM 6:

SELECTED FINANCIAL DATA

The following table sets forth selected financial data as of and for the last five years. This selected financial data should be read in conjunction with the consolidated financial statements and related notes included in Part IV, Item 15 of this Annual Report on Form 10-K. The results of acquired companies have been included in the consolidated financial statements since their respective dates of acquisition.

ITEM 7:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

ANSYS, Inc.’s (hereafter the “Company” or “ANSYS”) results for the year ended December 31, 20072008 reflect a revenue increase of 46.2%24.1%, and basic and diluted earnings per share growth of $1.0627.4% and $1.02,26.5%, respectively, as compared to 2006.2007. These results were significantly impacted by the July 2008 acquisition of Ansoft. The results of operations include the results of Ansoft for the period from the date of acquisition (July 31, 2008) through December 31, 2008. The Company experienced higher revenues in 20072008 from both the FluentAnsoft acquisition (included for only eight months in 2006) and from license and maintenance growth in the Company’s other software products and services. These revenues were partially offset by increased intangible amortization costs and increased operating expenses, including higher salaries and related headcount costs, increases in amortization expenseas well as the additional costs associated with acquired intangible assets and additional stock-based compensation expense. These increases were partially offset by reduced interest expense and a decreasethe Ansoft business. Also, in connection with the Company’s effective tax rate. The Company’s operating results in 2007 were also favorably impacted by changes in foreign currency exchange rates as compared toacquisition of Ansoft on July 31, 2008, the prior year. In addition to the impactsCompany borrowed $355.0 million. As of December 31, 2008, these items, the 2006 results include a $28.1 million non-tax deductible charge related to acquired Fluent in-process research and development (recorded in the second quarter of 2006).remaining outstanding borrowings totaled $279.0 million. The Company’s financial position includes $171.9$233.9 million in cash and short-term investments, and working capital of $109.3$129.5 million as of December 31, 2007.2008.

In connection with the acquisition of Fluent on May 1, 2006, the Company borrowed $198 million (incurring interest expense) and used existing cash, cash equivalents and short-term investments (decreasing interest income). As of December 31, 2007, these outstanding borrowings totaled $59.5 million.

ANSYS develops and globally markets engineering simulation software and services widely used by engineers and designers across a broad spectrum of industries, including aerospace, automotive, manufacturing, electronics, biomedical, energy and defense. Headquartered at Southpointe in Canonsburg, Pennsylvania, the Company and its subsidiaries employ approximately 1,4001,750 people as of December 31, 20072008 and focus on the development of open and flexible solutions that enable users to analyze designs directly on the desktop, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing and validation. The Company distributes its ANSYS^® suite and Ansoft suites of simulation technologies including ANSYS Workbench™, ANSYS CFX^®, ANSYS ICEM CFD™, ANSYS AUTODYN^®, and ANSYS FLUENT^® products through a global network of independent channel partners and direct sales offices in strategic, global locations. It is the Company’s intention to continue to maintain this mixed sales and distribution model.

The Company licenses its technology to businesses, educational institutions and governmental agencies. Growth in the Company’s revenue is affected by the strength of global economies, general business conditions, currency exchange rate fluctuations, customer budgetary constraints and the competitive position of the Company’s products. Given the current global economic conditions and the increased strength of the U.S. Dollar relative to other currencies in which the Company conducts transactions, the Company believes that there may be a future adverse impact on the Company’s revenue streams and that these conditions may particularly impact the Ansoft product line as Ansoft has historically derived a significant portion of its total revenue from international sales. Please see the sub-sections entitled “Adverse Conditions in the Global Economy and Disruption in Financial Markets,” “Decline in Customers’ Business” and “Risks Associated with International Activities” under Item 1A – Risk Factors above for a complete discussion of how these factors might impact the Company’s financial condition and operating results. The Company believes that the features, functionality and integrated multiphysics capabilities of its software products are as strong as they have ever been. However, the software business is generally characterized by long sales cycles. These long sales cycles increase the difficulty of predicting sales for any particular quarter. The Company makes many operational and strategic decisions based upon short- and long-term sales forecasts which are impacted not only by these long sales cycles but by current global economic conditions. As a result, the Company believes that its overall performance is best measured by fiscal year results rather than by quarterly results. Please see the sub-section entitled “Sales Forecasts” under Item 1A – Risk Factors above for a complete discussion of the potential impact of the Company’s sales forecasts on the Company’s financial condition and operating results.

