4. Comprehensive Income

        The components of comprehensive income are as follows:

5. Fair Value Measurements of Assets and Liabilities

        The Company classifies marketable securities as available-for-sale. The fair value hierarchy established in the guidance adopted by the Company prioritizes the inputs used in valuation techniques into three levels as follows:

•

Level 1—Observable inputs—quoted prices in active markets for identical assets and liabilities;



•

Level 2—Observable inputs other than the quoted prices in active markets for identical assets and liabilities—includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets; and



•

Level 3—Unobservable inputs—include amounts derived from valuation models where one or more significant inputs are unobservable and require us to develop relevant assumptions.

        The following is a summary of assets and liabilities held by the Company and their related classifications under the fair value hierarchy.

        The Company utilizes the market approach to measure fair value for its financial assets. The market approach uses prices and other relevant information generated by market transactions involving

7

Table of Contents

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—UNAUDITED (Continued)

(in thousands, except per share data unless otherwise noted)

5. Fair Value Measurements of Assets and Liabilities (Continued)

identical or comparable assets. The Company's marketable securities investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the three months ended March 31, 2011.

        The aggregate fair value of available for sale securities and aggregate amount of unrealized gains and losses for available for sale securities at March 31, 2011 were as follows:

        The aggregate fair value of available-for-sale securities and aggregate amount of unrealized gains and losses for available-for-sale securities at December 31, 2010 were as follows:

        Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. The cost of securities sold is based on specific identification method. No available-for-sale securities have been in a continuous unrealized loss position for twelve months or longer.

        The Company determined the fair value of the contingent consideration obligation based on a probability-weighted income approach derived from quarterly revenue estimates and a probability assessment with respect to the likelihood of achieving the various FusionOne Earn-out criteria. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. No changes in valuation techniques occurred during the three months ended March 31, 2011. The increase in the estimate of the fair value of the contingent consideration obligation is due to FusionOne business achieving the quarterly targets and increases in the Company's stock price. The increase in the contingent consideration obligation is also attributed to the addition of the contingent consideration for the Sapience Knowledge Systems, Inc. ("SKS") Earn-out.

8

Table of Contents

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—UNAUDITED (Continued)

(in thousands, except per share data unless otherwise noted)

5. Fair Value Measurements of Assets and Liabilities (Continued)

        The changes in fair value of the Company's Level 3 contingent consideration obligation during the three months ended March 31, 2011 were as follows:

6. Acquisition

SKS

        On March 16, 2011 the Company acquired 100% of the capital stock of Sapience Knowledge Systems, Inc. ("SKS") for the total purchase price of $5.8 million. Pursuant to the Stock Purchase Agreement dated March 16, 2011 ("the Purchase Agreement"), the Company made an initial cash payment of $2.9 million in March 2011 and the second cash installment in May 2011. Additionally, the Company potentially may make payments (SKS Earn-Out) totaling up to $3.0 million with additional payments for certain operational efficiencies achieved.

        The Company accounted for this business combination by applying the acquisition method, and accordingly, the preliminary estimated purchase price was allocated to the tangible assets and liabilities assumed based upon their relative fair values. The excess of the purchase price over the net tangible assets and liabilities was recorded as goodwill. The Company recorded $8.5 million of goodwill associated with the acquisition of SKS which is not tax deductible. The results of SKS's operations have been included in the consolidated financial statements since the acquisition date. The Company is in the process of finalizing the purchase allocation and the value of contingent consideration, thus the provisional measures of contingent consideration, intangible assets, deferred income taxes and goodwill are subject to change. The Company expects the purchase price allocation will be finalized in 2011.

        The Company believes that Sapience Knowledge Systems will help to accelerate Synchronoss' time to market with its new mobility management solution for the benefit of both enterprises and consumers, by eliminating redundancies, reducing costs and streamlining faster product introductions.

