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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~August~~November 3130, 2000

/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-22703

GREAT PLAINS SOFTWARE, INC.
(Exact name of registrant as specified in its charter)

MINNESOTA (State or other jurisdiction of incorporation or organization)		45-0374871 (I.R.S. Employer Identification No.)
1701 S.W. 38TH STREET, FARGO, NORTH DAKOTA (Address of principal executive offices)		58103 (Zip Code)

(701) 281-0550
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /

As of ~~September~~November 30, 2000, the number of shares outstanding of the registrant's Common Stock, par value $.01 per share, was 20,~~070~~226,~~225~~146.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GREAT PLAINS SOFTWARE, INC. Consolidated Condensed Balance Sheet (In thousands)

Consolidated Condensed Balance Sheet

				November 30, 2000			May 31, 2000
				(unaudited)
Assets:
	Current assets:
		Cash and cash equivalents		$	40,764		$	26,912
		Investments			23,353			44,698
		Accounts receivable, net			41,735			43,509
		Deferred income tax assets			7,089			5,961
		Other current assets			7,617			10,314

			Total current assets		120,558			131,394
	Property and equipment, net				55,814			46,898
	Goodwill and other intangibles, net				234,550			161,192
	Deferred income tax assets				—			1,444
	Other assets				6,123			6,878

Total assets				$	417,045		$	347,806

Liabilities and stockholders' equity:
	Current liabilities:
		Accounts payable		$	7,066		$	8,403
		Accrued expenses			45,465			28,507
		Deferred revenue			60,964			49,615
		Current portion of long-term debt and capital leases			2,012			1,289

			Total current liabilities		115,507			87,814
	Long-term liabilities:
		Deferred income tax liabilities			6,954			—
		Long-term debt and capital leases, net of current portion			4,074			3,007

			Total liabilities		126,535			90,821
	Stockholders' equity:
		Common stock			202			174
		Additional paid-in capital			312,391			241,909
		Accumulated other comprehensive loss			(8,863	)		(5,025	)
		Retained earnings (accumulated deficit)			(13,220	)		19,927

			Total stockholders' equity		290,510			256,985

	Total liabilities and stockholders' equity.			$	417,045		$	347,806

(In thousands)

				August 31, 2000			May 31, 2000
				(unaudited)
Assets:
	Current assets:
		Cash and cash equivalents		$	34,629		$	26,912
		Investments			22,971			44,698
		Accounts receivable, net			38,165			43,509
		Deferred income tax assets			8,908			5,961
		Other current assets			6,427			10,314
			Total current assets		111,100			131,394
	Property and equipment, net				54,802			46,898
	Goodwill and other intangibles, net				250,414			161,192
	Deferred income tax assets				—			1,444
	Other assets				5,005			6,878
Total assets				$	421,321		$	347,806
Liabilities and stockholders' equity:
	Current liabilities:
		Accounts payable		$	9,254		$	8,403
		Accrued expenses			39,534			28,507
		Deferred revenue			58,430			49,615
		Current portion of long-term debt and capital leases			2,155			1,289
			Total current liabilities		109,373			87,814
	Long-term liabilities:
		Deferred income tax liabilities			8,784			—
		Long-term debt and capital leases, net of current portion			3,493			3,007
			Total liabilities		121,650			90,821
	Stockholders' equity:
		Common stock			201			174
		Additional paid-in capital			309,530			241,909
		Accumulated other comprehensive loss			(7,304	)		(5,025	)
		Retained earnings (accumulated deficit)			(2,756	)		19,927
			Total stockholders' equity		299,671			256,985
Total liabilities and stockholders' equity.				$	421,321		$	347,806

See accompanying notes to the consolidated condensed financial statements.

GREAT PLAINS SOFTWARE, INC.

Consolidated Condensed Statement of Income

(In thousands, except share and per share amounts)

			Three Months Ended August 31, 2000			Three Months Ended August 31, 1999
			(unaudited)			(unaudited)
Revenues:
	License		$	30,847		$	23,445
	Service			36,218			16,423
		Total revenues		67,065			39,868
Cost of revenues:
	License			5,927			5,943
	Service			16,673			6,023
	Amortization of acquired intangibles			1,654			—
		Total cost of revenues		24,254			11,966
		Gross profit		42,811			27,902
Operating expenses:
	Sales and marketing			22,711			13,351
	Research and development			12,174			6,152
	General and administrative			7,121			3,613
	Minority interest			219			—
	Restructuring charge			4,565			—
	Amortization of acquired intangibles			12,315			261
		Total operating expenses		59,105			23,377
Operating income (loss)				(16,294	)		4,525
Other income, net				715			1,316
Income (loss) before taxes				(15,579	)		5,841
Income tax provision				7,104			2,338
	Net income (loss)		$	(22,683	)	$	3,503
Income (loss) per common share:
Basic			$	(1.14	)	$	0.23
Diluted			$	(1.14	)	$	0.22
Shares used in computing income (loss) per common share:
Basic				19,876,778			15,451,912
Diluted				19,876,778			16,120,335

See accompanying notes to the consolidated condensed financial statements.

GREAT PLAINS SOFTWARE, INC. Consolidated Condensed Statement of Income (In thousands, except share and per share amounts)

Consolidated Condensed Statement of Cash Flows

			Three Months Ended Nov. 30, 2000			Three Months Ended Nov. 30, 1999		Six Months Ended Nov. 30, 2000			Six Months Ended Nov. 30, 1999
			(unaudited)			(unaudited)		(unaudited)			(unaudited)
Revenues:
	License		$	34,875		$	27,020	$	65,722		$	50,465
	Service			40,673			20,346		76,891			36,769

		Total revenues		75,548			47,366		142,613			87,234
Cost of revenues:
	License			6,443			6,570		12,370			12,513
	Service			16,547			7,407		33,220			13,430
	Amortization of acquired intangibles			2,278			—		3,932			—

		Total cost of revenues		25,268			13,977		49,522			25,943

	Gross profit			50,280			33,389		93,091			61,291
Operating expenses:
	Sales and marketing			24,971			16,203		47,682			29,554
	Research and development			12,986			7,249		25,160			13,401
	General and administrative			8,108			3,788		15,229			7,401
	Minority interest			225			—		444			—
	Restructuring charge			—			—		4,565			—
	Amortization of acquired intangibles			11,988			358		24,303			619

		Total operating expenses		58,278			27,598		117,383			50,975

Operating income (loss)				(7,998	)		5,791		(24,292	)		10,316
Other income, net				811			1,476		1,526			2,792

Income (loss) before income taxes				(7,187	)		7,267		(22,766	)		13,108
Income tax provision				3,277			2,906		10,381			5,244

		Net income (loss)	$	(10,464	)	$	4,361	$	(33,147	)	$	7,864

Income (loss) per common share:
Basic			$	(0.52	)	$	0.28	$	(1.66	)	$	0.51
Diluted			$	(0.52	)	$	0.27	$	(1.66	)	$	0.49
Shares used in computing income (loss) per common share:
Basic				20,130,715			15,562,499		20,005,898			15,506,289
Diluted				20,130,715			16,255,130		20,005,898			16,187,988