The Company’s management considers the intense competition and price pressure that it faces in the short and long term by focusing on expanding the breadth, depth, ease of use and quality of the technologies, features, functionality and integrated multiphysics capabilities of its software products as compared to its competitors, investing in research and development to develop new and innovative products and increase the capabilities of its

existing products, supplying new products and services, focusing on customer needs, training, consultation and support, and enhancing its distribution channels. From time to time, the Company also considers acquisitions to supplement its product offerings and distribution channels.

The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to fair value of stock awards, bad debts, contract revenue, valuation of goodwill, valuation of intangible assets, income taxes, and contingencies and litigation. The Company bases its estimates on historical experience, estimated future cash flows and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including the following statements, as well as statements that contain such words as “anticipates,”�� “intends,” “believes,” “plans” and other similar expressions:

Forward-looking statements should not be unduly relied upon because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the Company’s control. The Company’s actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference include risks and uncertainties detailed in Item 1A.

Acquisitions

On July 31, 2008, the Company completed its acquisition of Ansoft, a global provider of electronic design automation software. Under the terms of the merger agreement, Ansoft stockholders received $16.25 in cash and 0.431882 shares of ANSYS common stock for each outstanding Ansoft share held on July 31, 2008. ANSYS issued an aggregate of 12.24 million shares of its common stock, including 1.95 million shares pursuant to assumed stock options, valued at approximately $432.6 million based on the average closing market price on the two days preceding and the two days following the announcement of the acquisition, and paid approximately $387.3 million in cash. The total purchase price of approximately $823.9 million includes approximately $4.0 million in transaction fees. The Company used a combination of existing cash and proceeds from a $355.0 million unsecured senior term loan credit facility to fund the transaction. In addition to the $4.0 million in transaction-related costs, the Company incurred financing costs of approximately $4.6 million related to the credit facility.

The operating results of Ansoft have been included in the Company’s consolidated financial statements since the date of acquisition, July 31, 2008. The total purchase price was allocated to the foreign and domestic assets and liabilities of Ansoft based upon management’s estimates of the fair market values of the assets acquired and the liabilities assumed. The allocation included $235.2 million to identifiable intangible assets (including $98.4 million to developed software to be amortized over ten years, $97.4 million to customer contracts and related relationships to be amortized over thirteen years, and $39.4 million to trademark to be amortized over ten years) and $601.1 million to goodwill, which is not amortized and not tax deductible. The acquisition of Ansoft enhanced the breadth, functionality, usability and interoperability of the combined ANSYS portfolio of engineering simulation solutions. The acquisition is expected to increase operational efficiency and lower design and engineering costs for customers, and accelerate development and delivery of new and innovative products to the marketplace.

In valuing deferred revenue on the Ansoft balance sheet as of the acquisition date, the Company applied the fair value provisions of Emerging Issues Task Force Issue No. 01-3, “Accounting in a Business Combination for Deferred Revenue of an Acquiree” (“EITF 01-3”). In accordance with EITF No. 01-3, acquired deferred revenue of $7.5 million was recorded on the opening balance sheet. This amount was approximately $23.5 million lower than the historical carrying value. Although this purchase accounting requirement had no impact on the

Company’s business or cash flow, the Company’s reported revenue under accounting principles generally accepted in the United States (“GAAP”), primarily for the first 12 months post-acquisition, is less than would have been reported by Ansoft absent the acquisition. The impact on reported revenue for the year ended December 31, 2008 was $1.7 million for lease license revenue and $13.0 million for maintenance revenue. The expected impact on reported revenue for the year ending December 31, 2009 is approximately $8.2 million.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of acquisition of Ansoft:

Ansoft is in the process of preparing its tax returns for the year ended April 30, 2008 and for the pre-acquisition period from May 1, 2008 to July 31, 2008. As a result, the allocation of the purchase price is subject to refinement.