9

Table of Contents

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—UNAUDITED (Continued)

(in thousands, except per share data unless otherwise noted)

7. Stockholders' Equity

Stock Options

        The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The weighted-average assumptions used in the Black-Scholes option pricing model are as follows:

        The weighted-average fair value (as of the date of grant) of the options granted was $14.10 and $8.87 per share for the three months ended March 31, 2011 and 2010, respectively. During the three months ended March 31, 2011 and 2010, the Company recorded total pre-tax stock-based compensation expense of $5.5 million ($3.8 million after tax or $0.10 per diluted share) and $2.8 million ($1.9 million after tax or $0.06 per diluted share), respectively, which includes the fair value for equity awards issued after January 1, 2006. The total stock-based compensation cost related to non-vested equity awards not yet recognized as an expense as of March 31, 2011 was approximately $35.9 million. That cost is expected to be recognized over a weighted-average period of approximately 2.93 years.

        The following table summarizes information about stock options outstanding:

10

Table of Contents

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—UNAUDITED (Continued)

(in thousands, except per share data unless otherwise noted)

7. Stockholders' Equity (Continued)

        A summary of the Company's non-vested restricted stock at March 31, 2011, and changes during the three months ended March 31, 2011, is presented below:

8. Income Taxes

        During the three months ended March 31, 2011 and 2010, the Company recognized approximately $1.5 million and $1.8 million, respectively, in related tax expense. The Company's effective tax rate was approximately 91.4% and approximately 39.3% during the three months ended March 31, 2011 and 2010, respectively.

        A reconciliation of the statutory tax rates and the effective tax rates for the three months ended March 31, 2011 and 2010 are as follows:

        The Company reviews the expected annual effective income tax rate and makes changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income, changes to the actual and forecasted permanent book-to-tax differences, or changes resulting from the impact of a tax law change. The Company's effective tax rate is higher than its US federal statutory rate primarily due to the unfavorable tax impact of the fair market value adjustment for the contingent consideration obligation related to the FusionOne Earn-out for the FusionOne equity holders offset by benefits received from other discrete items including GAAP compensation expense for incentive stock options and the federal R&D tax credit.

11

Table of Contents

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—UNAUDITED (Continued)

(in thousands, except per share data unless otherwise noted)

8. Income Taxes (Continued)

        A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

9. Legal Matters

        On September 5, 2008, September 18, 2008, and September 23, 2008, three complaints were filed against the Company and certain of its officers and directors in the United States District Court for the District of New Jersey purportedly on behalf of a class of shareholders who purchased the Company's common stock between February 4, 2008 and June 9, 2008 (the "Securities Law Actions"). The complaints were consolidated and an amended complaint was filed by the plaintiffs on March 13, 2009. The plaintiffs in each complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. They alleged that certain of the Company's public disclosures regarding its financial prospects during the proposed class period were false and/or misleading. The principal allegation set forth in each complaint was that the Company issued misleading statements concerning its business prospects relating to the activation of Apple Inc.'s iPhone product. On April 7, 2010, the Court granted the Company's Motion to Dismiss all of the claims against all of the defendants without prejudice. On August 9, 2010, the parties filed a notice of voluntary dismissal with prejudice, noting that the plaintiff was dismissing the case without receiving payment of any kind.

        On October 23, 2008 and November 3, 2008, complaints were filed in the state court of New Jersey (the "State Derivative Suit") and the United States District Court for the District of New Jersey (the "Federal Derivative Suit") against certain of the Company's officers and directors, purportedly derivatively on behalf of the Company (collectively, the "Derivative Suits"). The Complaints in the Derivative Suits assert that the named officers and directors breached their fiduciary duties and other obligations in connection with the disclosures that also are the subject of the Securities Law Actions described above. The Company is also named as a nominal defendant in the Derivative Suits, although the lawsuits are derivative in nature and purportedly asserted on the Company's behalf. On October 20, 2010, the parties to the Federal Derivative Suit filed a notice of voluntary dismissal, dismissing the case in its entirety and with prejudice as to the named plaintiff. On November 17, 2010, the parties to the State Derivative Suit filed a notice of voluntary dismissal, dismissing the case in its entirety with prejudice as to the named plaintiff.