(In thousands)

			Three Months Ended
			August 31, 2000			August 31, 1999
			(unaudited)			(unaudited)
Cash flows from operating activities:
	Net income (loss)		$	(22,683	)	$	3,503
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization			17,645			1,883
	Deferred income tax expense (benefit)			(1,655	)		284
	Changes in operating assets and liabilities excluding the effect of business combinations:
		Accounts receivable		11,810			(1,379	)
		Other current assets		8,996			442
		Accounts payable		15			(2,770	)
		Accrued expenses		(2,061	)		652
		Deferred revenue		(2,863	)		3,780
		Net cash provided by operating activities		9,204			6,395
Cash flows from investing activities:
	Purchases of property and equipment			(6,653	)		(7,311	)
	Net sale (purchase) of investments			21,727			(409	)
	Purchases of businesses, net of cash acquired			(17,938	)		—
	Purchase of other assets			—			(858	)
		Net cash used by investing activities		(2,864	)		(8,578	)
Cash flows from financing activities:
	Exercise of stock options			1,992			2,129
	Payment of long-term debt and capital lease obligations			(615	)		—
		Net cash provided by financing activities		1,377			2,129
Net increase (decrease) in cash and cash equivalents				7,717			(54	)
Cash and cash equivalents at beginning of period				26,912			26,983
Cash and cash equivalents at end of period			$	34,629		$	26,929

See accompanying notes to the consolidated condensed financial statements.

GREAT PLAINS SOFTWARE, INC. Consolidated Condensed Statement of Cash Flows (In thousands)

Notes to Consolidated Condensed Financial Statements

				Six Months Ended
				November 30, 2000			November 30, 1999
				(unaudited)			(unaudited)
Cash flows from operating activities:
	Net income (loss)			$	(33,147	)	$	7,864
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization			35,798			3,633
		Deferred income tax benefit			(1,667	)		(754	)
		Changes in operating assets and liabilities excluding the effect of business combinations:
			Accounts receivable		8,240			(11,147	)
			Other current assets		7,807			(233	)
			Accounts payable		(2,173	)		(1,719	)
			Accrued expenses		4,296			4,821
			Deferred revenue		(329	)		7,933

		Net cash provided by operating activities			18,825			10,398
Cash flows from investing activities:
	Purchases of property and equipment				(11,819	)		(15,530	)
	Net sale of investments				21,345			9,256
	Purchases of businesses, net of cash acquired				(17,938	)		(5,873	)
	Purchase of other assets				(173	)		(10,123	)

		Net cash used by investing activities			(8,585	)		(22,270	)
Cash flows from financing activities:
	Exercise of stock options				4,854			2,638
	Payment of long-term debt and capital lease obligations				(1,242	)		—

		Net cash provided by financing activities			3,612			2,638

Net increase (decrease) in cash and cash equivalents					13,852			(9,234	)
Cash and cash equivalents at beginning of period					26,912			26,983

Cash and cash equivalents at end of period				$	40,764		$	17,749

See accompanying ~~(Unaudited)~~ notes to the consolidated condensed financial statements.

GREAT PLAINS SOFTWARE, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

1. Basis of Presentation

The information at ~~August~~November 3130, 2000 and 1999 and for the three ~~months~~month and six month periods then ended is unaudited, but includes all adjustments (consisting only of normal recurring adjustments) that the ~~Company's~~ management of Great Plains Software, Inc. ("the Company") believes to be necessary for the fair presentation of the financial position, results of operations and changes in cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Despite management's best efforts to establish good faith estimates and assumptions, actual results may differ.

The accompanying interim financial statements should be read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended May 31, 2000. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as permitted by rules and regulations of the Securities and Exchange Commission. Interim results of operations for the three ~~months~~and ~~ended~~six month ~~August~~periods ended November 3130, 2000 are not necessarily indicative of operating results for the full fiscal year.

Certain amounts in the financial statements for the three ~~months~~and six month periods ending ~~August~~November 3130, 1999 have been reclassified to conform with the current period presentation.

2. Earnings per Share

Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity, similar to fully diluted earnings per share.

Stock options are not included in the diluted loss per share calculation for the three ~~months~~and six month periods ended ~~August~~November 3130, 2000 as they are anti-dilutive. As of ~~August~~of November 3130, 2000 there were 3,~~263~~104,~~324~~818 outstanding stock options which could potentially impact diluted earnings per share if the Company were to generate net income. Actual weighted average stock options outstanding using the treasury stock method that would have been included in the earnings per share calculation had the Company generated net income for the three ~~months~~and six month periods ended ~~August~~November 3130, 2000 were ~~648~~1,~~755~~196,677 and 920,871, respectively.

The following table sets forth the computation of basic and diluted net income per share:

(In thousands, except share and per share amounts)			Three Months Ended August 31, 2000			Three Months Ended August 31, 1999
		Three Months Ended						Six Months Ended
Basic earnings (loss) per share calculation:
		November 30, 2000			November 30, 1999			November 30, 2000			November 30, 1999
	Net income (loss) available to common shareholders		$	(22,683	)	$	3,503
		(In thousands, except share and per share amounts)
	Weighted average common shares			19,876,778			15,451,912
Basic earnings (loss) per share calculation:
	Basic net income (loss) per share		$	(1.14	)	$	0.23
	Net income (loss) available to common shareholders	$	(10,464	)	$	4,361		$	(33,147	)	$	7,864
Diluted earnings (loss) per share calculation:
	Weighted average common shares		20,130,715			15,562,499			20,005,898			15,506,289
	Net income (loss)		$	(22,683	)	$	3,503
	Basic net income (loss) per share	$	(0.52	)	$	0.28		$	(1.66	)	$	0.51
	Shares calculation
Diluted earnings (loss) per share calculation:
	Weighted average number of common shares			19,876,778			15,451,912
	Net income (loss)	$	(10,464	)	$	4,361		$	(33,147	)	$	7,864
	Effect of dilutive stock options			—			668,423
	Shares calculation
				19,876,778			16,120,335
	Weighted average number of common shares		20,130,715			15,562,499			20,005,898			15,506,289
	Diluted net income (loss) per share		$	(1.14	)	$	0.22
	Effect of dilutive stock options		—			692,631			—			681,699
			20,130,715			16,255,130			20,005,898			16,187,988
	Diluted net income (loss) per share	$	(0.52	)	$	0.27		$	(1.66	)	$	0.49

3. Comprehensive Income (Loss)

Comprehensive income (loss) for the Company includes net income (loss), the effects of currency translation which are charged or credited to the cumulative translation adjustments account within stockholders' equity, and the unrealized gain/loss on investments available for sale which is recorded within stockholders' equity. Comprehensive income (loss) for the three ~~months~~and six month periods ended ~~August~~November 3130, 2000 and 1999 are as follows:

(Dollars in thousands)		Three Months Ended August 31, 2000			Three Months Ended August 31, 1999
	Three Months Ended						Six Months Ended
Net income (loss)		$	(22,683	)	$	3,503
	November 30, 2000			November 30, 1999			November 30, 2000			November 30, 1999
Changes in cumulative translation adjustments and unrealized gain/loss on investments			(2,279	)		28
	(Dollars in thousands)
Comprehensive income (loss)		$	(24,962	)	$	3,531
Net income (loss)	$	(10,464	)	$	4,361		$	(33,147	)	$	7,864
Changes in cumulative translation adjustments and unrealized gain/loss on investments		(1,559	)		264			(3,838	)		292
Comprehensive income (loss)	$	(12,023	)	$	4,625		$	(36,985	)	$	8,156

4. Business Combination

In June 2000, the Company acquired Solomon Software, Inc. ("Solomon"), a leading provider of flexible business management and e-business solutions, through the issuance of approximately 2.5 million shares of the Company's common stock and $14.6 million in cash.