On May 1, 2006, the Company completed its acquisition of Fluent Inc. (“Fluent”), a global provider of computational fluid dynamics (“CFD”)-based computer-aided engineering software and services. The acquisition of Fluent enhancesenhanced the breadth, functionality, usability and interoperability of the Company’s portfolio of simulation solutions. Under the terms of the merger agreement, the Company issued 11,999,896 shares of its common stock, valued at approximately $274 million based on the average closing market price on the two days preceding and the two days following the announcement of the acquisition (February 16, 2006), and paid approximately $315 million in cash to acquire Fluent.cash. The total purchase price of approximately $598 million includes approximately $9 million in transaction fees. The Company used a combination of existing cash and $198 million from committed bank financing to fund the transaction. In addition to the $9 million in transaction-related costs, the Company incurred financing costs of $1.9 million related to the long-term debt utilized to fund the acquisition.

The operating results of Fluent have been included in the Company’s consolidated financial statements since the date of acquisition, May 1, 2006. The total purchase price was allocated to the foreign and domestic assets and liabilities of Fluent based upon management’s estimates of the fair market values of the assets acquired and the liabilities assumed. The allocation included $213.9 million to identifiable intangible assets (including $88.0 million to developed software to be amortized over seven years, $65.9 million to customer contracts and related relationships to be amortized over nine and a half years, and $60.0 million to trade name)a non-amortizing trademark) and $404.3 million to goodwill, which is not tax deductible. The Fluent trade nametrademark is one of the most recognized among CFD technologies. The trade nametrademark represents a reputation of superior technical capability and strong support service that has been recognized by Fluent customers. Because the trade nametrademark continues to gain strength in the marketplace today, as evidenced by increased sales of ANSYS FluentFLUENT software over the past several years, the Company expectshad originally expected the trade nametrademark to contribute to cash flows indefinitely and, accordingly, hashad assigned an indefinite life to the trade name.trademark.

The Company reconsidered the indefinite life associated with the Fluent trademark, as well as the trademark acquired in the 2003 acquisition of CFX, as part of the product and naming strategy changes that occurred as a result of the July 31, 2008 acquisition of Ansoft and determined that these trademarks had a remaining useful life of ten years. Accordingly, on July 31, 2008, the Company began amortizing these trademarks over a ten-year period. During the third quarter of 2008, the Company completed an impairment test for these trademarks and determined that these assets had not been impaired as of the test date, July 31, 2008.

In valuing deferred revenue on the Fluent balance sheet as of the acquisition date, the Company applied the fair value provisions of Emerging Issues Task Force IssueEITF No. 01-3 (“EITF No. 01-3”), “Accounting in a Business Combination for Deferred Revenue of an Acquiree.” In accordance with EITF No. 01-3,and acquired deferred revenue of $31.5 million was recorded on the opening balance sheet. This amount was $20.1 million lower than the historical carrying value by Fluent.value. Although this purchase accounting requirement had no impact on the Company’s business or cash flow, the Company’s reported software license revenue under accounting principles generally accepted in the United States, (“GAAP”), primarily for the first 12 months post-acquisition, was less than would have been reported by Fluent absent the acquisition by $1.8 million for the year ended December 31, 2007 and $18.4 million for the period of May 1, 2006 through December 31, 2006. There will bewas no significant impact on reported revenue for the year ending December 31, 2008 from the Fluent acquisition as it relates to this purchase accounting requirement.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:acquisition of Fluent:

The Company expensed acquired in-process research and development (“IPR&D”) of $28.1 million that representsrepresented incomplete Fluent research and development projects that had not reached technological feasibility and had no alternative future use as of the acquisition date.

Technological feasibility is established when an enterprise has completed all planning, designing, coding and testing activities that are necessary to establish that a product can be produced to meet its design specifications, including functions, features and technical performance requirements. The value assigned to IPR&D was determined by considering the importance of each project to the overall development plan, estimating costs to develop the purchased IPR&D into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows to their present values based on the percentage of completion of the IPR&D projects. During 2007, the Company terminated the development of these projects.

The following unaudited pro forma information presentsDuring the 2006years ended December 31, 2007 and 2005 results of operations of2006, the Company as ifmade acquisition payments unrelated to Ansoft or Fluent of $119,000 and $8.3 million, respectively. These amounts primarily relate to the 2005 acquisition of Century Dynamics, Inc. and contingent consideration paid in 2007 and 2006 related thereto. The 2006 payment also includes approximately $3.5 million related to the acquisition had occurred at the beginning of each period. The unaudited pro forma results are not necessarily indicative of results that would have occurred had the acquisition been in effect for the years presented, nor are they necessarily indicative of future results. These pro forma results exclude the impacts of IPR&D expense and the purchase accounting adjustment to deferred revenue that were previously discussed.certain independent channel partners.