        Except for the above claims, the Company is not currently subject to any legal proceedings that could have a material adverse effect on its operations; however, it may from time to time become a party to various legal proceedings arising in the ordinary course of its business. For instance, on January 4, 2011, the Company filed a complaint in the United States District Court for the District of Wisconsin (Civ Act. No. 11-CV-02) against Dashwire, Inc. ("Dashwire"), claiming that Dashwire has infringed, and continues to infringe, several of the Company's patents. The Company filed an Amended Complaint against Dashwire on April 22, 2011. As a result of these claims, Dashwire filed a complaint

12

Table of Contents

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—UNAUDITED (Continued)

(in thousands, except per share data unless otherwise noted)

9. Legal Matters (Continued)

against the Company in the same court asserting that the Company is infringing two of the Dashwire patents which it recently acquired from Intellectual Venture Partners. The Company believes that the Dashwire claims are without merit, and the Company intends to defend against all of the Dashwire claims. Due to the inherent uncertainties of litigation, the Company cannot predict the outcome of the actions at this time.

10. Subsequent Events

        The Company has evaluated all subsequent events and transactions through the filing date. See Legal Proceedings.

        On April 29, 2011, the Company executed a settlement and amendment agreement with the FusionOne equity holders, including existing employees, which includes a determination of the aggregate Earn-out amount and the Earn-out payment dates. As a result of this agreement, the Company estimates that it will pay approximately $11 million in cash, issue approximately 400 thousand shares of stock and recognize additional expense of approximately $3 million during the year ending December 31, 2011.

        On May 2, 2011, the Company's board of directors authorized a stock repurchase program to purchase up to $20 million of the Company's outstanding common stock. The duration of the repurchase program is twelve months. Under the program, the Company may purchase shares of its common stock in the open market, through block trades or otherwise at prices deemed appropriate by the Company. The timing and amount of repurchase transactions under the program will depend on market conditions and corporate and regulatory considerations. The purchases will be funded from available working capital. The Company will classify stock repurchased as treasury stock on its balance sheet upon commencement of the program. The stock repurchase program may be suspended or discontinued at any time.

13

Table of Contents

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

        The following discussion and analysis should be read in conjunction with the information set forth in our consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q and in our annual report Form 10-K for the year ended December 31, 2010. This report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management as of the date hereof based on information currently available to our management. Use of words such as "believes," "expects," "anticipates," "intends," "plans," "should, "continues," "likely" or similar expressions, indicate a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions. Actual results may differ materially from the forward-looking statements we make. We caution investors not to place substantial reliance on the forward-looking statements included in this report. These statements speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments. All numbers are expressed in thousands unless otherwise stated.

Overview

        We are a leading provider of on-demand transaction management, cloud enablement and mobile connectivity services that enable communications service providers (CSPs), cable operators/multi-services operators (MSOs), original equipment manufacturers (OEMs) with embedded connectivity (e.g. smartphones, laptops, netbooks and mobile Internet devices, among others), e-Tailers/retailers and other customers to accelerate and monetize their go-to-market strategies for connected devices. This includes automating subscriber activation, order management, service provisioning and connectivity and content management from any channel (e.g., e-commerce, telesales, enterprise, indirect and other retail outlets, etc.) to any communication service (e.g., wireless(2G, 3G, 4G), high speed access, local access, IPTV, cable, satellite TV, etc.) across any connected device type and content transfer. Our ConvergenceNow®, ConvergenceNow® Plus^+TM and InterconnectNow^TM platforms provide end-to-end seamless integration between customer-facing channels/applications, communication services, or devices and "back-office" infrastructure-related systems and processes. Our customers rely on our solutions and technology to automate the process of activation and content management for their customers' devices while delivering additional communication services. Our platforms are designed to be flexible and scalable to enable multiple converged communication services to be managed across multiple distribution channels allowing us to meet the rapidly changing and converging services and connected devices offered by our customers. We enable our customers to acquire, retain and service subscribers quickly, reliably and cost-effectively by simplifying the processes associated with managing the customer experience for activating and synchronizing connected devices and services through the use of our platforms.