The transaction above was accounted for using the purchase accounting method and accordingly, the net assets acquired were recorded at their estimated fair values at the effective dates of the acquisitions. The following table presents the purchase price allocation of this acquisition (dollars in thousands):

Cash and fair value of the Company's common stock issued	$	$81,322	~~81,322~~
Direct acquisition costs		438	~~438~~
Net liabilities assumed		25,603	~~26,028~~
Total purchase price	$	$107,363	~~107,788~~
Estimated fair value of tangible assets acquired	$	$15,877	~~15,877~~
Estimated fair value of identifiable intangible assets		30,315	~~30,315~~
Goodwill		72,986	~~73,411~~
Deferred tax liabilities related to identifiable intangibles		(11,815	~~(11,815~~)	)
	$	$107,363	~~107,788~~

The value of the intangible assets was determined bybased on a ~~third~~valuation. ~~party~~The ~~appraiser~~identifiable intangible assets consist of technology, workforce, customer base and trademarks. The goodwill and identifiable intangible assets are being amortized over their estimated lives of four to ~~seven~~ eight years.

The following table presents the consolidated results of operations on an unaudited pro forma basis as if the acquisition of Solomon had taken place at the beginning of the periods presented (dollars in thousands):

	Three Months Ended August 31, 2000			Three Months Ended August 31, 1999
	Six Months Ended November 30, 2000			Six Months Ended November 30, 1999
Total revenues	$	68143,~~039~~587		$	58117,~~607~~585
Net loss	$	(2233,~~937~~401	)	$	(51,~~040~~510	)
Net loss per share	$	(1.1567	)	$	(0.2708	)

The unaudited pro forma results of operations are for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the periods presented or the results which may occur in the future.

5. Restructuring Charge

In June 2000, Great Plains instituted a restructuring plan related to the reorganization and consolidation of operations in various international and United States locations. The restructuring charge of $4.6 million ($2.7 million net of tax benefits) consisted of $0.9 million of existing commitments for rent on facilities that Great Plains will be vacating in various locations internationally as well as in the United

States and $3.7 million of termination payments associated with the elimination of 172 positions throughout the organization. A summary of the payments and accrued restructuring charges as of August 31, 2000 is included in the table below (amounts in thousands).

Description	Restructuring Charge		Payments		Accrued Restructuring August 31, 2000
Severance and termination costs	$	3,655	$	3,117	$	538
Rent commitments		910				910
Total	$	4,565	$	3,117	$	1,448

States and $3.7 million of termination payments associated with the elimination of 172 positions throughout the organization. A summary of the payments and accrued restructuring charges as of November 30, 2000 is included in the table below (amounts in thousands).

Description	Restructuring Charge		Payments		Accrued Restructuring November 30, 2000
Severance and termination costs	$	3,655	$	3,167	$	488
Rent commitments		910		150		760

Total	$	4,565	$	3,317	$	1,248

6. Subsequent Event

In December 2000, Microsoft Corporation ("Microsoft") agreed to acquire Great Plains by exchanging 1.1 shares of Microsoft common stock for each share of Great Plains common stock. Based on the value of Microsoft common stock as of December 21, 2000, the value of this transaction would be approximately $1.1 billion. This transaction is subject to regulatory review.

GREAT PLAINS SOFTWARE, INC.

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

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Company's Consolidated Condensed Financial Statements and Notes thereto.

~~Results~~RESULTS ofOF ~~Operations~~OPERATIONS

The following table sets forth for the periods indicated the percentage of total revenues represented by certain items reflected in the Company's ~~consolidated~~Consolidated ~~condensed~~Condensed ~~statement~~Statement of ~~income~~Income.

				Three Months Ended August 31, 2000		Three Months Ended August 31, 1999
				Three Months Ended				Six Months Ended
As a percentage of total revenues
				November 30, 2000		November 30, 1999		November 30, 2000		November 30, 1999
	Revenues:
As a percentage of total revenues
		License		46.0	%	58.8	%
	Revenues:
		Service		54.0		41.2
		License		46.2	%	57.0	%	46.1	%	57.9	%
			Total revenues	100.0		100.0
		Service		53.8		43.0		53.9		42.1
Cost of revenues:
			Total revenues	100.0		100.0		100.0		100.0
		License		8.8		14.9
Cost of revenues:
		Service		24.9		15.1
		License		8.5		13.9		8.7		14.3
		Amortization of acquired intangibles		2.5
		Service		21.9		15.6		23.3		15.4
			Total cost of revenues	36.2		30.0
		Amortization of acquired intangibles		3.0		—		2.7		—
			Gross profit	63.8		70.0
			Total cost of revenues	33.4		29.5		34.7		29.7
	Operating expenses:
			Gross profit	66.6		70.5		65.3		70.3
		Sales and marketing		33.9		33.5
	Operating expenses:
		Research and development		18.2		15.4
		Sales and marketing		33.1		34.2		33.5		33.9
		General and administrative		10.5		9.1
		Research and development		17.2		15.3		17.6		15.4
		Minority interest		0.3
		General and administrative		10.7		8.0		10.7		8.5
		Restructuring charge		6.8
		Minority interest		0.3		—		0.3		—
		Amortization of acquired intangibles		18.4		0.6
		Restructuring charge		—		—		3.2		—
			Total operating expenses	88.1		58.6
		Amortization of acquired intangibles		15.9		0.8		17.0		0.7
	Operating income (loss)			(24.3	)	11.4
			Total operating expenses	77.2		58.3		82.3		58.5
	Other income, net			1.1		3.3
	Operating income (loss)			(10.6	)	12.2		(17.0	)	11.8
	Income (loss) before income taxes			(23.2	)	14.7
	Other income, net			1.1		3.1		1.1		3.2
	Income tax provision			10.6		5.9
	Income (loss) before income taxes			(9.5	)	15.3		(15.9	)	15.0
	Net income (loss)			(33.8	)%	8.8	%
	Income tax provision			4.4		6.1		7.3		6.0
	Net income (loss)			(13.9	)%	9.2	%	(23.2	)%	9.0	%

~~REVENUES~~Revenues

Revenues. Revenues for the quarter ended ~~August~~November 3130, 2000 were $6775.15 million, representing an increase of 6859.25% over revenues of $3947.94 million for the quarter ended ~~August~~November 3130, 1999. ~~These~~For ~~increases~~the insix ~~revenues~~months ~~were~~ended ~~due~~November 30, ~~primarily~~2000, torevenues were $142.6 million, an ~~increased~~increase ~~demand~~of ~~for~~63.5% ~~the Company's~~over ~~eEnterprise~~revenues ~~and~~of ~~Dynamics~~$87.2 million ~~products~~for ~~and~~the ~~services~~same ~~from~~period ~~both~~last ~~new~~fiscal ~~and~~year. ~~existing~~These ~~customers,~~increases ~~the~~in ~~availability~~revenues ofprimarily ~~the~~resulted ~~Company's~~from ~~new~~Great ~~customer~~Plains' ~~relationship~~recent acquisitions ~~management~~of orSolomon ~~"front~~Software, Inc. ~~office~~("Solomon"), ~~solution~~FRx ~~through a~~Software ~~strategic~~Corporation ~~relationship~~("FRx"), ~~with Siebel~~

Systems, and as a result of the Company's recent acquisitions including Solomon Software, Inc. ("Solomon"), FRx Software Corporation ("FRx"), PWA Group, Limited ("PWA"), RealWorld Corporation ("RealWorld") and BTK Software and Consulting AG ("BTK").

The Company's international revenues increased 71.3% to $11.0 million for the quarter ended August 31, 2000, compared to international revenues of $6.4 million for the quarter ended August 31, 1999. International revenues as a percentage of total revenues were 16.3% and 16.1% for the three months ended August 31, 2000 and 1999, respectively. This increase in revenue is the result of growth in existing markets as well as the acquisition of PWA in the United Kingdom and BTK in Germany.

License. Total license revenues for the quarter ended August 31, 2000 were $30.8 million, representing an increase of 31.6% over license revenues of $23.5 million for the quarter ended August 31, 1999. This increase in total license revenues is attributable to increased market demand for our products from both new and existing customers. Contributing to this increased demand was the availability of additional Great Plains product offerings including our new front office solution and solutions added through the acquisitions of Solomon, FRx, PWA, RealWorld and BTK.

Service. Service revenues for the quarter ended August 31, 2000 were $36.2 million, representing an increase of 120.5% over service revenues of $16.4 million for the quarter ended August 31, 1999. For the three months ended August 31, 2000 and 1999, service revenues as a percentage of total revenues were 54.0% and 41.2%, respectively. The increase in service revenues and increase in service revenue as a percentage of total revenue is due largely to the service associated with our increased number of licenses for our products and renewals of existing maintenance and support contracts from the increased installed base of customers as well as the increased service revenue from Great Plains' recent acquisitions of Solomon, FRx, PWA, RealWorld and BTK.

COSTS AND EXPENSES

Cost of License Revenues. Cost of license revenues consists primarily of the costs of product manuals, media, shipping and royalties paid to third-parties. Cost of license fees for the quarter ended August 31, 2000 were $5.9 million compared to $5.9 million for the quarter ended August 31, 1999, representing 19.2% and 25.3% of total license fee revenues, respectively. Cost of license revenue decreased as a percentage of total license revenue for the quarter ended August 31, 2000 compared to the same period last fiscal year as a result of a lower mix of revenue from sales of third-party products for which Great Plains is obligated to make royalty payments. The decrease in revenue for which Great Plains is obligated to make royalty payments is partially the result of Great Plains acquiring late in fiscal 2000 a number of companies to which we were previously obligated to make royalty payments. These companies were FRx, Southern Plains, LLC and Forestar Asset Management, LLC. The cost of license revenues may increase if Great Plains enters into additional royalty arrangements or if the sales of products which include royalty obligations increase as a percentage of total license revenues.

Cost of Service Revenues. Cost of service revenues consists of the costs of providing electronic and telephone support, training and consulting services to customers and partners. Cost of services for the quarter ended August 31, 2000 increased to $16.7 million from $6.0 million for the quarter ended August 31, 1999, representing 46.0% and 36.7% of total service revenues, respectively. The increase in cost of service revenues in dollars and the increase in cost of service revenues as a percentage of service revenues is due to the expansion of Great Plains' service resources across the eEnterprise and Dynamics product lines, additional team members added to support the new solution areas of front office and electronic commerce, and as a result of additional service resources added as a result of the acquisitions of Solomon, FRx, PWA, Realword and BTK. Great Plains anticipates that cost of service revenues will increase in dollar amount as service revenues increase and may increase as a percentage of service revenues if additional resources are added to support new initiatives.

~~Sales~~ PWA ~~and~~Group, ~~Marketing. Sales~~Limited ~~and~~("PWA"), ~~marketing~~RealWorld ~~expenses~~Corporation ~~consist~~("RealWorld") ~~primarily of salaries, commissions, travel~~ and ~~promotional~~BTK ~~expenses.~~Software ~~Sales~~ and ~~marketing~~Consulting ~~expenses~~AG ~~increased to $22~~("BTK").~~7 million~~ ~~for~~Revenues ~~the~~from ~~quarter~~these ~~ended~~acquisitions ~~August 31,~~represented ~~2000~~33.9% ~~compared~~of ~~with~~total ~~$13.4 million~~revenues for the ~~quarter~~three ~~ended~~months ~~August~~ended November 3130, ~~1999,~~2000 ~~representing 33.9%~~ and 3335.5% of total ~~revenues,~~revenue ~~respectively.~~for ~~The~~the ~~increase~~six inmonths ~~sales~~ended ~~and~~November 30, ~~marketing~~2000. ~~expenses~~These isincreases ~~attributable~~in torevenue ~~increased~~also ~~sales~~resulted ~~personnel~~from ~~and~~continued ~~sales~~demand ~~programs~~for ~~to expand~~our ~~the~~eEnterprise ~~capacity~~ and Dynamics ~~capability~~products ~~of the channel~~ and ~~increased~~services ~~commission~~from ~~expenses~~both ~~associated~~new ~~with~~and ~~higher~~existing ~~revenues. In addition~~customers, ~~sales~~ and ~~marketing~~the ~~expenses~~addition ~~were also increased as a result~~ of ~~sales and marketing expenses associated with~~ the ~~operations~~Company's ~~brought~~new onCustomer ~~through~~Relationship ~~the~~Management ~~acquisitions~~or of"front ~~Solomon,~~office" ~~FRx,~~solution ~~PWA,~~through ~~RealWorld~~a ~~and~~strategic ~~BTK. Great Plains anticipates that sales and marketing expenses will~~relationship ~~increase~~with inSiebel ~~dollar amount as total revenues increase; however, Great Plains does not anticipate significant changes in sales and marketing expenses as a percentage of total revenues~~Systems.

~~Research and Development. Research and development expenses consist primarily of compensation~~The ofCompany's ~~development~~international ~~personnel~~revenues ~~and~~increased ~~depreciation of equipment~~65.2% ~~Total~~to ~~research and development expenses were~~ $1213.20 million for the quarter ended ~~August~~November 3130, 2000, compared ~~with~~to international revenues of $67.29 million for the quarter ended ~~August~~November 3130, 1999. For the six month period ended November 30, ~~representing~~2000, 18international revenues were $25.2% million, ~~and~~an 15increase of 76.4% ofover ~~total~~ international revenues, ~~respectively~~of $14.3 million ~~The~~for ~~increase~~the insame ~~research~~period ~~and~~last ~~development~~fiscal ~~expenses~~year. ~~both~~International inrevenues ~~dollars and~~ as a percentage of total revenues ~~was~~were ~~due~~16.5% toand 16.6% for the ~~acquisitions~~three ofmonths ~~Solomon,~~ended ~~FRx~~November 30, ~~PWA~~ 2000 and ~~BTK~~1999, ~~and~~respectively. asFor athe ~~result~~six ofmonths ~~additional~~ended ~~resources~~November 30, ~~added~~2000 toand ~~further~~1999, ~~develop~~international ~~the~~revenue ~~new~~as ~~solution~~a ~~areas~~percentage of ~~front~~total ~~office~~revenue was 17.4% and ~~electronic~~16.4%, ~~commerce~~respectively. We ~~anticipate~~These ~~that~~increases wein international ~~will~~revenue ~~continue~~are toprimarily ~~devote~~the ~~substantial~~result ~~resources~~of tointernational ~~our~~revenue ~~research~~resulting ~~and~~from ~~development~~the ~~effort~~acquisitions ~~and~~of ~~that~~PWA, ~~research~~Solomon, and ~~development~~BTK, ~~expenses~~and ~~will~~growth ~~increase~~ in ~~dollar~~many ~~amount in future periods and may increase as a percentage~~ of ~~total~~our ~~revenues~~existing markets.

~~General and Administrative~~License. ~~General~~Total ~~and~~license ~~administrative~~revenues ~~expenses~~for ~~consist~~the ~~primarily~~quarter ofended ~~salaries of executive~~November 30, ~~financial~~2000 were $34.9 million, ~~human~~representing ~~resources~~an ~~and~~increase ~~information~~of ~~services~~29.1% ~~personnel,~~over aslicense ~~well~~revenues asof ~~outside~~$27.0 million ~~professional~~for ~~fees.~~the ~~General~~quarter ~~and~~ended ~~administrative~~November 30, ~~expenses~~1999. ~~for~~For the ~~quarter~~six months ended ~~August~~November 3130, 2000, license revenues were $765.17 million, ~~compared~~an ~~with~~increase of 30.2% over license revenues of $350.65 million for the ~~quarter~~same ~~ended~~period ~~August 31,~~last ~~1999,~~fiscal ~~representing 10~~year.5% ~~and~~These ~~9.1%~~increases ofin total license revenues, ~~respectively.~~primarily resulted ~~This~~from ~~increase~~the ~~was~~solutions ~~primarily~~added ~~due~~through to the acquisitions of Solomon, FRx, PWA, RealWorld and BTK. ~~and~~In ~~increased~~addition, ~~professional~~these ~~fees~~increases toin ~~support~~total ~~Great~~license ~~Plains'~~revenue ~~expansion.~~can ~~Great~~be ~~Plains~~attributed ~~believes~~to ~~that~~increased ~~our~~market ~~general~~demand for ~~and~~our ~~administrative~~products ~~expenses~~from ~~will increase~~both innew ~~dollar~~and ~~amount~~existing incustomers ~~the~~as ~~future~~well toas ~~support~~ the ~~expansion~~availability of our ~~operations~~new front office solution.

~~Minority Interest~~Service. ~~Minority~~Service ~~interest~~revenues ~~represents~~for athe ~~49%~~quarter ~~minority~~ended ~~interest~~November 30, in2000 awere $40.7 million, ~~joint~~representing ~~venture~~an increase of ~~a Solomon~~99.9% ~~subsidiary~~over ~~that~~service isrevenues ~~consolidated~~of $20.3 million for ~~financial~~the ~~reporting~~quarter ~~purposes~~ended November 30, 1999. For the ~~quarter~~six months ended ~~August~~November 3130, 2000, service ~~minority~~revenues ~~interest~~were ~~was~~$76.9 million, an increase of 109.1% over service revenues of $036.28 million for the same period last fiscal year. For the three months ended November 30, 2000 and 1999, service revenues as a percentage of total revenues were 53.8% and 43.0%, respectively. For the six months ended November 30, 2000 and 1999, service revenues as a percentage of total revenues were 53.9% and 42.1%, respectively. These increases in service revenues are primarily a result of service revenue resulting from Great Plains' recent acquisitions of Solomon, FRx, PWA, RealWorld and BTK, service revenue associated with an increased number of new licenses for our products, and renewals of existing maintenance and support contracts from our increased installed base of customers. The increases in service revenues as a percentage of total revenues are due both to higher percentage of service revenue than license revenue in the PWA and Solomon businesses as well as the increased service revenue in Great Plains' traditional business as a result of a growing installed base.

~~Restructuring~~Costs ~~Charge. In June 2000, Great Plains instituted a restructuring plan related to the reorganization~~ and consolidation of operations in various international and United States locations. The restructuring charge of $4.6 million ($2.7 million net of tax benefits) consisted of $0.9 million of existing commitments for rent on facilities that Great Plains will be vacating in various locations internationally as well as in the United States and $3.7 million of termination payments associated with the elimination of 172 positions throughout the organization. Expenses

~~Amortization~~Cost of ~~Acquired~~License ~~Intangibles~~Revenues. ~~Amortization~~Cost of ~~acquired~~license ~~intangible~~revenues ~~assets~~consists ~~represents~~primarily of the ~~periodic~~ ~~amortization~~costs ~~expense~~ of ~~acquired~~product manuals, ~~intangibles~~media, shipping and ~~goodwill~~royalties ~~from~~paid ~~acquisitions~~to ~~completed by Great Plains~~third-parties. ~~The~~Cost ~~portion~~ of ~~acquired~~license ~~intangible~~revenues ~~assets~~for ~~that~~the isquarter ~~identified~~ended asNovember 30, ~~'acquired~~2000 ~~technology'~~were ~~is included~~$6.4 million incompared ~~the~~to ~~Cost~~$6.6 million offor ~~Revenues~~the quarter ~~section~~ended ofNovember 30, ~~the~~1999, ~~Consolidated~~representing ~~Condensed~~18.5% ~~Statement~~and ~~of Income~~24.3% ~~The~~of ~~acquired~~total ~~technology~~license ~~assets~~revenues, ~~are~~respectively. ~~being~~For ~~amortized~~the ~~over~~six ~~their~~months ~~expected~~ended ~~useful~~November 30, ~~lives~~2000, ~~ranging~~cost ~~from~~of ~~four~~license ~~to five~~revenues ~~years~~were $12.4 million ~~Amortization~~compared ofto ~~acquired~~$12.5 million ~~technology~~ for the ~~quarter~~six months ended ~~August~~November 3130, ~~2000~~1999 ~~was~~representing $118.~~7 million,~~8% ~~representing~~and 224.58% of total license revenues, respectively. ~~There~~Cost ~~was~~of nolicense ~~amortization~~revenues decreased as a percentage of ~~acquired technology~~total license revenues for the ~~three~~quarter and six months ended ~~August~~November 3130, ~~1999.~~2000 ~~Amortization~~compared ofto ~~other~~the ~~acquired~~same ~~intangible~~periods ~~assets~~last ~~and~~fiscal ~~goodwill~~year isas ~~recorded~~a ~~within~~result ~~the~~of ~~Operating~~a ~~Expenses~~lower ~~section~~portion of ~~the Consolidated~~ ~~Condensed~~revenue ~~Statement~~from sales of ~~Income.~~third-party ~~The~~products ~~goodwill~~for ~~and~~which ~~acquired~~Great ~~intangibles~~Plains ~~are~~is ~~being~~obligated ~~amortized over their expected useful lives ranging from four~~ to ~~seven~~make ~~years~~royalty payments. ~~Amortization~~The ofdecrease ~~acquired~~in ~~intangible~~revenue ~~assets~~ for ~~the~~which ~~quarter~~Great ~~ended~~Plains ~~August 31,~~is ~~2000~~obligated ~~was~~to ~~$12.3 million~~make ~~compared~~royalty topayments ~~$0.3 million~~is partially ~~for~~ the ~~quarter~~result ~~ended August 31, 1999, representing 18.4% and 0.6%~~ of ~~total~~

~~revenues,~~Great ~~respectively.~~Plains ~~The~~acquiring ~~increase~~a ofnumber ~~amortization~~ of ~~intangibles~~companies ~~both~~late in ~~dollar~~fiscal ~~amount~~2000 ~~and~~to aswhich awe ~~percentage~~were ofpreviously ~~total~~obligated ~~revenues~~to ismake ~~due~~royalty topayments. ~~the~~These ~~acquisitions~~companies ~~that~~ were ~~completed~~FRx, ~~during~~Southern ~~fiscal~~Plains, ~~2000~~LLC ~~as well~~and asForestar ~~the~~Asset Management, ~~acquisition of Solomon which occurred in June 2000~~LLC. ~~See~~The ~~Note 4~~cost ~~"Business~~of ~~Combinations"~~license torevenues ~~Consolidated~~may ~~Condensed~~increase ~~Financial~~if ~~Statements~~Great ~~contained~~Plains ~~within~~enters ~~this~~into ~~document~~additional asroyalty ~~well as~~arrangements ~~Note 2~~or toif the ~~consolidated~~ ~~financial~~sales ~~statements~~ of ~~the~~products ~~Company~~which ~~included~~include inroyalty ~~the~~obligations ~~Company's~~increase ~~Annual~~as ~~Report~~a percentage onof ~~Form 10-K~~total ~~for~~license ~~the year ended May 31, 2000~~revenues.

~~Other~~Cost ~~Income,~~of ~~Net~~Service Revenues. ~~Other~~Cost ~~income,~~of ~~net,~~service revenues consists ~~primarily~~of the costs of ~~earnings~~providing electronic ~~from~~and ~~investments~~telephone support, ~~net~~training ~~of any~~and ~~interest~~consulting ~~expense.~~services ~~Other~~to ~~income,~~customers ~~net~~and ~~was $0~~partners.~~7 million~~ Cost of service revenues for the quarter ended ~~August~~November 3130, 2000, ~~compared~~increased ~~with~~to $116.35 million from $7.4 million for the quarter ended ~~August~~November 3130, 1999, representing 40.7% ~~The decrease~~and in36.4% ~~other~~of ~~income~~total service revenues, ~~net~~respectively. ~~for~~For the ~~quarter~~six months ended ~~August~~November 3130, 2000, ~~compared~~cost of service revenues increased to $33.2 million from $13.4 million for the ~~same~~six ~~period~~months ended November 30, 1999, representing 43.2% and 36.5% of total service revenues, respectively. The increase in cost of service revenues in dollars and the ~~last~~increase ~~fiscal~~in ~~year~~cost ~~was~~of ~~primarily~~service revenues as a ~~result~~percentage of ~~decreased~~service ~~investment~~revenues ~~earnings~~is primarily due to ~~decreased investments~~the asadditional service resources added a result of the acquisitions of ~~cash~~Solomon, ~~used~~FRx, ~~for~~PWA, ~~acquisitions~~RealWord and BTK, and the expansion of Great Plains' service resources across the eEnterprise and Dynamics product lines including the new solution areas of front office, electronic commerce and supply chain management. Great Plains anticipates that cost of service revenues will increase in dollar amount as service revenues increase and may increase as a percentage of service revenues if additional resources are added to support new initiatives.

~~Provision~~Sales ~~for~~and ~~Income Taxes~~Marketing. ~~The~~Sales ~~Company's~~and ~~income~~marketing ~~tax~~expenses ~~provision~~consist ~~for~~primarily ~~the~~of ~~quarter~~salaries, ~~ended August 31~~commissions, travel ~~2000~~and ~~was~~promotional expenses. Sales and marketing expenses increased to $725.10 million for the quarter ended November 30, 2000 compared with $216.32 million for the quarter ended ~~August~~ November 3130, 1999, representing 33.1% ~~The~~and ~~income~~34.2% ~~tax~~of ~~provision~~total revenues, respectively. For the six months ended November 30, 2000, sales and marketing expenses increased to $47.7 million from $29.6 million for the ~~three~~six months ended ~~August~~November 3130, 1999, representing 33.4% and 33.9% of total revenues, respectively. The increase in sales and marketing ~~2000~~expenses is alargely ~~result~~attributable ofto sales and marketing expenses associated with the ~~non-deductibility~~operations ~~for~~brought ~~income~~on ~~tax~~through ~~purposes~~the acquisitions of Solomon, FRx, PWA, RealWorld and BTK. The increase in sales and marketing expense is also attributable to increased sales personnel and new programs to expand the ~~amortization~~capacity and capability of ~~certain~~the ~~acquired~~Great ~~intangible~~Plains ~~assets~~channel as well as from increased commission expenses associated with higher revenues. Great Plains anticipates that sales and marketing expenses will increase in dollar amount as total revenues increase; however, Great Plains does not anticipate significant changes in sales and marketing expenses as a percentage of total revenues.

Research and Development. Research and development expenses consist primarily of compensation of development personnel and depreciation of equipment. Total research and development expenses were $13.0 million for the quarter ended November 30, 2000 compared with $7.2 million for the quarter ended November 30 1999, representing 17.2% and 15.3% of total revenues, respectively. For the six months ended November 30, 2000, research and development expenses were $25.2 million compared to $13.4 million for the six months ended November 30, 1999, representing 17.6% and 15.4% of total revenues, respectively. The increase in research and development expenses both in dollars and as a percentage of total revenues was largely due to the acquisitions of Solomon, FRx, PWA and BTK. We anticipate that we will continue to devote substantial resources to our research and development effort and that research and development expenses will increase in dollar amount in future periods and may increase as a percentage of total revenues.

General and Administrative. General and administrative expenses consist primarily of salaries of executive, financial, human resources and information services personnel, as well as outside professional fees. General and administrative expenses for the quarter ended November 30, 2000 were $8.1 million, compared with $3.8 million for the quarter ended November 30, 1999, representing 10.7% and 8.0% of total revenues, respectively. For the six months ended November 30, 2000 general and administrative expenses were $15.2 million compared to $7.4 million for the six months ended November 30, 1999,

representing 10.7% and 8.5% of total revenues, respectively. This increase was primarily due to the acquisitions of Solomon, FRx, PWA, RealWorld and BTK and increased professional fees to support Great Plains' expansion. Great Plains believes that our general and administrative expenses will increase in dollar amount in the future to support the expansion of our operations.

Minority Interest. Minority interest represents a 49% minority interest in a joint venture that is consolidated for financial reporting purposes. The subsidiary is responsible for certain research and development activities for the Solomon product line. For the quarter and six months ended November 30, 2000, minority interest was $0.2 million and $0.4 million, respectively.

Restructuring Charge. In June 2000, Great Plains instituted a restructuring plan related to the reorganization and consolidation of operations in various international and United States locations. The restructuring charge of $4.6 million ($2.7 million net of tax benefits) consisted of $0.9 million of existing commitments for rent on facilities that Great Plains will be vacating in various locations internationally as well as in the United States and $3.7 million of termination payments associated with the elimination of 172 positions throughout the organization.

Amortization of Acquired Intangibles. Amortization of acquired intangible assets represents the periodic amortization expense of acquired intangibles and goodwill from acquisitions completed by Great Plains. The portion of acquired intangible assets that is identified as "acquired technology" is included in the Cost of Revenues section of the Consolidated Condensed Statement of Income. The acquired technology assets are being amortized over their expected useful lives ranging from four to five years. Amortization of acquired technology for the quarter ended November 30, 2000 was $2.3 million, representing 3.0% of total revenues. For the six months ended November 30, 2000, amortization of acquired technology was $3.9 million, representing 2.8% of total revenues. There was no amortization of acquired technology for the three and six month periods ended November 30, 1999. Amortization of other acquired intangible assets and goodwill is recorded within the Operating Expenses section of the Consolidated Condensed Statement of Income. The goodwill and acquired intangibles are being amortized over their expected useful lives ranging from four to eight years. Amortization of acquired intangible assets for the quarter ended November 30, 2000 was $12.0 million compared to $0.4 million for the quarter ended November 30, 1999, representing 15.9% and 0.8% of total revenues, respectively. For the six months ended November 30, 2000, amortization of acquired intangible assets was $24.3 million compared to $0.6 million for the six months ended November 30, 1999 representing 17.0% and 0.7% of total revenues, respectively. The increase of amortization of intangibles both in dollar amount and as a percentage of total revenues is due to the acquisitions that were completed during fiscal 2000 as well as the acquisition of Solomon which occurred in June 2000. See Note 4 "Business Combinations" to Consolidated Condensed Financial Statements contained within this document as well as Note 2 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended May 31, 2000.

Other Income, Net. Other income, net, consists primarily of earnings from investments, net of any interest expense. Other income, net was $0.8 million for the quarter ended November 30, 2000, compared with $1.5 million for the quarter ended November 30, 1999. For the six months ended November 30, 2000, other income, net was $1.5 million compared to $2.8 million for the same period last fiscal year. The decrease in other income, net for the quarter and six months ended November 30, 2000 compared to the same periods in the last fiscal year was primarily a result of decreased investment earnings due to decreased investments as a result of cash used for acquisitions.

Provision for Income Taxes. The Company's income tax provision for the quarter ended November 30, 2000 was $3.3 million, compared with $2.9 million for the quarter ended November 30, 1999. For the six months ended November 30, 2000, the provision for income taxes was $10.4 million compared to $5.2 million for the same period last fiscal year. The income tax provision for the three and six months ended November 30, 2000 is a result of the non-deductibility for income tax purposes of the amortization of certain acquired intangible assets.

Net income (loss). Net income (loss) was ($10.5) million and $4.4 million for the three months ended November 30, 2000 and 1999, respectively. Net income (loss) was ($33.1) million and $7.9 million for the six months ended November 30, 2000 and 1999, respectively. The decrease in net income to a net loss position is due primarily to the amortization of acquired intangibles that Great Plains recorded as a result of acquisitions that were completed during the latter half of fiscal 2000 and the Solomon acquisition completed in fiscal 2001 as well as the $4.6 million restructuring charge incurred in the first quarter of fiscal 2001. Great Plains anticipates that it will experience net losses for the foreseeable future as a result of the amortization expenses associated with these acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

Great Plains has historically funded operations primarily through cash provided by operations and the sale of equity securities. Currently, Great Plains meets its working capital needs with cash provided by operations.

Cash provided by operating activities for the ~~three~~six months ended ~~August~~November 3130, 2000 was $918.28 million, compared with $610.4 million for the ~~three~~six months ended ~~August~~November 3130, 1999. ~~The~~For ~~increase~~the insix ~~cash~~months ~~provided~~ended byNovember 30, ~~operations~~2000, ~~for~~ the ~~quarter~~$18.8 million ~~ended~~of ~~August 31,~~cash ~~2000,~~generated from operating activities was ~~due~~primarily tothe anresult ~~increase~~of inthe net loss being adjusted for depreciation and amortization ~~expense,~~as awell ~~decrease~~as decreases in our accounts receivable balance and ~~a decrease in~~ other current assets. ~~These~~The ~~increases~~depreciation ~~were~~and ~~offset,~~amortization inadjustment ~~part~~was $35.8 million for the six months ended November 30, by2000 acompared ~~net~~to ~~loss~~$3.6 million for the six months ended November 30, a1999. ~~decrease~~The increase in ~~accrued~~the ~~expenses~~depreciation and aamortization ~~decrease~~adjustment inover ~~deferred~~the prior ~~revenue~~years ~~excluding~~amount is due to the ~~impact of~~amortization associated with the ~~Solomon~~acquisitions ~~acquisition.~~that ~~Deferred~~took ~~revenue,~~place ~~excluding~~in the ~~impact~~latter half of fiscal 2000 and the Solomon acquisition, ~~decreased~~in on2001. ~~August~~For the six months ended November 3130, ~~2000~~1999, inthe ~~comparison~~$10.4 million toof ~~May 31,~~cash ~~2000~~generated ~~due~~from tooperating ~~the~~activities ~~staggered~~was ~~timing~~primarily the result of the net income being adjusted upwards for the depreciation and amortization ~~support~~charge and ~~enhancement~~increases ~~plan~~in ~~renewals~~accrued expenses and deferred revenue. This amount was offset by an increase in our accounts receivable balance.

The Company's investing activities used cash of $28.96 million for the ~~three~~six months ended ~~August~~November 3130, 2000, compared with $822.63 million for the ~~three~~six months ended ~~August~~November 3130, 1999. For the ~~quarter~~six months ended ~~August~~November 3130, 2000, cash used for investing activities consisted primarily of $17.9 million for the purchase of businesses and $611.78 million for the purchase of property and equipment, including costs associated with the construction of a second building on ~~the~~Great ~~Company~~Plains's Fargo, North Dakota campus. These cash outlays were offset, in part, by cash generated from the net sale of $21.73 million inof investments. For the ~~quarter~~ six months ended ~~August~~November 3130, 1999, cash used for investing activities consisted of $715.35 million for the purchase of property and equipment, and $010.91 million for the purchase of other assets. ~~and~~These ~~$0.4 million~~cash ~~for~~outlays were offset, in part, by the net ~~purchase~~sale of $9.3 million of investments.

The Company's financing activities provided cash of $13.46 million during the ~~three~~six months ended ~~August~~November 3130, 2000, compared with cash provided of $2.16 million for the ~~three~~six months ended ~~August~~November 3130, 1999. For the ~~quarter~~six months ended ~~August~~November 3130, 2000, cash provided by financing activities was comprised of $24.09 million in proceeds from the exercise of stock options offset by $01.62 million payment for long-term debt and capital lease obligations. For the ~~quarter~~six months ended ~~August~~November 3130, 1999, cash provided by financing activities was comprised of $2.16 million in proceeds from the exercise of stock options.

The Company's sources of liquidity at ~~August~~November 3130, 2000 consisted principally of cash, cash equivalents and investments totaling $5764.61 million. Great Plains also has a $10.0 million revolving line of credit facility with a bank. The line of credit expires November 2000, and borrowings made thereunder are subject to certain covenants. No amounts were outstanding under the line of credit at August 31, 2000. Great Plains

1113

credit facility with a bank. The line of credit expires November 2001, and borrowings made thereunder are subject to certain covenants. No amounts were outstanding under the line of credit at November 30, 2000. Great Plains believes that our existing cash, cash equivalents and investments, cash generated from operations and the amounts available under the line of credit will be sufficient to fund its operations for the foreseeable future.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission published Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." This SAB summarized certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. This SAB, as amended, is currently required to be implemented by Great Plains in the fourth quarter of fiscal 2001. Great Plains' management believes the adoption of SAB No. 101 will not have a material effect on Great Plains' financial statements.

In June 1998, the Financial Accounting Standards Board issued Statement No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities." This standard establishes accounting and reporting standards for derivative instruments and hedging activities. The Company must adopt SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, no later than June 1, 2001. Management believes the adoption of SFAS No. 133 will not have a material effect on the Company's financial statements.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

The foregoing Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent the Company's expectations or beliefs, including, but not limited to, statements concerning the Company's operations and financial performance and condition. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, certain of which are beyond the Company's control, and actual results may differ materially depending on a variety of important factors, including those described in Exhibit 99.1 to this Quarterly Report filed on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Great Plains does not have operations subject to risks of material foreign currency fluctuations, nor does it use derivative financial instruments in ~~its~~our operations or investment portfolio. Great Plains places its investments in instruments that meet high credit quality standards, as specified in ~~its~~our investment policy guidelines. The Company does not expect any material loss with respect to ~~its~~our investment portfolio or exposure to market risk associated with interest rates.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

~~None~~The 2000 Annual Meeting of Shareholders of Great Plains Software, Inc. (the "Company") was held on September 13, 2000 (the "Annual Meeting"). Holders of the Company's common stock of record on July 26, 2000 were entitled to one vote per share.

At the Annual Meeting, J. A. Heidi Roizen and Joseph S. Tibbetts, Jr. were elected directors for a term of three years and James Leland Strange was elected to the Board for a one year term. The number of votes cast for the election of each director and the number of votes withheld were as follows:

	FOR	WITHHELD
J.A. Heidi Roizen	14,051,054	53,318
Joseph S. Tibbetts, Jr.	14,059,704	44,668
James Leland Strange	13,937,067	167,305

The other directors whose terms of office as directors continued after the Annual Meeting are Douglas J. Burgum, Bradley J. Burgum and Frederick W. Burgum.

With respect to the proposal to approve the appointment of PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal year ending May 31, 2001, there were 14,085,477 votes cast for the proposal, 10,337 votes cast against the proposal and 8,558 abstentions. There were no broker nonvotes with respect to such matter.

With respect to the proposal to increase the number of shares authorized under the Company's Employee Stock Purchase Plan by 875,000 shares, there were 13,747,963 votes cast for the proposal, 314,816 votes cast against the proposal and 41,593 abstentions. There were no broker nonvotes with respect to such matter.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a): Exhibits

3.1		Amended and Restated Articles of Incorporation, ~~as amended~~ (incorporated herein by reference to Exhibit 3.12 to the Company's Registration Statement on Form S-1 filed March 5, 1997 (SEC File No. 333-22833))
3.2		Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed October 16, 2000)
27.1		Financial Data Schedule
99.1		Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

(b): Reports on Form 8-K

~~On June 9, 2000, the Company filed a form 8-K (as amended on June 28, 2000) reporting the acquisition of Solomon Software, Inc~~None. ~~as an Item 2 event.~~ ~~The financial statements of Solomon Software, Inc. and pro forma financial information of the Company were filed as Item 7 information therewith.~~

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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.

Date: October 13, 2000	GREAT PLAINS SOFTWARE, INC.
	By	/s/ DOUGLAS J. BURGUM Douglas J. Burgum Chairman of the Board, President and Chief Executive Officer (principal executive officer)
	By	/s/ TAMI L. RELLER Tami L. Reller Chief Financial Officer (principal financial officer)
	By	/s/ DAVID K. EDSON David K. Edson Controller (principal accounting officer)

Date: January 12, 2001

14GREAT PLAINS SOFTWARE, INC. By /s/ DOUGLAS J. BURGUM Douglas J. Burgum Chairman of the Board, President and Chief Executive Officer By /s/ TAMI L. RELLER Tami L. Reller Chief Financial Officer By /s/ DAVID K. EDSON David K. Edson Controller

EXHIBIT INDEX

3.1		Amended and Restated Articles of Incorporation, ~~as amended~~ (incorporated herein by reference to Exhibit 3.12 to the Company's Registration Statement on Form S-1 filed March 5, 1997 (SEC File No. 333-22833))
3.2		Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed October 16, 2000)
27.1		Financial Data Schedule
99.1		Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

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PART I—FINANCIAL INFORMATION
GREAT PLAINS SOFTWARE, INC. Consolidated Condensed Balance Sheet (In thousands)
GREAT PLAINS SOFTWARE, INC. Consolidated Condensed Statement of Income (In thousands, except share and per share amounts)
GREAT PLAINS SOFTWARE, INC. Consolidated Condensed Statement of Cash Flows (In thousands)
GREAT PLAINS SOFTWARE, INC. Notes to Consolidated Condensed Financial Statements (Unaudited)
GREAT PLAINS SOFTWARE, INC.
PART II. OTHER INFORMATION
SIGNATURES
EXHIBIT INDEX

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