Results of Operations

The operating results of Ansoft and Fluent have been included in the results of operations since the acquisition datedates of July 31, 2008 and May 2006.1, 2006, respectively.

For purposes of the following discussion and analysis, the table below sets forth certain consolidated financial data for the years 2008, 2007 2006 and 2005.2006.

		Year Ended December 31,
(in thousands)		2008				2007				2006
Revenue:
Software licenses		$	318,154			$	253,287			$	156,960
Maintenance and service			160,185				132,053				106,680
Total revenue			478,339				385,340				263,640
Cost of sales:
Software licenses			9,766				9,113				7,306
Amortization			27,803				21,532				14,909
Maintenance and service			53,845				47,402				34,512
Total cost of sales			91,414				78,047				56,727
Gross profit			386,925				307,293				206,913
Operating expenses:
Selling, general and administrative			134,887				115,108				86,901
Research and development			71,594				56,481				49,406
Amortization			10,713				8,935				6,350
In-process research and development			—				—				28,100
Total operating expenses			217,194				180,524				170,757
Operating income			169,731				126,769				36,156
Interest expense			(9,342	)			(6,822	)			(7,779	)
Interest income			5,575				4,916				4,766
Other income (expense), net			727				(600	)			(82	)
Income before income tax provision			166,691				124,263				33,061
Income tax provision			55,020				41,871				18,905
Net income		$	111,671			$	82,392			$	14,156

Year Ended December 31, 20072008 Compared to Year Ended December 31, 20062007

Revenue:Revenue:

Software license revenue increased as follows:

The increasesincrease in software license revenue werewas the result of overall growth in both lease and perpetual license sales, the impact of the Fluent operations for a full twelve months in 2007 as compared to eight months in 2006, as well as an $18.4 million adverse impact on 2006 leasethe addition of Ansoft-related license revenue as compared to a $1.8of $21.1 million adverse impact on 2007, related to purchase accounting adjustments to acquired deferred revenue (see below).

Maintenance and service revenue increased as follows:

The increase in maintenance revenue was primarily the result of annual maintenance subscriptions sold in connection with new perpetual license sales in recent quarters. quarters and Ansoft-related maintenance revenue of $8.4 million for the period from the acquisition (July 31, 2008) through December 31, 2008.

The increasedecrease in service revenue was primarily the result of increasedreduced revenue from engineering consulting services. The increases in both maintenance andThis decrease was partially offset by service revenue were also positively impacted byof $700,000 related to the inclusion of a full twelve months of Fluent operations in 2007 as compared to eight months in 2006.Company’s 2008 biennial users’ conference.

With respect to revenue, on average, for the year ended December 31, 2007,2008, the U.S. Dollar was approximately 6.9%2.8% weaker, when measured against the Company’s primary foreign currencies, than for the year ended December 31, 2006.2007. The U.S. Dollar weakened against the British Pound, the Indian Rupee, the Euro, the Chinese Renminbi, the Canadian DollarSwedish Krona and the Swedish Krona,Japanese Yen, while it strengthened against the Japanese Yen.British Pound, Indian Rupee and Canadian Dollar. The net overall weakening throughout the year resulted in increased revenue and operating income during 2007,2008, as compared with 2006,2007, of approximately $9.5$5.5 million and $3.2$2.2 million, respectively.

A substantial portion of the Company’s license and maintenance revenue is derived from annual lease and maintenance contracts. These contracts are generally renewed on an annual basis and have a high rate of customer renewal. In addition to the recurring revenue base associated with these contracts, a majority of customers purchasing new perpetual licenses also purchase related annual maintenance contracts. As a result of the significant recurring revenue base, the Company’s license and maintenance revenue growth rate in any period does not necessarily correlate to the growth rate of new license and maintenance contracts sold during that period. To the extent the rate of customer renewal for lease and maintenance contracts remains at current levels, incremental lease contracts and maintenance contracts sold with new perpetual licenses will result in license and maintenance revenue growth.