        Our industry-leading customers include Tier 1 service providers such as AT&T Inc., Verizon and Vodafone, Tier 1 cable operators/MSOs like Cablevision, Charter Communications, Comcast, and Time Warner Cable and large OEMs/e-Tailers such as Apple, Dell, Panasonic and Nokia. These customers utilize our platforms, technology and services to service both consumer and business customers, including over 300 of the Fortune 500 companies.

Revenues

        We generate a substantial portion of our revenues on a per-transaction basis, most of which is derived from contracts that extend up to 60 months from execution. For the three months ended March 31, 2011 and 2010, we derived approximately 77% and 82%, respectively, of our revenues from

14

Table of Contents

transactions processed and subscription arrangements. The remainder of our revenues was generated by professional services and licenses.

        Historically, our revenues have been directly impacted by the number of transactions processed. In recent years, the fourth quarter has had the highest volume of transactions processed due to increased consumer activation activity during the holiday season. The future success of our business depends on the continued growth of consumer and business transactions and, as such, the volume of transactions that we process could fluctuate on a quarterly basis. See "Current Trends Affecting Our Results of Operations" for certain matters regarding future results of operations.

        We currently derive a significant portion of our revenues from one customer, AT&T. For the three months ended March 31, 2011, AT&T accounted for approximately 51% of our revenues compared to 66% for the three months ended March 31, 2010. Our agreement with AT&T was renewed effective January 1, 2009 and runs through December of 2011. AT&T may renew this agreement for two additional one year periods. This agreement defines the work activities, transaction pricing, forecasting process, service level agreements and remedies associated with certain services performed by us for AT&T's ecommerce organization. The agreement provides for AT&T to pay us (i) a monthly hosting fee, (ii) a fee based on the number of transactions processed through our technology platform, (iii) a fee based on manual processing services and (iv) for professional services rendered by us. A copy of this agreement has been previously filed with the Securities & Exchange Commission.

        Our five largest customers, for the three months ending March 31, 2011 were AT&T, Comcast, Level 3, Time Warner Cable, and Verizon, which accounted for approximately 87% of our revenues, compared to 86% of our revenues from our five largest customers, AT&T, Comcast, Level 3, Time Warner Cable, and Vonage, for the three months ended March 31, 2010. See "Risk Factors" for certain matters bearing risks on our future results of operations.

Costs and Expenses

        Our costs and expenses consist of cost of services, research and development, selling, general and administrative, depreciation and amortization, change in contingent consideration and interest and other expense.

        Cost of services includes all direct materials, direct labor, cost of facilities and those indirect costs related to revenues such as indirect labor, materials and supplies. Our primary cost of services is related to our information technology and systems department, including network costs, data center maintenance, database management and data processing costs, as well as personnel costs associated with service implementation, customer deployment and customer care. Also included in cost of services are costs associated with our exception handling centers and the maintenance of those centers. Currently, we utilize a combination of employees and third-party providers to process transactions through these centers.

        Research and development costs are expensed as incurred unless they meet GAAP criteria for deferral and amortization. Software development costs incurred prior to the establishment of technological feasibility do not meet these criteria, and are expensed as incurred. Research and development expense consists primarily of costs related to personnel, including salaries and other personnel-related expenses, consulting fees and the cost of facilities, computer and support services used in service technology development. We also expense costs relating to developing modifications and minor enhancements of our existing technology and services.

        Selling, general and administrative expense consists of personnel costs including salaries, sales commissions, sales operations and other personnel-related expense, travel and related expense, trade shows, costs of communications equipment and support services, facilities costs, consulting fees and costs of marketing programs, such as internet and print. General and administrative expense consists

15

Table of Contents

primarily of salaries and other personnel-related expense for our executive, administrative, legal, finance and human resources functions, facilities, professional services fees, certain audit, tax and bad debt expense.

        Depreciation and amortization relates to our property and equipment and includes our network infrastructure and facilities. Amortization relates to the trademarks, customer lists and technology acquired from Wisor in 2008 and from FusionOne in 2010.

        Net change in contingent consideration obligation consists of the changes to the fair value estimate of the obligation to the FusionOne former equity holders. The estimate is based on the weighted probability achievements of certain financial targets for the period from July 1, 2010 through December 31, 2011.

        Interest and other expense consist of interest on our lease financing obligations and other non-operating expenses.

Current Trends Affecting Our Results of Operations

        Our on-demand business model enables delivery of our proprietary solutions over the Web as a service and has been driven by market trends such as various forms of order provisioning, local number portability, the implementation of new technologies, subscriber growth, competitive churn, network changes, growth of the emerging device market (i.e., smartphone devices, netbooks, etc.) and consolidations in the industry. In particular, the emergence of order provisioning of e-commerce transactions for smartphone devices, wireless, VoIP, LNP, and other communication services surrounding the convergence of bundled services has increased the need for our services and we believe will continue to be a source of growth for us.

        To support the growth driven by the favorable industry trends mentioned above, we continue to look for opportunities to improve our operating efficiencies, such as the utilization of offshore technical and non-technical resources for our exception handling center management. We believe that these opportunities will continue to provide future benefits and position us to support revenue growth. In addition, we anticipate further automation of the transactions generated by our more mature customers and additional transaction types. Our cost of services can fluctuate from period to period based upon the level of automation and the on-boarding of new transaction types.

        We continue to advance our plans for the expansion of our platform footprint with international carriers to support connected devices and multiple networks through our focus on transaction management. Our initiatives with AT&T and other CSP's continue to grow along with our account presence with connected device OEM's. We are also exploring additional opportunities through merger and acquisition activities to support our customer, product and geographic diversification strategies.

Critical Accounting Policies and Estimates

        The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these consolidated financial statements in accordance with GAAP requires us to utilize accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during a fiscal period. The Securities and Exchange Commission ("SEC") considers an accounting policy to be critical if it is important to a company's financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. We have discussed the selection and development of the critical accounting policies with the audit committee of our board of directors, and the audit committee has reviewed our related disclosures in this Form 10-Q. Although

16

Table of Contents

we believe that our judgments and estimates are appropriate, correct and reasonable under the circumstances, actual results may differ from those estimates.

        We believe that of our significant accounting policies, which are described in Note 2 in our Annual Report on Form 10-K for the year ended December 31, 2010, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected. See "Risk Factors" for certain matters bearing risks on our future results of operations.

•

Revenue Recognition and Deferred Revenue



•

Income Taxes



•

Goodwill and Impairment of Long-Lived Assets



•

Stock-Based Compensation



•

Allowance for Doubtful Accounts



•

Business Combinations

        There were no significant changes in our critical accounting policies and estimates discussed in our Form 10-K during the three months ended March 31, 2011. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2010 for a more complete discussion of our critical accounting policies and estimates.

Results of Operations

Three months ended March 31, 2011 compared to the three months ended March 31, 2010

        The following table presents an overview of our results of operations for the three months ended March 31, 2011 and 2010.

        Net Revenue.    Net revenues increased $17.8 million to $52.9 million for the three months ended March 31, 2011, compared to the same period in 2010. This increase was due primarily to increased

17

Table of Contents

transaction volumes and expansion into new programs from our AT&T, Time Warner Cable, and Verizon relationships. Transaction and subscription revenues recognized for the three months ended March 31, 2011 and 2010 represented 77% or $40.9 million and 82% or $28.6 million of net revenues, respectively. Net revenues related to AT&T increased $3.8 million to $27.1 million for the three months ended March 31, 2011 compared to the same period in 2010. AT&T represented 51% of our revenues for the three months ended March 31, 2011, compared to 66% for the three months ended March 31, 2010. Net revenues outside of AT&T generated $25.8 million of our revenues during the three months ended March 31, 2011 as compared to $11.8 million during the three months ended March 31, 2010. Net revenues outside of AT&T represented 49% and 34% of our revenues during the three months ended March 31, 2011 and 2010, respectively. Professional service revenues as a percentage of sales were 20% or $10.6 million for the three months ended March 31, 2011, compared to 18% or $6.4 million for the previous three months ended March 31, 2010. The increase in professional services revenue is primarily due to the expansion of services with new customers. License revenues increased $1.2 million to $1.3 million or 2% of net revenues for the three months ended March 31, 2011 as compared to the same period in 2010. The increase in license revenues is primarily due to the expansion of offerings through acquisitions.

Expense

        Cost of Services.    Cost of services increased $7.0 million to $24.6 million for the three months ended March 31, 2011, compared to the same period in 2010, due primarily to an increase of $3.8 million for outside consultants related to growth in existing and new programs with our customers. There was an increase of $2.0 million in our personnel and related costs and an increase of $382 thousand in stock-based compensation. The increase in personnel and related costs and stock-based compensation was due primarily to an increase in headcount as a result of our continued global expansion and the increase in the fair value of our stock awards which was due to the increase of our stock price. In addition, there was an increase of $784 thousand in telecommunication and facility costs related to the increase call volume and capacity associated with our data facilities. Cost of services as a percentage of revenues decreased to 46.5% for the three months ended March 31, 2011, as compared to 50.3% for the three months ended March 31, 2010.

        Research and Development.    Research and development expense increased $5.8 million to $10.1 million for the three months ended March 31, 2011, compared to the same period in 2010, due to headcount increases. Personnel and related costs increased $2.6 million and stock-based compensation increased $808 thousand. The increase in personnel and related costs and stock-based compensation was due primarily to an increase in headcount as a result of our continued global expansion and the increase in the fair value of our stock awards which was due to the increase of our stock price. Also included in the increase in personnel and related costs and in stock-based compensation costs was $466 thousand related to the FusionOne employee Earn-out achieved in the quarter ended March 31, 2011. In addition there was an increase of $187 thousand in telecommunication and facility costs related to the increase in headcount and the utilization of our expanded resources, an increase of $2.1 million in professional services augmenting our staff related to the development of new technologies and software solutions, and $106 thousand in acquisition related costs. Research and development expense as a percentage of revenues increased to 19.1% for the three months ended March 31, 2011 as compared to 12.2% for the three months ended March 31, 2010.

18

Table of Contents

        Selling, General and Administrative.    Selling, general and administrative expense increased $3.7 million to $10.1 million for the three months ended March 31, 2011, compared to the same period in 2010 primarily due to increased headcount. Personnel and related costs increased by $1.9 million and stock-based compensation expense increased $1.5 million. The increase in personnel and related costs and stock-based compensation was due primarily to an increase in headcount as a result of our continued global expansion and the increase in the fair value of our stock awards which was due to the increase of our stock price. Also included in the increase in personnel and related costs and in stock-based compensation costs were costs of $736 thousand related to the FusionOne employee Earn-out achieved during the quarter ended March 31, 2011. Additionally, we had an increase of $542 thousand of operating expenses related to our continued global expansion. Offsetting the increases was a decrease in bad debt expense of $451 thousand due to increased collections from non-Tier 1 customers. Lastly, during the three months ended March 31, 2011 there were $188 thousand in acquisition related costs. Selling, general and administrative expense as a percentage of revenues increased to 19.2% for the three months ended March 31, 2011, compared to 18.5% for the three months ended March 31, 2010.

        Depreciation and amortization.    Depreciation and amortization expense increased $1.4 million to $3.4 million for the three months ended March 31, 2011, compared to the same period in 2010, primarily related to the amortization of our newly acquired intangible assets of FusionOne and the continued expansion of our platforms. This increase was offset by the completion of the depreciation of certain assets which, for accounting purposes, have reached the end of their respective lives. Depreciation and amortization expense as a percentage of revenues increased to 6.4% for the three months ended March 31, 2011, as compared to 5.7% for the same period in 2010.

        Net change in contingent consideration obligation.    The fair value change in the contingent consideration liability related to the Earn-out for the FusionOne equity holders resulted in additional expense of $2.9 million for the three months ended March 31, 2011. The increase in the estimate of the fair value of the contingent consideration obligation is due to changes in our stock price, FusionOne business achieving quarterly targets and updates to the FusionOne 2011 forecast and the weighted probability of achieving certain future quarterly targets.

        Income from Operations.    Income from operations decreased $2.9 million to $1.7 million for the three months ended March 31, 2011, compared to the same period in 2010. This decrease was due primarily to the change in contingent consideration obligation and increased investments in our research and development staff and related costs. Income from operations as a percentage of revenues decreased to 3.3% for the three months ended March 31, 2011, as compared to 13.3% for the three months ended March 31, 2010.

        Interest and other income.    Interest and other income increased $57 thousand to $168 thousand for the three months ended March 31, 2011, compared to the same period in 2010. Interest and other income increased primarily due to increased interest income from increased cash balances and rates on our investments.

        Interest and other expense.    Interest expense and other expense increased $21 thousand to $295 thousand for the three months ended March 31, 2011, compared to the same period in 2010. Interest and other expense increased primarily due to currency fluctuations related to the settlement of our customer account sales. During three months ended March 31, 2011 and 2010 we recognized $229 thousand and $228 thousand, respectively, of interest expense related to the Bethlehem facility lease.

        Income Tax.    During the three months ended March 31, 2011 and 2010, we recognized approximately $1.5 million and $1.8 million, respectively, in related tax expense. Our effective tax rate was approximately 91.4% and approximately 39.3% during the three months ended March 31, 2011 and

19

Table of Contents

2010, respectively. We review the expected annual effective income tax rate and make changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income, changes to the actual and forecasted permanent book-to-tax differences, or changes resulting from the impact of a tax law change. Our effective tax rate is higher than our US federal statutory rate primarily due to the unfavorable tax impact of the fair market value adjustment for the contingent consideration obligation related to the FusionOne Earn-out for the FusionOne equity holders offset by benefits received from other discrete items including GAAP compensation expense for incentive stock options and the federal R&D tax credit.

Liquidity and Capital Resources

        Our principal source of liquidity has been cash provided by capital market activities and operations. Our cash, cash equivalents and marketable securities balance was $200.9 million at March 31, 2011, an increase of $11.3 million as compared to the end of 2010. This increase was primarily due to the exercise of stock options. We anticipate that our principal uses of cash in the future will be to fund the expansion of our business through both organic growth as well as possible acquisition activities and the expansion of our customer base internationally. Uses of cash will also include facility expansion, capital expenditures and working capital.

Discussion of Cash Flows

        Cash flows from operations.    Net cash provided by operating activities for the three months ended March 31, 2011 was $6.7 million, as compared to $4.3 million for the three months ended March 31, 2010. Our primary uses of cash from operating activities are for personnel related expenditures and outside consultants. We also make cash payments related to taxes and leased facilities. The increase in net cash provided by operating activities for the three months ended March 31, 2011 of $2.4 million as compared to the same period in 2010 is primarily due to changes in working capital which included a $6.0 million increase in deferred revenues offset by a $2.6 million decrease in net income.

        Cash flows from investing.    Net cash used in investing activities for the three months ended March 31, 2011 was $13.2 million, as compared to $3.3 million for the three months ended March 31, 2010. The primary use of cash was $7.4 million used in the purchase of marketable securities and $3.2 million used to purchase property and equipment primarily related to our continued investments in our global information technology and business system infrastructure. Additionally, $2.9 million of cash was used in the acquisition of Sapience Knowledge Systems, Inc.

        Cash flows from financing.    Net cash provided by financing activities for the nine months ended March 31, 2011 was $10.5 million, as compared to $1.5 million for the three months ended March 31, 2010. The increase was due to the $6.8 million in proceeds from the exercise of stock options and a $4.0 million tax benefit from the exercise of stock options, offset by $263 thousand in payments on our capital obligation related to our data facility in the three months ended March 31, 2011.

        We believe that our existing cash and cash equivalents, and cash generated from our existing operations will be sufficient to fund our operations for the next twelve months.

Effect of Inflation

        Although inflation generally affects us by increasing our cost of labor and equipment, we do not believe that inflation has had any material effect on our results of operations for the three months ended March 31, 2011 and 2010.

Off-Balance Sheet Arrangements

        We had no off-balance sheet arrangements as of March 31, 2011 and December 31, 2010.

20

Table of Contents

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

        In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part II, "Item 7A. Quantitative and Qualitative Disclosures about Market Risk" in our Annual Report on Form 10-K for the year ended December 31, 2010, which could materially affect our business, financial condition or future results. We believe our exposure associated with these market risks has not changed materially since December 31, 2010.

Foreign Currency Exchange Risk

        We conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, and Indian Rupee. The financial statements of these foreign subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates for the period for revenues and expenses.

        We do not hold any derivative instruments and do not engage in any hedging activities. Although our reporting currency is the U.S. dollar, we may conduct business and incur costs in the local currencies of other countries in which we may operate, make sales and buy materials. As a result, we are subject to currency translation risk. Further, changes in exchange rates between foreign currencies and the U.S. dollar could affect our future net sales and cost of sales and could result in exchange losses.

        We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our business, results of operations and financial condition. To the extent that our international activities recorded in local currencies increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase and hedging activities may be considered if appropriate.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

        Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2011. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of March 31, 2011, the end of the period covered by this quarterly report, to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in internal controls over financial reporting

        There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

21

Table of Contents

PART II—OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

        On September 5, 2008, September 18, 2008, and September 23, 2008, three complaints were filed against us and certain of our officers and directors in the United States District Court for the District of New Jersey purportedly on behalf of a class of shareholders who purchased our common stock between February 4, 2008 and June 9, 2008 (the "Securities Law Actions"). The complaints were consolidated and an amended complaint was filed by the plaintiffs on March 13, 2009. The plaintiffs in each complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. They alleged that certain of our public disclosures regarding our financial prospects during the proposed class period were false and/or misleading. The principal allegation set forth in each complaint was that we issued misleading statements concerning its business prospects relating to the activation of Apple Inc.'s iPhone product. On April 7, 2010, the Court granted our Motion to Dismiss all of the claims against all of the defendants without prejudice. On August 9, 2010, the parties filed a notice of voluntary dismissal with prejudice, noting that the plaintiff was dismissing the case without receiving payment of any kind.

        On October 23, 2008 and November 3, 2008, complaints were filed in the state court of New Jersey (the "State Derivative Suit") and the United States District Court for the District of New Jersey (the "Federal Derivative Suit") against certain of our officers and directors, purportedly derivatively on our behalf (collectively, the "Derivative Suits"). The Complaints in the Derivative Suits assert that the named officers and directors breached their fiduciary duties and other obligations in connection with the disclosures that also are the subject of the Securities Law Actions described above. We were also named as a nominal defendant in the Derivative Suits, although the lawsuits are derivative in nature and purportedly asserted on our behalf. On October 20, 2010, the parties to the Federal Derivative Suit filed a notice of voluntary dismissal, dismissing the case in its entirety and with prejudice as to the named plaintiff. On November 17, 2010, the parties to the State Derivative Suit filed a notice of voluntary dismissal, dismissing the case in its entirety with prejudice as to the named plaintiff.

        Except for the above claims, we are not currently subject to any legal proceedings that could have a material adverse effect on our operations; however, it may from time to time become a party to various legal proceedings arising in the ordinary course of our business. For instance, on January 4, 2011, we filed a complaint in the United States District Court for the District of Wisconsin (Civ Act. No. 11-CV-02) against Dashwire, Inc. ("Dashwire"), claiming that Dashwire has infringed, and continues to infringe, several of our patents. We filed an Amended Complaint against Dashwire on April 22, 2011. As a result of these claims, Dashwire filed a complaint against us in the same court asserting that we are infringing two of the Dashwire patents which it recently acquired from Intellectual Venture Partners. We believe that the Dashwire claims are without merit, and we intend to defend against all of the Dashwire claims. Due to the inherent uncertainties of litigation, we cannot predict the outcome of the actions at this time.

ITEM 1A.    RISK FACTORS

        In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2010, which could materially affect our business, financial condition or future results. The risks described in our Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our stock could decline, and our stockholders may lose part or all of their investment.

22

Table of Contents

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

        None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

        None.

ITEM 4.    RESERVED

ITEM 5.    OTHER INFORMATION

        None.

ITEM 6.    EXHIBITS

23

Table of Contents

SIGNATURES

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

May 6, 2011

24