The Company’s revenue increased 24.1% and 46.2% in 2008 and 2007, respectively. These growth rates are influenced by both the Company’s organic growth rate, incremental growth associated with acquired companies, as well as the positive impact of currency fluctuations. Although the Company’s overall revenue growth in 2009 will benefit from the inclusion of a full twelve months of Ansoft operations as compared to five months of Ansoft operations in 2008, the Company is anticipating a reduction in the revenue growth rate of the non-Ansoft operations as compared to recent historical periods. This slowing revenue growth is significantly impacted by the current disruption in domestic and global economies, as well as by the Company’s expectation that currency fluctuations will have an adverse impact on revenue growth in 2009. Reductions in the Company’s revenue growth rate are also expected to adversely impact the Company’s operating income, net income and earnings per share in 2009.

International and domestic revenues, as a percentage of total revenue, were 68.3% and 31.7%, respectively, during the year ended December 31, 2008 and 65.8% and 34.2%, respectively, during the year ended December 31, 2007.

In valuing deferred revenue on an acquired company’s balance sheet as of the acquisition date, the Company applied the fair value provisions of Emerging Issues Task Force Issue No. 01-3, “Accounting in a Business Combination for Deferred Revenue of an Acquiree” (“EITF No. 01-3”). Although this purchase accounting requirement had no impact on the Company’s business or cash flow, the Company’s reported revenue under accounting principles generally accepted in the United States, primarily for the first 12 months post-acquisition, is less than would have been reported by the acquired company absent the acquisition.

In accordance with EITF No. 01-3, acquired deferred revenue of $7.5 million was recorded on the Ansoft opening balance sheet. This amount was approximately $23.5 million lower than the historical carrying value. The impact on reported revenue for the year ended December 31, 2008 was $1.7 million for lease license revenue and $13.0 million for maintenance revenue. The expected impact on reported revenue for the year ending December 31, 2009 is approximately $8.2 million.

Acquired deferred revenue of $31.5 million was recorded on the Fluent opening balance sheet. This amount was $20.1 million lower than the historical carrying value. The impact on reported revenue was $1.8 million for the year ended December 31, 2007; there was no significant impact for the year ended December 31, 2008.

Cost of Sales and Gross Profit:

The change in cost of sales is primarily due to the following:

The improvement in the gross profit was a result of the increase in revenue offset by a smaller increase in related cost of sales.

The Company reconsidered the indefinite lives associated with certain trademarks as part of the product and naming strategy changes that occurred as a result of the July 31, 2008 acquisition of Ansoft. The Company determined that such trademarks had a remaining useful life of ten years and therefore amortization began July 31, 2008.

Operating Expenses:

Selling, General and Administrative: Ansoft-related selling, general and administrative costs were $18.2 million for the period from the acquisition (July 31, 2008) through December 31, 2008. Non-Ansoft related expenses increased by $1.6 million during the year ended December 31, 2008 which included increased stock-based compensation expenses of $1.7 million and increased salary costs of $1.4 million. In addition, third party commissions increased $1.0 million and facilities and information technology maintenance costs increased

$900,000 as compared to the year ended December 31, 2007. Partially offsetting the increases in selling, general, and administrative costs were decreases in tax compliance costs of $1.8 million and incentive compensation of $1.7 million.

The Company anticipates that it will make investments throughout 2009 in its global sales and marketing organization and its global business infrastructure to enhance major account sales activities and to support both its worldwide sales distribution and marketing strategies and the growth of the business in general.

Research and Development:Ansoft-related research and development costs were $7.4 million for the period from the acquisition (July 31, 2008) through December 31, 2008. Non-Ansoft related expenses increased by $7.7 million during the year ended December 31, 2008 which included increased salary costs of $4.1 million. In addition, stock-based compensation expense and consulting fees increased by $900,000 and $800,000, respectively as compared to the year ended December 31, 2007.

The Company has traditionally invested significant resources in research and development activities and intends to continue to make significant investments in this area, particularly as it relates to ongoing integration and evolution of its portfolio of software technologies.

Amortization:Ansoft-related amortization expense was $2.1 million for the period from the acquisition (July 31, 2008) through December 31, 2008.

Interest Expense:The Company’s long-term debt incurred interest expense, including the amortization of debt financing costs, of $9.3 million during the year ended December 31, 2008, as compared to $6.5 million during the year ended December 31, 2007. The interest expense on the term loans and amortization related to debt financing costs were as follows:

The increased interest costs shown above for the 2008 period are primarily a result of a higher average outstanding debt balance, partially offset by a lower weighted-average effective interest rate of 4.72% as compared to 5.85% in the 2007 period. The increased amortization costs shown above for 2008 are primarily a result of the early prepayment of the 2006 term loan as well as the additional amortization related to the 2008 term loan.

Interest Income (Expense), net:Interest income for the year ended December 31, 2008 was $5.6 million as compared to $4.9 million for the year ended December 31, 2007. Interest income increased as a result of additional funds invested in the 2008 period as compared to the 2007 period.

Other Income (Expense), net: The Company recorded other income of $727,000 during the year ended December 31, 2008 as compared to other expense of $600,000 for the year ended December 31, 2007. The net change was primarily the result of changes in foreign currency transaction gains and losses. As the Company’s presence in foreign locations continues to expand, the Company, for the foreseeable future, will have increased exposure to volatility of foreign exchange rates.

Income Tax Provision: The Company recorded income tax expense of $55.0 million and had income before income taxes of $166.7 million for the year ended December 31, 2008. This represents an effective tax rate of 33.0%. During the year ended December 31, 2007, the Company recorded income tax expense of $41.9 million and had income before income taxes of $124.3 million. The Company’s effective tax rate was 33.7% for the year ended December 31, 2007.

As compared to the federal and state combined statutory rate, these rates are favorably impacted by lower tax rates in many of the Company’s foreign jurisdictions, Section 199 manufacturing deductions and research and experimentation credits. These rates are also impacted by charges or benefits associated with the Company’s uncertain tax positions. During the third quarter of 2008, the Company filed its 2007 U.S. federal and state income tax returns. In conjunction with the completion of these returns, the Company adjusted its estimate for 2007 taxes to reflect the actual results and recorded a net tax benefit of $1.2 million. The effect of this adjustment reduced the 2008 effective tax rate from 33.7% to 33.0%.

Net Income: The Company’s net income for the year ended December 31, 2008 was $111.7 million as compared to net income of $82.4 million for the year ended December 31, 2007. Diluted earnings per share was $1.29 for the year ended December 31, 2008 and $1.02 for the year ended December 31, 2007. The weighted average shares used in computing diluted earnings per share were 86.8 million and 81.1 million during the years ended December 31, 2008 and 2007, respectively.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Revenue:

The increases in software license revenue were the result of overall growth in both lease and perpetual license sales, the impact of the Fluent operations for a full twelve months in 2007 as compared to eight months in 2006, as well as an $18.4 million adverse impact on 2006 lease license revenue, as compared to a $1.8 million adverse impact on 2007, related to purchase accounting adjustments to acquired deferred revenue (see below).

The increase in maintenance revenue was primarily the result of annual maintenance subscriptions sold in connection with new perpetual license sales in recent quarters. The increase in service revenue was primarily the result of increased revenue from engineering consulting services. The increase in both maintenance and service revenue was also positively impacted by the inclusion of a full twelve months of Fluent operations in 2007 as compared to eight months in 2006.

With respect to revenue, on average, for the year ended December 31, 2007, the U.S. Dollar was approximately 6.9% weaker, when measured against the Company’s primary foreign currencies, than for the year ended December 31, 2006. The U.S. Dollar weakened against the British Pound, Indian Rupee, Euro, Chinese Renminbi, Canadian Dollar and Swedish Krona, while it strengthened against the Japanese Yen. The overall weakening resulted in increased revenue and operating income during 2007, as compared with 2006, of approximately $9.5 million and $3.2 million, respectively.

International and domestic revenues, as a percentage of total revenue, were 65.8% and 34.2%, respectively, during the year ended December 31, 2007 and 64.2% and 35.8%, respectively, during the year ended December 31, 2006.

In accordance with EITF No. 01-3, acquired deferred revenue of $31.5 million was recorded on the Fluent opening balance sheet. This amount was $20.1 million lower than the historical carrying value by Fluent.value. Although this

purchase accounting requirement had no impact on the Company’s business or cash flow, the Company’s reported software license revenue under accounting principles generally accepted in the United States, (“GAAP”), primarily for the first 12 months post-acquisition, was less than would have been reported by Fluent, absent the acquisition, by $1.8 million for the year ended December 31, 2007 and $18.4 million for the period of May 1, 2006 through December 31, 2006.

Cost of Sales and Gross Profit:Profit:

The changeincrease in cost of sales is primarily due towas partially the variances detailed below. These variances were partially a result of a full year of Fluent activity in 2007 as compared to eight months of Fluent activity in 2006. The following variances also contributed to the prior year:increase:

The increase in the gross profit was a result of the increase in revenue offset by a smaller increase in related cost of sales.

Operating Expenses:Expenses:

Selling, General and Administrative:Administrative: The increase in selling, general and administrative costs was a result of increased salary and headcount-related costs, including incentive compensation, of $14.4 million, additional stock-based compensation expense of $2.3 million, increased professional fees, including legal and accounting, of $1.6 million, additional third party commissions of $1.6 million, increased operating and office lease expenseexpenses of $1.4 million and increased depreciation expense of $900,000. The Company also experienced increased tax compliance costs of $1.2 million and higher bad debt expense of $1.0 million. These increases were partially impacted by the inclusion of a full year of Fluent activity for the year ended December 31, 2007 as compared to eight months of Fluent activity for the year ended December 31, 2006.

The Company anticipates that it will make investments throughout 2008 in its global sales and marketing organization and its global business infrastructure to enhance major account sales activities and to support both its worldwide sales distribution and marketing strategies, and the growth of the business in general.

Research and Development:Development:Salary and headcount-related costs, including incentive compensation, increased by $3.9 million, stock-based compensation expense increased by $700,000 and the capitalization of internal labor costs decreased by $900,000 as compared to the prior year. In addition, depreciation and maintenance costs increased $800,000 and consulting costs increased $500,000. These increases were partially impacted by the inclusion of a full year of Fluent activity for the year ended December 31, 2007 as compared to eight months of activity for the year ended December 31, 2006.

As a percentage of revenue, research and development expenses declined during the year ended December 31, 2007 as compared to 2006. This decline can primarily be attributed to two items. Research and development expenditures as a percentage of revenue have historically been lower for the Fluent business than they have for the ANSYS business. Because 2007 contains more Fluent operational activity than 2006, there is a reduction in the 2007 research and development expenditures as a percentage of revenue. Additionally, there were certain development activities that existed in both the former ANSYS and Fluent development organizations that were duplicative and through the integration efforts have beenwere rationalized in line with the future product direction. During this rationalization process, certain personnel that formerly existed in the research and development function were reassigned to other functions to maximize both efficiency and the related contribution to the strategy of the combined organization.

The Company has traditionally invested significant resources in research and development activities and intends to continue to make significant investments in this area, particularly as it relates to ongoing integration and evolution of its portfolio of software technologies.

Amortization:Amortization: Fluent-related amortization increased $2.5 million for the year ended December 31, 2007 as compared to the prior-year period. The increase relates to twelve months of amortization expense in 2007 associated with certain acquired intangible assets as compared to eight months of amortization in the 2006 period.

In-Process Research and Development:Development:The non-tax deductible charge in 2006 of $28.1 million represents the fair value assigned to incomplete Fluent research and development projects that had not reached technological feasibility and had no alternative future value when acquired on May 1, 2006.

Interest Expense:Expense:In connectionThe Company’s long-term debt associated with the acquisition of Fluent on May 1, 2006 the Company borrowed $198 million and assumed certain capital leases. These borrowingsacquisition of Fluent incurred interest expense, including the amortization of debt financing costs, of $6.6 million during the year ended December 31, 2007 as compared to $7.7 million for the year ended December 31, 2006. The decrease in interest expense in 2007 was a result of lower interest rates and lower average debt balances outstanding.

Other Expense, net:net: Other expense for the year ended December 31, 2007 was $600,000 as compared to other expense of $82,000 for the year ended December 31, 2006. The net increase in expense was a result of the following two factors:

Foreign Currency Transaction – For the years ended December 31,both 2007 and 2006, the Company had a net foreign exchange losslosses of $700,000. During 2007, the U.S. Dollar weakened against the British Pound, Indian Rupee, Euro, Canadian Dollar, Swedish Krona, Japanese Yen and the Chinese Renminbi. As the Company’s presence in foreign locations continues to expand, the Company, for the foreseeable future, will have increased exposure to volatility of foreign exchange rates. The Company is most impactedThese amounts were partially offset by movements among and between the British Pound, Euro, Canadian Dollar, Japanese Yen, Indian Rupee, Swedish Krona, Chinese Renminbi and the U.S. Dollar.

Other – Incomeincome from other non-operating transactions decreased $500,000 during the year ended December 31,of $100,000 and $600,000 in 2007 as compared to the year ended December 31, 2006.and 2006, respectively.

Income Tax Provision:Provision: The Company recorded income tax expense of $41.9 million and had income before income tax provisiontaxes of $124.3 million for the year ended December 31, 2007. This represents an effective tax rate of 33.7% in 2007. The Company recorded income tax expense of $18.9 million and had income before income tax provisiontaxes of $33.1 million for the year ended December 31, 2006. This represents an effective tax rate of 57.2%.

In connection with the May 1, 2006 acquisition of Fluent, the Company recorded a non-tax deductible charge related to in-process research and development of $28.1 million. This non-tax deductible charge increased the Company’s effective tax rate from 30.9% to 57.2% for the year ended December 31, 2006. Because Fluent’s operating results from the date of acquisition reflect a net loss that is primarily related to acquisition-related amortization and the purchase accounting adjustments to deferred revenue, the related tax benefits on this loss have reduced the Company’s overall effective tax rate during the year ended December 31, 2006. The adoption of Interpretation No. 48,“Accounting for Uncertainty in Income TaxesTaxes”” (“(“FIN 48”) adversely affected the 2007 income tax expense by $1.5 million and the effective tax rate by 1.2%. The 2007 tax rate was also adversely affected by the phase-out of export benefits under the American Jobs Creation Act and higher stock-based compensation costs from incentive stock options (which include no tax benefit until the stock option is disqualified).

As compared to the federal and state combined statutory rate, these rates are favorably impacted by domestic manufacturing deductions, as well as research and experimentation credits. Additionally, Fluent has historically had an effective tax rate that has been higher than the Company’s. The effective tax rates in 2007 and 2006 were also impacted by the tax benefits discussed in the following paragraphs.

InAs indicated above, in October 2004, the American Jobs Creation Act of 2004 was signed into law and included replacement legislation for export benefits that the Company previously received under the Foreign Sales Corporation Repeal and Extraterritorial Income Exclusion Act. The phase-out of export benefits associated with the legislation is summarized as follows:

In addition to repealing the export tax benefits, the American Jobs Creation Act of 2004 provides significant tax relief for domestic manufacturers. Effective for taxable years beginning after December 31, 2004, qualifying entities may deduct a certain percentage (as defined below) of the lesser of their qualified production activities income or their taxable income for a taxable year. The deduction, however, is limited to 50% of an employer’s W-2 wages for the tax year. Beginning in 2010, when the 9% deduction is fully phased in, corporations facing a marginal tax rate of 35% will be subject to an effective tax rate of 31.85% on qualifying income.

In 2007, export benefits were fully phased out. In 2006, export benefits reduced the Company’s effective tax rate by 4.5%. The loss in export benefits during 2007 was partially replaced with an increased benefit for domestic production activities. Any other prospective changes regarding tax benefits associated with the Company’s export sales or other federal and state tax planning vehicles may adversely impact the Company’s effective tax rate and decrease its net income in future periods.

The Company makes significant estimates in determining its worldwide income tax provision. These estimates involve complex tax regulations in a number of jurisdictions across the Company’s global operations and are subject to many transactions and calculations in which the ultimate tax outcome is uncertain. Although the Company believes that its estimates are reasonable, the final outcome of tax matters could be different than the estimates reflected in the historical income tax provision and related accruals. Such differences could have a material impact on income tax expense and net income in the period in which such determination is made.

Net Income::The Company’s net income for the year ended December 31, 2007 was $82.4 million or $1.02 diluted earnings per share, as compared to net income of $14.2 million or $0.19 diluted earnings per share, infor the year ended December 31, 2006. The Company’s 2006 net income was significantly impacted by the $28.1 million non-tax deductible in-process research and development charge related to the Fluent acquisition. In addition, net income for 2007 includes a full year of activity related to Fluent as compared to eight months of activity in 2006. Diluted earnings per share was $1.02 for the year ended December 31, 2007 and $0.19 for the year ended December 31, 2006. The weighted average common and common equivalent shares used in computing diluted earnings per share were 81.1 million in 2007 and 76.4 million in 2006.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Revenue: