~~Table~~STRATUS ofTECHNOLOGIES ~~Contents~~INTERNATIONAL, S.à r.l

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

Date: ~~July 13~~January 11, ~~2005~~ 2006

Commission File Number 333-112764

STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.

(Translation of registrant’s name into English)

123, Avenue de X Septembre, L-2551 Luxembourg

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x [X] Form 40-F ¨[ ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(7) :

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨[ ] No x[X]

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .

~~Table~~STRATUS ofTECHNOLOGIES ~~Contents~~INTERNATIONAL, S.à r.l

EXHIBITS

Exhibit 99.1

Report of the Condensed Consolidated Results of Operations for the ~~first~~Third Quarterly Period Ended ~~May 29~~November 27, 2005.

~~Table~~2 ~~of Contents~~

~~SIGNATURES~~STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l

~~Pursuant~~SIGNATURES ~~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.~~

	STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.
	(Registrant)
Date: July 13, 2005	By:	/s/ GRAHAM DAVID MCGREGOR-SMITH
	Name:	Graham David McGregor-Smith
	Title:	Manager

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.


	STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.
	(Registrant)

Date: January 11, 2006	By:	/s/ Graham David McGregor-Smith
	Name:	Graham David McGregor-Smith
	Title:	Manager

~~STRATUS~~3 ~~TECHNOLOGIES INTERNATIONAL, S.á r.l .~~

~~INDEX~~STRATUS TOTECHNOLOGIES ~~THE REPORT OF THE CONDENSED CONSOLIDATED RESULTS OF OPERATIONS FOR THE QUARTERLY PERIOD ENDED MAY 29~~INTERNATIONAL, ~~2005~~S.à r.l

		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of May 29, 2005 and February 27, 2005	2
	Condensed Consolidated Statements of Operations for the fiscal three-month periods ended May 29, 2005 and May 30, 2004	3
	Condensed Consolidated Statements of Cash Flows for the fiscal three-month periods ended May 29, 2005 and May 30, 2004,	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Submission of Matters to a Vote of Security Holders	29
Item 5.	Other Information	29
Item 6.	Exhibits	30

INDEX TO THE REPORT OF THE CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

1FOR THE QUARTERLY PERIOD ENDED NOVEMBER 27, 2005


		Page Number
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of November 27, 2005 and February 27, 2005	2

	Condensed Consolidated Statements of Operations for the fiscal three-month periods ended November 27, 2005 and November 28, 2004	3

	Condensed Consolidated Statements of Operations for the fiscal nine-month periods ended November 27, 2005 and November 28, 2004	4

	Condensed Consolidated Statements of Cash Flows for the fiscal nine-month periods ended November 27, 2005 and November 28, 2004	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34

Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Submission of Matters to a Vote of Security Holders	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

~~STRATUS~~1 ~~TECHNOLOGIES INTERNATIONAL, S.á r.l.~~

~~CONDENSED~~STRATUS ~~CONSOLIDATED~~TECHNOLOGIES ~~BALANCE~~INTERNATIONAL, ~~SHEETS~~S.à r.l.

AsCONDENSED ofCONSOLIDATED ~~May~~BALANCE ~~29,~~SHEETS ~~2005 and February 27, 2005 (Unaudited)~~

	May 29, 2005			February 27,2005
	(In thousands, except pershare amounts.)
ASSETS
Current assets:
Cash and cash equivalents	$	27,365		$	34,751
Accounts receivable, net of allowance for doubtful accounts of $859 and $755		56,437			60,577
Inventory		27,668			32,512
Prepaid expenses and other current assets		6,917			7,222
Total current assets		118,387			135,062
Property, plant and equipment, net		36,534			35,250
Intangible assets, net		21,230			22,898
Goodwill		4,394			4,412
Other assets		14,838			14,540
Total assets	$	195,383		$	212,162
LIABILITIES AND STOCKHOLDER’S DEFICIT
Current liabilities:
Current portion of long-term debt	$	959		$	10,943
Accounts payable		14,519			15,903
Accrued expenses		34,875			40,298
Deferred revenue		50,616			49,741
Other current liabilities		6,655			7,437
Total current liabilities		107,624			124,322
Long-term debt		163,737			163,292
Embedded derivatives		4,705			3,620
Other liabilities		3,615			3,252
Total liabilities		279,681			294,486
Commitments and contingencies (Note 9)
Stockholder’s deficit:
Ordinary stock, $30 par value, 2,401 shares authorized, issued and outstanding		72,015			72,015
Additional paid-in capital		67,119			67,137
Deferred compensation		—			(20	)
Accumulated deficit		(118,785	)		(117,213	)
Accumulated other comprehensive loss		(734	)		(330	)
		19,615			21,589
Preferred shares held in Parent, at cost, 4,938 shares		(58,700	)		(58,700	)
Ordinary shares held in Parent, at cost, 6,763 shares		(45,213	)		(45,213	)
Total stockholder’s deficit		(84,298	)		(82,324	)
Total liabilities and stockholder’s deficit	$	195,383		$	212,162

As of November 27, 2005 and February 27, 2005 (Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.


	November 27, 2005			February 27, 2005
	(in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	23,965		$	34,751
Accounts receivable, net of allowance for doubtful accounts of $551 and $755		39,979			60,577
Inventory		21,070			32,512
Prepaid expenses and other current assets		7,290			7,222

Total current assets		92,304			135,062

Property, plant and equipment, net		33,774			35,250
Intangible assets, net		18,058			22,898
Goodwill		4,315			4,412
Other assets		13,313			14,540

Total assets	$	161,764		$	212,162

LIABILITIES AND STOCKHOLDER’S DEFICIT
Current liabilities:
Current portion of long-term debt	$	—		$	10,943
Accounts payable		14,773			15,903
Accrued expenses		33,587			40,298
Deferred revenue		33,617			49,741
Other current liabilities		5,142			7,437

Total current liabilities		87,119			124,322

Long-term debt		150,101			163,292
Embedded derivatives		2,850			3,620
Other liabilities		2,510			3,252

Total liabilities		242,580			294,486

Stockholder’s deficit:
Ordinary stock, $30 par value, 2,401 shares authorized, issued and outstanding		72,015			72,015
Additional paid-in capital		67,119			67,137
Deferred compensation		—			(20	)
Accumulated deficit		(114,747	)		(117,213	)
Accumulated other comprehensive loss		(1,290	)		(330	)

		23,097			21,589
Preferred shares held in Parent, at cost, 4,938 shares		(58,700	)		(58,700	)
Ordinary shares held in Parent, at cost, 6,763 shares		(45,213	)		(45,213	)

Total stockholder’s deficit		(80,816	)		(82,324	)

Total liabilities and stockholder’s deficit	$	161,764		$	212,162

2The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table~~2 ~~of Contents~~

STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the fiscal three-month periods ended ~~May 29~~November 27, 2005 and ~~May~~ November 28, ~~30,~~ 2004 (Unaudited)

	May 29,2005			May 30,2004
	November 27,2005			November 28,2004
	(In thousands, exceptper share amounts.)
	(in thousands, except per share amounts)
REVENUE
Product	$	26,~~425~~391		$	2728,~~957~~329
Service		3837,~~896~~441			39,~~594~~900
Total revenue		6563,~~321~~832			6768,~~551~~229
COST OF REVENUE
Product		15,~~253~~312			1714,~~955~~395
Service		1615,~~088~~842			1617,~~954~~163
Amortization of intangibles		502			502
Total cost of revenue		31,~~843~~656			3532,~~411~~060
Gross profit		3332,~~478~~176			3236,~~140~~169
OPERATING EXPENSES
Research and development		109,~~113~~562			1211,~~674~~988
Sales, marketing, general and administrative		1514,~~373~~667			1516,~~705~~556
Amortization of intangibles		1,150			1,150
Restructuring charges		407			(10	)
Total operating expenses		25,379			29,694
Total operating expenses		27,043			29,519
Profit from operations		6,797			6,475
Profit from operations		6,435			2,621
Interest income		108			44
Interest income		120			28
Interest (expense)		(5,171	)		(5,670	)
Interest expense		(5,710	)		(5,272	)
Other income (expense), net		(2,334	)		152
Other (expense), net		(1,823	)		(947	)
Income (loss) before income taxes		(600	)		1,001
(Loss) before income taxes		(978	)		(3,570	)
Provision for income taxes		8			(209	)
Provision for income taxes		594			536
Net income (loss)	$	(608	)	$	1,210
Net (loss)	$	(1,572	)	$	(4,106	)
Net income (loss) per share:
Net (loss) per share:
Basic and diluted	$	(0.25	)	$	0.50
Basic and diluted	$	(0.65	)	$	(1.71	)
Weighted average shares used to compute net income (loss) per share:
Weighted average shares used to compute net (loss) per share:
Basic and diluted		2,401			2,401

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table~~STRATUS ofTECHNOLOGIES ~~Contents~~INTERNATIONAL, S.à r.l.

~~STRATUS~~CONDENSED ~~TECHNOLOGIES~~CONSOLIDATED ~~INTERNATIONAL,~~STATEMENTS ~~S.á~~OF ~~r.l.~~OPERATIONS

~~CONDENSED~~For ~~CONSOLIDATED~~the ~~STATEMENTS~~fiscal OFnine-month ~~CASH~~periods ~~FLOWS~~ended November 27, 2005 and November 28, 2004 (Unaudited)

For the fiscal three-month period ended May 29, 2005 and May 30, 2004 (Unaudited)


	November 27, 2005			November 28, 2004
	(in thousands, except per share amounts)
REVENUE
Product	$	80,294		$	85,653
Service		114,062			119,566

Total revenue		194,356			205,219

COST OF REVENUE
Product		45,284			48,956
Service		47,448			53,368
Amortization of intangibles		1,506			1,506

Total cost of revenue		94,238			103,830

Gross profit		100,118			101,389

OPERATING EXPENSES
Research and development		30,016			36,877
Sales, marketing, general and administrative		45,625			48,069
Amortization of intangibles		3,450			3,450
Restructuring charges		186			(10	)

Total operating expenses		79,277			88,386

Profit from operations		20,841			13,003
Interest income		300			101
Interest (expense)		(16,293	)		(16,180	)
Other income (expense), net		(1,284	)		(597	)

Income (loss) before income taxes		3,564			(3,673	)
Provision for income taxes		1,098			967

Net income (loss)	$	2,466		$	(4,640	)

Net income (loss) per share:
Basic and diluted	$	1.03		$	(1.93	)
Weighted average shares used to compute net income (loss) per share:
Basic and diluted		2,401			2,401

	May 29,2005			May 30,2004
	(In thousands, exceptper share amounts)
OPERATING ACTIVITIES
Cash flows from operating activities:
Net loss	$	(1,572	)	$	(4,106	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		5,660			6,243
Amortization of deferred financing costs		584			539
Amortization of debt discount		445			—
Change in fair value of embedded derivatives		1,085			—
Inventory reserve provision		1,369			1,102
Other non-cash adjustments		477			188
Changes in assets and liabilities
Accounts receivable		3,648			4,158
Inventory		(582	)		1,266
Prepaid expenses and other current assets		206			(82	)
Accounts payable		(1,251	)		(4,657	)
Accrued expenses		(5,142	)		2,241
Deferred revenue		1,806			1,424
Other long-term assets and liabilities		(1,946	)		830
Net cash provided by operating activities		4,787			9,146
INVESTING ACTIVITIES
Cash flows from investing activities:
Acquisition of property and equipment		(2,350	)		(2,210	)
Capitalized software		—			(446	)
Net cash used in investing activities		(2,350	)		(2,656	)
FINANCING ACTIVITIES
Cash flows from financing activities:
Deferred financing fees		—			(758	)
Decrease in cash overdraft		—			(796	)
Payments on debt		(9,952	)		(470	)
Net cash used in financing activities		(9,952	)		(2,024	)
Effect of exchange rate changes on cash		129			81
Net increase (decrease) in cash and cash equivalents		(7,386	)		4,547
Cash and cash equivalents at beginning of period		34,751			23,098
Cash and cash equivalents at end of period	$	27,365		$	27,645

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~The~~4 ~~accompanying notes are an integral part of these consolidated financial statements.~~

4STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.

~~Table~~CONDENSED ofCONSOLIDATED ~~Contents~~STATEMENTS OF CASH FLOWS (Unaudited)

~~STRATUS~~For ~~TECHNOLOGIES~~the ~~INTERNATIONAL~~fiscal nine-month periods ended November 27, ~~S.à~~2005 ~~r.l~~and November 28, 2004

NOTE 1 – BASIS OF PRESENTATION


	November 27, 2005			November 28, 2004
OPERATING ACTIVITIES
Cash flows from operating activities:
Net income (loss)	$	2,466		$	(4,640	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		16,446			18,330
Amortization of deferred financing costs and debt discount		3,029			2,148
Provision for doubtful accounts		(119	)		(111	)
Change in fair value of embedded derivatives		(594	)		785
Inventory reserve provision		3,315			2,376
Loss from debt repurchase		1,317			—
Gain on sale of subsidiary		(500	)		—
Other non-cash adjustments		243			1,098
Changes in assets and liabilities
Accounts receivable		18,416			1,464
Inventory		1,931			(597	)
Prepaid expenses and other current assets		(591	)		59
Accounts payable		(578	)		(2,944	)
Accrued expenses		(5,617	)		4,141
Income taxes payable		(1,875	)		(106	)
Deferred revenue		(14,251	)		(1,781	)
Other long-term assets and liabilities		(799	)		(1,312	)

Net cash provided by operating activities		22,239			18,910

INVESTING ACTIVITIES
Cash flows from investing activities:
Acquisition of property and equipment		(6,887	)		(8,460	)
Capitalized software		(711	)		(1,182	)
Proceeds from sale of subsidiary		365			—
Other long-term assets		(14	)		(239	)

Net cash used in investing activities		(7,247	)		(9,881	)

FINANCING ACTIVITIES
Cash flows from financing activities:
Deferred financing fees		—			(1,358	)
Payments on debt		(26,361	)		(1,395	)

Net cash used in financing activities		(26,361	)		(2,753	)
Effect of exchange rate changes on cash		583			(892	)

Net increase (decrease) in cash and cash equivalents		(10,786	)		5,384
Cash and cash equivalents at beginning of period		34,751			23,098

Cash and cash equivalents at end of period	$	23,965		$	28,482

~~(a)~~The accompanying notes ~~Organization~~are an integral part of these condensed consolidated financial statements.

~~Stratus~~5 Technologies International, S.à r.l. (“Stratus S.à r.l.” or “the Company”) is a global provider of fault tolerant computers and related services. When used in these notes, the terms “the Company”, “we”, “our”, and “us” refer to Stratus Technologies International, S.à r.l. and its consolidated subsidiaries, unless otherwise specified. Stratus S.à r.l. is a wholly-owned subsidiary of Stratus Technologies Group, S.A. (“Stratus SA” or the “Parent”).

~~(b)~~STRATUS ~~Basis~~TECHNOLOGIES ~~of Presentation~~INTERNATIONAL, ~~and~~S.à ~~Principles~~r.l ~~of Consolidation~~

~~The accompanying~~NOTE ~~condensed~~1 ~~consolidated~~– ~~financial~~BASIS ~~statements~~OF ~~have~~PRESENTATION been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, adjustments (consisting solely of normal recurring items) necessary for a fair presentation of the results for the periods presented have been included. Results for interim periods should not be considered indicative of results for a full year. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s 2005 Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 27, 2005 (“the 2005 Form 20-F”).

~~The Company operates on~~ (a) ~~52-to-53~~Organization week fiscal year that ends on the Sunday closest to the last day of February. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Stratus Technologies International, S.à r.l. (c“Stratus S.à r.l.” or “the Company”) ~~Restricted~~is ~~Cash~~a global provider of fault-tolerant computers and related services. When used in these notes, the terms “the Company”, “we”, “our”, and “us” refer to Stratus Technologies International, S.à r.l. and its consolidated subsidiaries, unless otherwise specified. Stratus S.à r.l. is a wholly-owned subsidiary of Stratus Technologies Group, S.A. (“Stratus SA” or the “Parent”).

As(b) ofBasis ~~May 29, 2005, the Company had $972 and $1,257~~ of ~~restricted~~Presentation ~~cash~~and ~~included~~Principles ~~in cash and other assets, respectively. As~~ of ~~February~~Consolidation ~~27, 2005, $1,009 of restricted cash was included in cash.~~

The accompanying condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (d“U.S. GAAP”) ~~Recent~~for ~~pronouncements~~interim financial information. Accordingly, they do not include all information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, adjustments (consisting solely of normal recurring items) necessary for a fair presentation of the results for the periods presented have been included. Results for interim periods should not be considered indicative of results for a full year. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s 2005 Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 27, 2005 (“the 2005 Form 20-F”).

InThe ~~November~~Company ~~2004,~~operates ~~the~~on ~~Financial~~a ~~Accounting~~52-to-53 ~~Standards~~week ~~Board~~fiscal ~~(“FASB”)~~year ~~issued~~that ~~FASB~~ends ~~Statement~~on ~~No.~~the ~~151,~~Sunday ~~Inventory~~closest ~~Costs,~~to anthe ~~Amendment~~last day of ~~ARB No~~February. The ~~43,~~accompanying ~~Chapter~~unaudited 4condensed ~~(“SFAS~~consolidated ~~No.~~financial ~~151”).~~statements ~~SFAS~~include ~~No. 151 clarifies~~ the ~~accounting~~accounts ~~for abnormal amounts~~ of ~~idle~~the ~~facility~~Company ~~expense,~~and ~~freight,~~its ~~handling~~wholly-owned ~~costs,~~subsidiaries. ~~and~~All ~~wasted~~intercompany ~~material~~accounts and ~~specifies~~transactions ~~the~~have ~~accounting~~been ~~for the allocation of fixed production overhead costs~~eliminated. ~~SFAS~~Certain ~~No.~~amounts ~~151~~from isprior ~~effective~~years ~~for~~have ~~the~~been reclassified ~~Company~~in ~~beginning on February 27, 2006. The Company does not expect~~ the ~~adoption~~accompanying offinancial ~~SFAS~~statements ~~No.~~in ~~151~~order to ~~have~~be aconsistent ~~material~~with ~~impact~~the oncurrent ~~its~~year’s ~~financial position or results of operations~~classifications.

~~In December 2004, the FASB issued FASB Statement No. 123~~ (~~revised 2004~~c)~~, Share-Based~~ ~~Payment~~Restricted (“SFAS No. 123(R)”), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. SFAS No. 123(R) specifies that companies must use an option-pricing model to estimate fair value, although it does not specifically require the use of a particular model. Under SFAS No. 123(R), the pro forma disclosure will no longer be available to companies as an alternative to financial statement recognition. Nonpublic companies, including Stratus S.à r.l., will be required to adopt the new statement at the beginning of the first annual period after December 15, 2005 and therefore it will be effective for the Company in Fiscal Year 2007 (beginning on February 27, 2006). As a nonpublic company, the Company intends to apply a prospective transaction method under SFAS No. 123(R), continuing to account for any portion of awards that have not been vested by the date that SFAS No. 123(R) is adopted using accounting principles originally applied to these awards. Accordingly, under the prospective method SFAS No. 123(R) would be applied only to new awards and to awards modified, repurchased or cancelled after the effective date. The Company, which currently accounts for its stock-based compensation under APB 25 and discloses the pro forma effect of the fair value recognition provisions of Statement 123, anticipates that the adoption of SFAS No. 123(R) will have an impact on its results of operations.

InAs ~~December 2004, the FASB issued FASB Statement No. 153, Exchange~~ of ~~Nonmonetary Assets~~November 27, ~~an Amendment of APB Opinion No. 29~~2005, ~~Accounting for Nonmonetary Transactions (“SFAS No. 153”). SFAS No. 153 is based on~~ the ~~principle~~Company ~~that~~had ~~exchange~~$908 ofand ~~nonmonetary~~$939 ~~assets should be measured based on the fair market value~~ of ~~the~~restricted ~~assets~~cash ~~exchanged.~~included ~~SFAS~~in ~~No.~~cash ~~153 eliminates the exception of nonmonetary exchanges of similar productive assets~~ and ~~replaces~~other ~~it with a general exception for exchanges of nonmonetary~~ assets, ~~that do not have commercial substance~~respectively. ~~SFAS~~As ~~No.~~of ~~153 is effective for the Company beginning on~~ February 27, ~~2006. The~~ ~~Company~~2005, is$1,009 ~~currently evaluating the provisions~~ of ~~SFAS~~restricted ~~No.~~cash ~~153~~was ~~and~~included ~~does~~in ~~not believe that its adoption will have a material impact on its financial position or results of operations~~cash.

5(d) Recent Pronouncements

~~Table~~In November 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 151, Inventory Costs, an Amendment of ~~Contents~~ARB No.43, Chapter 4 (“SFAS No. 151”). SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material and specifies the accounting for the allocation of fixed production overhead costs. SFAS No. 151 is effective for the Company beginning on February 27, 2006. The Company does not expect the adoption of SFAS No. 151 to have a material impact on its financial position or results of operations.

~~STRATUS~~In ~~TECHNOLOGIES~~December ~~INTERNATIONAL~~2004, the FASB issued FASB Statement No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. SFAS No. 123(R) specifies that companies must use an option-pricing model to estimate fair value, although it does not specifically require the use of a particular model. Under SFAS No. 123(R), the pro forma disclosure will no longer be available to companies as an alternative to financial statement recognition. Nonpublic companies, including Stratus S.à .r.l., will be required to adopt the new statement at the beginning of the first annual period after December 15, 2005 and therefore it will be effective for the Company in Fiscal Year 2007 (beginning on February 27, 2006). As a nonpublic company, the Company intends to apply a prospective transaction method under SFAS No. 123(R), continuing to account for any portion of awards that have not been vested by the date that SFAS No. 123(R) is adopted using accounting principles originally applied to these awards. Accordingly, under the prospective method SFAS No. 123(R) would be applied only to new awards and to awards modified, repurchased or cancelled after the effective date. The Company, which currently accounts for its stock-based compensation under APB 25 and discloses the pro forma effect of the fair value recognition provisions of Statement 123, anticipates that the adoption of SFAS No. 123(R) will have an impact on its results of operations.

~~NOTES~~In TODecember ~~CONDENSED~~2004, ~~CONSOLIDATED~~the ~~FINANCIAL~~FASB ~~STATEMENTS~~issued -FASB ~~continued~~Statement No. 153, Exchange of Nonmonetary Assets, an Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions (“SFAS No. 153”). SFAS No. 153 is based on the principle that exchange of nonmonetary assets should be measured based on the fair market value of the assets exchanged. SFAS No. 153 eliminates the exception of nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 is effective for the Company beginning on February 27, 2006. The Company is currently evaluating the provisions of SFAS No. 153 and does not believe that its adoption will have a material impact on its financial position or results of operations.

~~(Unaudited)~~6

~~The~~STRATUS ~~FASB has~~TECHNOLOGIES issued two FASB Staff Positions (“FSP”) that provide accounting guidance on how companies should account for the effects of the American Jobs Creation Act of 2004 (“AJCA”) that was signed into law on October 22INTERNATIONAL, ~~2004~~S.à ~~The AJCA allows for temporary dividend deductions equal to 85% of cash dividends received during the tax year from controlled corporations and invested in the United States~~r. ~~The result of this legislation could affect how companies report their deferred tax balances~~l. The first FSP (FSP 109-1) concludes that the tax relief from this legislation should be accounted for as a “special deduction” instead of a tax rate reduction. The second FSP (FSP 109-2) gives a company additional time to evaluate the effects of the legislation on any plan for reinvestment or repatriation of foreign earnings for purposes of applying FASB Statement No. 109, Accounting for Income Taxes. The Company has not yet completed its evaluation of the provisions of the AJCA. The Company does not expect the repatriation of foreign earnings to have a material effect on the Company’s consolidated financial statements. The Company has no current plans to utilize the repatriation provision available under the AJCA at this time.

~~NOTE~~NOTES 2TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - ~~INVENTORY~~ continued

The Company currently provides two lines of fault-tolerant servers, the Continuum system family and the ftServer system family. In the first quarter of fiscal 2006, the Company completed its line of product offerings for the ftServer V-Series, which was first made available for sale in the second fiscal quarter of 2005, containing the Company’s proprietary Virtual Operating System (~~“VOS”~~Unaudited). The V-Series provides a migration path for Continuum system customers requiring a more robust, competitive, hardware platform based on standard industry components for use with VOS. In addition, the Company has initiated strategies designed to encourage customers to migrate from the older Continuum product lines to newer Continuum or V-Series platforms. As a result, the Company has determined, consistent with other material classified as spares, that material previously classified as inventory for the older Continuum and pre-Continuum product lines is also more appropriately included in fixed assets as spares, since the primary purpose of this material will be to service the installed base, rather than to produce systems to be sold. The impact of this reclassification as of February 28, 2005 (the beginning of the first quarter of 2006) was $3,781 resulting in a reduction of inventory and an increase to fixed assets. This amount will be depreciated over four years, consistent with the Company’s spare parts accounting policy. The accompanying Condensed Consolidated Statement of Operations includes a non-cash charge of approximately $236 in cost of sales related to this depreciation for the quarter ended May 29, 2005.

The ~~components~~FASB has issued two FASB Staff Positions (“FSP”) that provide accounting guidance on how companies should account for the effects of ~~inventory~~the American Jobs Creation Act of 2004 (“AJCA”) that was signed into law on October 22, ~~including~~2004. The AJCA allows for temporary dividend deductions equal to 85% of cash dividends received during the ~~effect~~tax year from controlled corporations and invested in the United States. The result of this legislation could affect how companies report their deferred tax balances. The first FSP (FSP 109-1) concludes that the ~~reclassification~~tax ~~discussed~~relief ~~above,~~from ~~were~~this legislation should be accounted for as ~~follows:~~a “special deduction” instead of a tax rate reduction. The second FSP (FSP 109-2) gives a company additional time to evaluate the effects of the legislation on any plan for reinvestment or repatriation of foreign earnings for purposes of applying FASB Statement No. 109, Accounting for Income Taxes. The Company has completed its evaluation of the provisions of the AJCA. The Company does not expect the repatriation of foreign earnings to have a material effect on the Company’s consolidated financial statements. The Company has no plans to utilize the repatriation provision available under the AJCA at this time.

	May 29,2005		February 27,2005
Parts and assemblies	$	14,977	$	19,491
Work-in-process		768		869
Finished products		11,923		12,152
Total inventory	$	27,668	$	32,512

In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes and Error Corrections. This statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements. It requires retrospective application to prior periods’ financial statements of all voluntary changes in accounting principles unless it’s not practical to do so. APB Opinion No. 20 previously required that most voluntary changes in accounting principles be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principles. FASB No. 154 is effective for the Company beginning on February 27, 2006. The adoption of FASB No. 154 is not expected to have a material impact on the Company’s results of operations or financial condition.

~~NOTE~~In 3June 2005, the FASB issued a FASB Staff Position (FSP) interpreting FASB 143, Accounting for Asset Retirement Obligations, specifically FSP 143-1, ~~STOCK~~Accounting ~~PLANS~~for Electronic Equipment Waste Obligations (hereinafter “FSP 143-1”). FSP 143-1 addresses the accounting for end-user related obligations associated with Directive 2002/96/EC, Waste Electrical and Electronic Equipment, which was adopted by the European Union (EU). Under the Directive, the waste management obligation for historical equipment (products put on the market on or prior to August 13, 2005) remains with the commercial user until the equipment is replaced. Depending upon the law adopted by the particular country, upon replacement, the waste management obligation for that equipment may be transferred to the producer of the related equipment. The user retains the obligation if it does not replace the equipment. The FSP provides guidance on how to account for the effects of the Directive, but only with respect to historical waste associated with products placed on the market on or before August 13, 2005. FSP 143-1 is effective the later of the first reporting period ending after June 8, 2005, or the date of the adoption of the law by the applicable EU-member country. The adoption of FSP 143-1 did not have a material impact on the Company’s results of operations or financial condition for countries that have adopted the law and is not expected to have a material impact for countries that have not adopted the law.

~~The~~NOTE ~~Company’s~~2 capitalization includes authorization for the issuance of stock options for the purchase of shares of the Parent’s ordinary stock to employees, management, directors or consultants of its direct and indirect subsidiaries under the Stratus Technologies, Inc. Stock Incentive Plan. The Company accounts for stock-~~based~~ ~~compensation~~INVENTORY granted to employees using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The fair value of options granted to employees is disclosed in accordance with SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure an Amendment of SFAS No. 123, and SFAS No. 123.

6In fiscal 2006, the Company has determined that material previously classified as inventory for the older Continuum and pre-Continuum product lines is more appropriately included in fixed assets as spares, since the primary purpose of this material will be to service the installed base, rather than to produce systems to be sold. In the first nine months of fiscal 2006, the Company reclassified $4,230 from inventory to fixed assets. Spares are depreciated over four years, consistent with the Company’s spare parts accounting policy.

~~Table~~The components of ~~Contents~~inventory, net of reserves and including the effect of the reclassification discussed above, were as follows:

STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.


	November 27, 2005		February 27, 2005
Parts and assemblies	$	12,893	$	19,491
Work-in-process		450		869
Finished products		7,727		12,152

	$	21,070	$	32,512

~~NOTES~~7 ~~TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued~~

~~(Unaudited)~~STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.

~~The following~~NOTES ~~table~~TO ~~illustrates~~CONDENSED ~~the~~CONSOLIDATED ~~effect,~~FINANCIAL ~~net~~STATEMENTS ~~of tax effect, on net loss and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock~~-~~based~~ ~~employee~~continued ~~compensation:~~

	Three Months Ended
	May 29,2005			May 30, 2004
Net (loss), as reported	$	(1,572	)	$	(4,106	)
Add: Stock-based employee compensation expense recognized		1			73
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards		(160	)		(537	)
Pro forma net loss	$	(1,731	)	$	(4,570	)
Basic and diluted loss per share: As reported	$	(0.65	)	$	(1.71	)
Pro forma	$	(0.72	)	$	(1.90	)

(Unaudited)

NOTE 43 - ~~NET~~STOCK ~~INCOME~~PLANS ~~(LOSS) PER SHARE~~

~~Basic~~The ~~net~~Company’s ~~income~~capitalization ~~(loss)~~includes ~~per~~authorization ~~share~~for isthe ~~calculated~~issuance ~~using~~of stock options for the ~~weighted-average~~ ~~number~~purchase of shares of the Parent’s ordinary ~~shares~~stock to ~~outstanding~~employees, ~~during~~management, directors or consultants of its direct and indirect subsidiaries under the ~~period~~Stratus Technologies, Inc. ~~Diluted~~Stock ~~net~~Incentive ~~income~~Plan. ~~(loss)~~The ~~per~~Company ~~share~~accounts isfor ~~computed~~stock-based compensation granted to employees using the ~~weighted-average~~intrinsic ~~number~~value method ofprescribed ~~ordinary~~in ~~shares~~Accounting ~~outstanding~~Principles ~~during~~Board ~~the~~Opinion ~~period~~No. 25, ~~plus~~Accounting ~~the~~for ~~dilutive~~Stock ~~effect~~Issued ofto ~~potential ordinary~~Employees, ~~shares~~and related interpretations. The ~~Company~~fair ~~had~~value noof ~~potentially~~options ~~dilutive~~granted ~~ordinary~~to ~~shares~~employees ~~during~~is ~~the~~disclosed ~~three~~in ~~months~~accordance ~~ended~~with ~~May~~SFAS 29No. 148, Accounting ~~2005~~for Stock-Based Compensation Transition and ~~May~~Disclosure 30an Amendment of SFAS No. 123, ~~2004~~and SFAS No. 123.

~~NOTE~~The 5following table illustrates the effect, net of tax effect, on net income (loss) and income (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based ~~WARRANTY~~employee compensation:

The Company warrants that its products will perform in all material respects in accordance with the Company’s standard published specifications in effect at the time of delivery of the products to the customer. The Company offers product warranties typically ranging from 30 days to 1 year. The Company estimates the costs that may be incurred under its basic limited warranty and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the Company’s warranty liability include the number of installed units, whether the units are covered by service contracts, historical and anticipated rates of warranty claims, and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.


	Three Months Ended
	November 27, 2005			November 28, 2004
Net income (loss), as reported	$	(608	)	$	1,210
Add: Stock-based employee compensation expense recognized		—			55
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards		(116	)		(464	)

Pro forma net income (loss)	$	(724	)	$	801

Basic and diluted income (loss) per share:
As reported	$	(.25	)	$	0.50
Pro forma	$	(.30	)	$	0.33

	Nine Months Ended
	November 27, 2005			November 28, 2004
Net income (loss), as reported	$	2,466		$	(4,640	)

Add: Stock-based employee compensation expense recognized		1			184
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards		(403	)		(1,474	)

Pro forma net income (loss)	$	2,064		$	(5,930	)

Basic and diluted income (loss) per share:
As reported	$	1.03		$	(1.93	)
Pro forma	$	.86		$	(2.47	)

~~Changes in the Company’s product warranty liability, which is included in accrued expenses in the Condensed~~NOTE ~~Consolidated~~4 ~~Balance~~- ~~Sheet,~~NET ~~are~~INCOME as(LOSS) ~~follows:~~PER SHARE

	Three Months Ended
	May 29,2005			May 30, 2004
Balance at beginning of fiscal period	$	410		$	556
Current period accrual		147			74
Amounts charged to the accrual		(126	)		(154	)
Balance at end of fiscal period	$	431		$	476

Basic net income (loss) per share is calculated using the weighted-average number of ordinary shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of ordinary shares outstanding during the period, plus the dilutive effect of potential ordinary shares. The Company had no potentially dilutive ordinary shares during the nine months ended November 27, 2005 and November 28, 2004.

NOTE 65 –- ~~RESTRUCTURING,~~WARRANTY ~~ASSET IMPAIRMENT AND OTHER CHARGES~~

The Company ~~implemented~~warrants that its products will perform in all material respects in accordance with the Company’s standard published specifications in ~~restructuring~~effect ~~programs~~at the time of delivery of the products to ~~reduce~~the ~~expenses~~customer. ~~and~~The Company offers product warranties typically ranging from thirty days to ~~align~~one ~~its~~year. ~~operations~~The ~~and~~Company ~~cost~~estimates ~~structure~~the ~~with~~costs that may be incurred under its ~~strategic~~basic ~~direction~~limited warranty and ~~market~~records ~~conditions~~a liability in ~~fiscal~~the ~~2005~~amount of such costs at the time product revenue is recognized. Factors that affect the Company’s warranty liability include the number of installed units, historical and ~~2004~~anticipated rates of warranty claims and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

~~During~~8 the first quarter of fiscal 2006, the Company recorded an additional charge of $289 related to severance and fringe benefits and a charge of $311 related to lease termination and legal expenses with respect to the restructuring program announced in January 2005. In addition, the Company recorded a $(193) adjustment, primarily related to its estimates of severance related costs at certain foreign subsidiaries.

7STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.

~~Table~~NOTES ofTO ~~Contents~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

~~STRATUS~~(Unaudited) ~~TECHNOLOGIES INTERNATIONAL, S.à r.l.~~

~~NOTES~~Changes TOin ~~CONDENSED~~the ~~CONSOLIDATED~~Company’s ~~FINANCIAL~~product ~~STATEMENTS~~warranty -liability, ~~continued~~which is included in accrued expenses in the Condensed Consolidated Balance Sheet, are as follows:

(Unaudited)


	Nine Months Ended
	November 27, 2005			November 28, 2004
Balance at beginning of fiscal period	$	410		$	556
Current period accrual		241			228
Amounts charged to the accrual		(361	)		(385	)

Balance at end of fiscal period	$	290		$	399

~~The~~NOTE ~~following~~6 ~~table~~– ~~summarizes~~RESTRUCTURING, ~~the~~ASSET ~~activity~~IMPAIRMENT ~~related~~AND toOTHER ~~the~~CHARGES ~~restructuring liability during the first three months of fiscal 2006 and fiscal 2005, respectively:~~

	Severance and fringe benefits			Excess facilitycharges and other exit cost			Total
Restructuring liability at February 29, 2004	$	—		$	90		$	90
Restructuring charge		—			—			—
Revisions		—			(10	)		(10	)
Cash payments		—			(25	)		(25	)
Restructuring liability at May 30, 2004	$	—		$	55		$	55
Restructuring liability at February 27, 2005	$	10,071		$	210		$	10,281
Restructuring charge		289			311			600
Revisions		(197	)		4			(193	)
Cash payments		(5,334	)		(288	)		(5,622	)
Restructuring liability at May 29, 2005	$	4,829		$	237		$	5,066

The Company implemented restructuring programs to reduce expenses and to align its operations and cost structure with its strategic direction and market conditions in fiscal 2005 and 2004.

~~The~~During ~~remaining~~the ~~balance at~~first ~~May~~nine 29months of fiscal 2006, ~~2005~~the isCompany ~~expected~~recorded an additional charge of $289 related to beseverance ~~fully~~and ~~utilized~~fringe bybenefits and a charge of $311 related to lease termination and legal expenses with respect to the ~~end~~restructuring program announced in January 2005. In addition, the Company recorded a $(414) adjustment, primarily related to its estimates of ~~fiscal~~severance ~~2006~~related costs.

~~NOTE~~The 7following –table ~~INCOME~~summarizes ~~TAXES~~the activity related to the restructuring liability for the three-month and nine-month periods ended November 28, 2004:

The effective tax rate of 60.7% for the first three months of fiscal 2006 and 15.0% for the same period in fiscal 2005 was higher than the statutory rate primarily as a result of realizing taxable income in certain foreign jurisdictions and not benefiting from taxable losses realized in the U.S. and certain other foreign jurisdictions.


	Severance and Fringe Benefits	Excess Facility Charges & Other Exit Costs			Total
Restructuring Liability as of February 29, 2004	—	$	90		$	90
Restructuring Charges	—		—			—
Revisions	—		(10	)		(10	)
Cash payments	—		(25	)		(25	)

Restructuing Liability as of August 29, 2004	—		55			55

Restructuring Charges	—		—			—
Revisions	—		—			—
Cash payments	—		(3	)		(3	)

Restructuing Liability as of November 28, 2004	—	$	52		$	52

~~The~~9 calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. The Company is currently undergoing a routine examination of the income tax returns of a subsidiary in a foreign jurisdiction. The outcome of this examination cannot be determined at this time since fieldwork was not complete at the time of this filing. The Company anticipates that the examination may be completed during fiscal 2006. Unfavorable settlement of any particular issue would require the use of cash. Favorable resolution would result in a reduction of the Company’s effective tax rate in the quarter of resolution. Any additional impact of the Company’s liability for income taxes cannot presently be determined; however the Company believes its accrued income tax liabilities are adequate.

~~NOTE~~STRATUS 8TECHNOLOGIES –INTERNATIONAL, ~~DEBT~~ S.à r.l.

~~Debt~~NOTES ~~consists~~TO ofCONDENSED ~~the~~CONSOLIDATED ~~following:~~FINANCIAL STATEMENTS - continued

	May 29,2005			February 27, 2005
New Senior Notes	$	170,000		$	170,000
Note payable to Lucent Technologies		—			9,450
Euro loan on R&D facility in Ireland		959			1,493
Total debt		170,959			180,943
Unamortized debt discount		(6,263	)		(6,708	)
Total long-term debt	$	164,696		$	174,235

(Unaudited)

8The following table summarizes the activity related to the restructuring liability for the three-month and nine-month periods ended November 27, 2005:


	Severance and Fringe Benefits			Excess Facility Charges & Other Exit Costs			Total
Restructuring Liability as of February 27, 2005	$	10,071		$	210		$	10,281
Restructuring Charges		289			311			600
Revisions		(453	)		39			(414	)
Cash payments		(7,216	)		(320	)		(7,536	)

Restructuing Liability as of August 28, 2005		2,691			240			2,931

Restructuring Charges		—			—			—
Revisions		—			—			—
Cash payments		(1,402	)		(18	)		(1,420	)

Restructuing Liability as of November 27, 2005	$	1,289		$	222		$	1,511

~~STRATUS~~The ~~TECHNOLOGIES~~remaining ~~INTERNATIONAL~~balance at November 27, ~~S.à~~2005 ris expected to be substantially utilized by the end of fiscal 2006.l.

~~NOTES~~NOTE TO7 ~~CONDENSED~~– ~~CONSOLIDATED~~INCOME ~~FINANCIAL~~TAXES ~~STATEMENTS - continued~~

~~(Unaudited)~~The effective tax rate was 30.8% for the first nine months of fiscal 2006 and 26.3% for the same period in fiscal 2005. The effective tax rate for the first nine months of fiscal 2006 was lower than the statutory rate primarily as a result of a reduction in the tax reserves, offset by realizing taxable income in certain foreign jurisdictions and not benefiting from taxable losses realized in the U.S. and certain other foreign jurisdictions. A tax provision was recorded against a loss before taxes for the first nine months of fiscal 2005 as a result of realizing taxable income in certain foreign jurisdictions and not benefiting from taxable losses realized in the U.S. and certain other foreign jurisdictions offset by a reduction in the tax reserve. In the nine months ended November 27, 2005 and the same period in fiscal 2005, the Company reduced the tax reserves by $0.4 million and $0.8 million, respectively, as a result of the expiration of the statute of limitations to audit specific tax years.

~~On September~~The 3,calculation ~~2004,~~of ~~Stratus,~~the ~~Inc.~~Company’s ~~consummated~~tax anliabilities ~~exchange~~involves ~~offer,~~dealing with uncertainties in ~~which~~the ~~$170,000~~application ~~principal~~of ~~amount~~complex tax regulations in a multitude of jurisdictions 10across our global operations.~~375%~~ ~~Senior~~The ~~Notes,~~Company ~~issued~~recognizes onpotential ~~November~~liabilities ~~18,~~and ~~2003~~records ~~(the~~tax ~~“Old~~liabilities ~~Senior~~for ~~Notes”)~~anticipated ~~were~~tax ~~exchanged~~audit ~~for~~issues ~~new~~in 10the U.~~375%~~S. ~~Senior~~and ~~Notes~~other ~~(the~~tax ~~“New Senior~~jurisdictions ~~Notes”)~~based on its estimate of whether, ~~Upon~~and the ~~effective~~extent ~~date~~to ofwhich, additional ~~the~~taxes ~~registration~~will ofbe ~~the~~due. ~~New~~The ~~Senior~~Company ~~Notes~~adjusts these estimates based on ~~September~~its 3,assessment ~~2004~~of changing facts and circumstances; however, ~~pursuant~~due to ~~Statement~~the complexity of ~~Financial~~these ~~Accounting~~uncertainties, ~~Standards~~ultimate ~~(“SFAS”)~~resolution ~~No.~~may ~~133,~~result ~~Accounting~~in ~~for~~payments ~~Derivative~~that ~~Instruments~~are ~~and Hedging~~materially ~~Activities,~~different ~~certain~~from ~~redemption~~current ~~and~~estimates. ~~change~~The ofCompany ~~control~~is ~~features~~currently ~~are~~undergoing ~~considered~~a ~~embedded~~routine ~~derivatives~~examination ~~and~~of the ~~value~~income oftax ~~which~~returns ~~have~~of ~~been~~a ~~included~~subsidiary in ~~non-current~~a ~~other~~foreign ~~liabilities~~jurisdiction. AsThe outcome of ~~May~~this ~~29,~~examination ~~2005~~cannot ~~and~~be ~~February~~determined ~~27,~~at ~~2005,~~this ~~the~~time ~~fair~~since ~~value~~fieldwork ~~of the~~was ~~embedded~~not ~~derivatives~~complete ~~was~~at ~~approximately~~the ~~$4,705~~time ~~and~~of ~~$3,620,~~this ~~respectively~~filing. The ~~change~~Company inanticipates that the ~~fair~~examination ~~market~~may ~~value~~be completed during fiscal 2006 or early fiscal 2007. Unfavorable settlement of any particular issue would require the ~~embedded~~use ~~derivatives~~of cash. Favorable resolution would result in a reduction of ~~$1,085~~the ~~was~~Company’s ~~included~~effective tax rate in ~~other~~the ~~expense~~quarter ~~for~~of resolution. Any additional impact on the ~~three~~Company’s ~~months~~liability ~~ended~~for ~~May~~income 29taxes cannot presently be determined; however, ~~2005~~the Company believes its accrued income tax liabilities are adequate.

OnNOTE ~~November~~8 ~~18,~~– ~~2003 the Company entered into a $30,000 collateralized~~DEBT revolving credit facility with a maturity date of November 19, 2007 (the “Revolving Credit Facility”). No amounts were outstanding on this facility; however, there were $1,100 of outstanding letters of credit applied against this facility as of May 29, 2005 and February 27, 2005.

OnDebt ~~April~~consists ~~29, 2005, the Company’s wholly-owned subsidiary Cemprus LLC made a principal payment~~ of ~~$9,450 and a final interest payment of $945 to Lucent Technologies, Inc., fulfilling its obligations under~~ the ~~$9,450~~following: ~~note assumed in connection with the Stratus Technologies, Inc. acquisition of Cemprus LLC in February 2003.~~

NOTE 9 – COMMITMENTS AND CONTINGENCIES


	November 27, 2005			February 27, 2005
10.375% Senior Notes due 2008	$	155,000		$	170,000
Note payable to Lucent Technologies		—			9,450
Euro loan facility		—			1,493

		155,000			180,943
Unamortized debt discount		(4,899	)		(6,708	)

Total	$	150,101		$	174,235

~~During~~10 the quarter ended May 29, 2005, in connection with the Company’s restructuring program announced in January 2005, a group of employees of Stratus Technology Ireland Ltd. were transferred to and became employees of a newly-formed and wholly independent company, Telemed Technology Ltd. (“Telemed”). The Company entered into an agreement with Telemed for certain engineering services to be performed over a two year period, representing a commitment of approximately $4,800 of which $111 was expensed during the three months ended May 29, 2005. In addition the Company agreed to provide for severance costs up to approximately $1,257 in the event of any involuntary termination actions, involving any of the transferred employees, occurring over the next two years.

~~NOTE~~STRATUS 10TECHNOLOGIES –INTERNATIONAL, ~~COMPREHENSIVE~~S.à ~~INCOME~~r.l. ~~(LOSS)~~

~~The~~NOTES ~~components~~TO ofCONDENSED ~~comprehensive~~CONSOLIDATED ~~income~~FINANCIAL ~~(loss),~~STATEMENTS ~~net~~- ofcontinued ~~tax, were as follows:~~

	Three Months Ended
	May 29,2005			May 30, 2004
Net (loss)	$	(1,572	)	$	(4,106	)
Other comprehensive income (loss), net of tax:
Foreign currency translation		(391	)		(203	)
Unrealized gain on available for sale securities		(13	)		16
Total comprehensive (loss)	$	(1,976	)	$	(4,293	)

(Unaudited)

~~NOTE~~On 11September 27, 2005, Stratus Inc. purchased and retired $15,000 of its outstanding $170,000 principal 10.375% Senior Notes. The total purchase price paid was $15,450 and the repurchase resulted in a $1,317 loss recorded in other income (expense), net on the retirement of debt, including unamortized debt issuance costs, write-off ~~SEGMENT~~of ~~INFORMATION~~the related debt discount and change in the fair value of the embedded derivatives.

~~During~~On ~~the~~September 3, ~~fourth~~2004, ~~quarter~~Stratus, Inc. consummated an exchange offer, in which $170,000 principal amount of ~~2005~~10.375% Senior Notes, issued on November 18, 2003 (the ~~Company~~“Old ~~significantly~~Senior Notes”) were exchanged for new 10.375% Senior Notes. Upon the effective date of the ~~reorganized~~registration ~~and~~of ~~restructured~~the Senior Notes on September 3, as2004, ~~briefly~~pursuant ~~described~~to inStatement ~~Note~~of 6Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and ~~more~~Hedging ~~completely~~Activities, incertain ~~the~~redemption ~~Company’s~~and ~~2005~~change of ~~Annual~~control ~~Report~~features onare ~~Form~~considered 20embedded derivatives and the value has been included in non-Fcurrent other liabilities. ~~These~~As ~~actions~~of ~~were~~November 27, ~~intended~~2005 toand ~~support~~February 27, 2005, the ~~Company’s~~fair ~~desire~~value toof ~~provide~~the ~~products~~embedded ~~and~~derivatives ~~services~~was ~~seamlessly~~approximately to$2,850 ~~its~~and ~~customers~~$3,620, respectively. The changes in ~~response~~the tofair ~~customers’~~market ~~expectations~~value of ~~their~~the ~~technology~~embedded ~~vendors~~derivatives of $(959) and $594 were included in other income (expense), net for the three months and nine months ended November 27, 2005, respectively. The ~~Company~~change ~~reorganized~~in the ~~largely~~fair ~~along~~market ~~functional~~value ~~lines~~of tothe ~~support~~embedded ~~this~~derivatives ~~change~~of $(785) was included in other income (expense), ~~since~~net for the ~~products~~three months and ~~services~~nine ~~management~~months ~~structure~~ended November 28, 2004.

9On November 18, 2003, the Company entered into a $30,000 collateralized revolving credit facility with a maturity date of November 19, 2007 (the “Revolving Credit Facility”). No amounts were outstanding on this facility; however, there were $1,100 of outstanding letters of credit applied against this facility as of November 27, 2005 and February 27, 2005.

~~Table~~NOTE of9 ~~Contents~~– SALE OF A FOREIGN SUBSIDIARY

On July 7, 2005, the Company’s ~~STRATUS~~wholly-owned ~~TECHNOLOGIES~~subsidiary, ~~INTERNATIONAL~~Stratus Technologies Inc., sold all of the capital stock of its wholly-owned subsidiary, Stratus Technologies, Mexico, S.àA. rde C.lV. for $650, resulting in a $500 gain. The first payment of $185 was received in July 2005. The remaining balance is due ratably in five annual installments beginning on January 31, 2006. The Company has obtained a $500 Performance Bond guaranteed by Fianzas Guardiana Inbursa, S.A. with the purchaser as Obligors and Stratus Technologies, Inc. as the beneficiary.

~~NOTES~~In TOconjunction ~~CONDENSED~~with ~~CONSOLIDATED~~this ~~FINANCIAL~~transaction, the ~~STATEMENTS~~Company’s wholly-owned ~~continued~~subsidiary, Stratus Technologies Ireland Ltd., entered into a Master Product Distribution and Services Agreement, under which the purchaser was appointed as the exclusive reseller of the Company’s products and a provider of maintenance services in Mexico and certain other nearby countries. Stratus Technologies Ireland Ltd. also granted the purchaser a two year royalty-bearing trademark license pursuant to a trademark license agreement in exchange for $300, which will be paid over two years.

NOTE 10 – COMPREHENSIVE INCOME (~~Unaudited~~LOSS)

~~previously~~The ~~employed~~components ~~by the Company no longer aligned with its strategic direction. As a~~of ~~result,~~comprehensive ~~the~~income ~~Company has determined that for fiscal 2006~~(loss), itnet ~~does not have any components~~ of ~~its business that meet the operating segment or reportable segment criteria defined by SFAS No. 131~~tax, ~~Disclosures~~were ~~about~~as ~~Segments~~follows: ~~of an Enterprise and Related Information and operates in one reportable segment.~~

NOTE 12–SUBSEQUENT EVENT


	Three Months Ended					Nine Months Ended
	November 27, 2005			November 28, 2004		November 27, 2005			November 28, 2004
Net income (loss)	$	(608	)	$	1,210	$	2,466		$	(4,640	)
Other comprehensive income (loss), net of tax:
Foreign currency translation		(412	)		432		(993	)		442
Unrealized gain on available for sale securities		30			—		33			16

Total comprehensive income (loss)	$	(990	)	$	1,642	$	1,506		$	(4,182	)

On11 July 7, 2005, the Company’s wholly-owned subsidiary, Stratus Technologies Inc., sold all of the capital stock of its wholly-owned subsidiary, Stratus Technologies, Mexico, S.A. de C.V. for $650. In conjunction with this transaction, the Company’s wholly-owned subsidiary, Stratus Technologies Ireland Ltd., also entered into a Master Product Distribution and Services Agreement, under which the buyer of the stock was appointed as a reseller of the Company’s products and a provider of maintenance services. Stratus Technologies Ireland Ltd. also granted the buyer a two year royalty-bearing trademark license pursuant to a trademark license agreement in exchange for $300, which will be paid over two years.

~~NOTE~~STRATUS ~~13–CONDENSED~~TECHNOLOGIES ~~CONSOLIDATING~~INTERNATIONAL, ~~FINANCIAL~~S.à ~~STATEMENTS~~r.l.

~~The~~NOTES ~~Company~~TO ~~and~~CONDENSED ~~the~~CONSOLIDATED ~~Company’s~~FINANCIAL ~~subsidiaries,~~STATEMENTS Stratus Equity S.à r.l., SRA Technologies Cyprus Limited, Stratus Technologies Bermuda Ltd., Stratus Technologies Ireland Ltd., Cemprus Technologies, Inc. and Cemprus, LLC (“Subsidiary Guarantors”) have fully and unconditionally guaranteed on a joint and several basis, the obligation to pay principal and interest with respect to the $170,000 aggregate principal amount of New Senior Notes issued by Stratus, Inc. Under certain circumstances, contractual and legal restrictions, as well as financial condition and operating requirements of the Company and its subsidiaries, could limit Stratus, Inc’s ability to obtain cash for the purpose of meeting the debt service obligations, including payment of principal and interest on the New Senior Notes. The holders of the New Senior Notes are direct creditors of Stratus, Inc., the Company and the Company’s principal direct subsidiaries by virtue of the guarantees. The Company has indirect subsidiaries located primarily in Europe and Asia (“Non-~~Guarantor~~ ~~Subsidiaries”~~continued that are not included among the Guarantor Subsidiaries, and such subsidiaries will not be obligated with respect to the New Senior Notes. As a result, the claims of creditors of the Non-Guarantor Subsidiaries will effectively have priority with respect to the assets and earnings of such companies over the claims of creditors of the Company, including the holders of the New Senior Notes.

~~Supplemental~~(Unaudited) ~~condensed consolidating financial information is presented below.~~

10NOTE 11 – SEGMENT INFORMATION

~~Table~~During the fourth quarter of ~~Contents~~2005, the Company significantly reorganized and restructured, as briefly described in Note 6 and more completely in the Company’s 2005 Annual Report on Form 20-F. These actions were intended to support the Company’s desire to provide products and services seamlessly to its customers in response to customers’ expectations of their technology vendors. The Company reorganized largely along functional lines to support this change, since the products and services management structure previously employed by the Company no longer aligned with its strategic direction. As a result, the Company has determined that for fiscal 2006, it does not have any components of its business that meet the operating segment or reportable segment criteria defined by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information and operates in one reportable segment.

~~STRATUS~~NOTE 12 ~~TECHNOLOGIES~~– ~~INTERNATIONAL,~~RELATED ~~S.à~~PARTY ~~r.l.~~TRANSACTIONS

~~NOTES~~The TOCompany ~~CONDENSED~~has ~~CONSOLIDATED~~entered into ~~FINANCIAL~~an ~~STATEMENTS~~Agreement for Management, Advisory, Strategic Planning and Consulting Services with two significant investors. The Company paid $700 for the first-year ~~continued~~services under the agreement beginning on October 1, 2005, of which $117 was recorded as an expense in the third quarter.

~~(Unaudited)~~NOTE 13 – SUBSEQUENT EVENT

~~CONDENSED~~On December 7, ~~CONSOLIDATING~~2005, ~~BALANCE~~the ~~SHEETS~~Company’s parent, Stratus Technologies Group, S.A. (~~Unaudited~~“Stratus SA” or the “Parent”) received a $9 million investment from NEC, in connection with a Share Purchase and Shareholder Agreement under which the Parent issued 1,989,940 shares of ordinary stock. As a result of this transaction, NEC’s ownership interest in the Parent increased to approximately five percent, or three percent on a fully diluted basis.

AsOn January 4, 2006, the Company repurchased and retired $5,115 of ~~May~~its 10.375% 29Senior Notes for cash of $5,304, ~~2005~~which includes accrued interest of $49.

	StratusS.à.r.l.			StratusInc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
	(dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	103		$	2,378		$	17,312		$	7,572		$	—		$	27,365
Accounts receivable, net		—			66,218			34,256			16,864			(60,901	)		56,437
Receivable from Parent		—			1,372			190			1,076			(2,638	)		—
Inventory		62			18,422			6,651			22,949			(20,416	)		27,668
Prepaid expenses and other current assets		—			2,077			979			3,852			9			6,917
Total current assets		165			90,467			59,388			52,313			(83,946	)		118,387
Property, plant and equipment, net		—			27,642			9,232			3,204			(3,544	)		36,534
Intangible assets, net		—			551			20,679			—			—			21,230
Goodwill		926			1,215			1,564			689			—			4,394
Long-term intercompany receivable		56,178			103,125			20,000			—			(179,303	)		—
Investment in subsidiaries		(956	)		18,304			5,867			—			(23,215	)		—
Other assets		—			6,121			5,702			3,015			—			14,838
Total assets	$	56,313		$	247,425		$	122,432		$	59,221		$	(290,008	)	$	195,383
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt	$	—		$	—		$	959		$	—		$	—		$	959
Accounts payable		22,645			4,111			40,774			7,893			(60,904	)		14,519
Accrued expenses		2,826			20,579			3,470			7,999			1			34,875
Deferred revenue		222			2,636			31,090			16,668			—			50,616
Other current liabilities		3,348			4,768			738			547			(2,746	)		6,655
Total current liabilities		29,041			32,094			77,031			33,107			(63,649	)		107,624
Long-term debt		—			163,737			—			—			—			163,737
Long-term intercompany payable		38,125			—			140,558			620			(179,303	)		—
Embedded derivatives		—			4,705			—			—			—			4,705
Other liabilities		—			1,331			2,284			—			—			3,615
Total liabilities		67,166			201,867			219,873			33,727			(242,952	)		279,681
Stockholder’s equity (deficit):
Ordinary stock		72,015			20,000			2,394			9,328			(31,722	)		72,015
Additional paid-in capital		35,000			46,541			29,964			7,542			(51,928	)		67,119
Deferred compensation		—			—			—			—			—			0
Accumulated deficit		(117,833	)		(20,972	)		(25,894	)		9,332			36,582			(118,785	)
Accumulated other comprehensive loss		—			(11	)		(27	)		(708	)		12			(734	)
Preferred shares held in Parent (Stratus SA)		—			—			(58,700	)		—			—			(58,700	)
Ordinary shares held in Parent (Stratus SA)		(35	)		—			(45,178	)		—			—			(45,213	)
Total stockholder’s equity (deficit)		(10,853	)		45,558			(97,441	)		25,494			(47,056	)		(84,298	)
Total liabilities and stockholder’s equity (deficit)	$	56,313		$	247,425		$	122,432		$	59,221		$	(290,008	)	$	195,383

NOTE 14 –CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

11The Company and the Company’s subsidiaries, Stratus Equity S.à r.l., SRA Technologies Cyprus Limited, Stratus Technologies Bermuda Ltd., Stratus Technologies Ireland Ltd., Cemprus Technologies, Inc. and Cemprus, LLC (“Subsidiary Guarantors”) have fully and unconditionally guaranteed on a joint and several basis, the obligation to pay principal and interest with respect to the $155,000 aggregate principal amount of Senior Notes issued by Stratus, Inc. Under certain circumstances, contractual and legal restrictions, as well as financial condition and operating requirements of the Company and its subsidiaries, could limit Stratus, Inc.’s ability to obtain cash for the purpose of meeting the debt service obligations, including payment of principal and interest on the Senior Notes. The holders of the Senior Notes are direct creditors of Stratus, Inc., the Company and the Company’s principal direct subsidiaries by virtue of the guarantees. The Company has indirect subsidiaries located primarily in Europe and Asia (“Non-Guarantor Subsidiaries”) that are not included among the Guarantor Subsidiaries, and such subsidiaries will not be obligated with respect to the Senior Notes. As a result, the claims of creditors of the Non-Guarantor Subsidiaries will effectively have priority with respect to the assets and earnings of such companies over the claims of creditors of the Company, including the holders of the Senior Notes.

~~Table~~Supplemental ofcondensed ~~Contents~~consolidating financial information is presented below:

~~STRATUS~~12 ~~TECHNOLOGIES INTERNATIONAL, S.à r.l.~~

~~NOTES~~STRATUS TOTECHNOLOGIES ~~CONDENSED~~INTERNATIONAL, ~~CONSOLIDATED~~S.à ~~FINANCIAL~~r.l. ~~STATEMENTS - continued~~

~~(Unaudited)~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

~~CONDENSED CONSOLIDATING~~(Unaudited) ~~BALANCE SHEETS~~

AsCONDENSED ofCONSOLIDATING ~~February~~BALANCE ~~27,~~SHEETS ~~2005~~(Unaudited)

	StratusS.à.r.l.			StratusInc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
	(dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,066		$	2,402		$	24,081		$	7,202		$	—		$	34,751
Accounts receivable, net		(7	)		64,123			32,804			21,137			(57,480	)		60,577
Receivable from Parent		—			1,372			—			1,073			(2,445	)		—
Inventory		62			19,721			5,621			22,690			(15,582	)		32,512
Prepaid expenses and other current assets		—			2,264			209			4,752			(3	)		7,222
Total current assets		1,121			89,882			62,715			56,854			(75,510	)		135,062
Property, plant and equipment, net		—			26,097			9,487			3,815			(4,149	)		35,250
Intangible assets, net		—			666			22,232			—			—			22,898
Goodwill		926			1,215			1,564			707			—			4,412
Long-term intercompany receivable		56,190			103,125			20,000			—			(179,315	)		—
Investment in subsidiaries		116			19,455			5,861			—			(25,432	)		—
Other assets		—			6,634			4,805			3,101			—			14,540
Total assets	$	58,353		$	247,074		$	126,664		$	64,477		$	(284,406	)	$	212,162
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt	$	—		$	—		$	10,943		$	—		$	—		$	10,943
Accounts payable		22,947			4,860			41,046			4,532			(57,482	)		15,903
Accrued expenses		2,878			20,884			5,658			10,848			30			40,298
Deferred revenue		222			1,617			28,391			19,511			—			49,741
Other current liabilities		3,143			5,072			671			996			(2,445	)		7,437
Total current liabilities		29,190			32,433			86,709			35,887			(59,897	)		124,322
Long-term debt		—			163,292			—			—			—			163,292
Long-term intercompany payable		38,125			—			140,558			632			(179,315	)		—
Embedded derivatives		—			3,620			—			—			—			3,620
Other liabilities		—			1,331			1,921			—			—			3,252
Total liabilities		67,315			200,676			229,188			36,519			(239,212	)		294,486
Stockholder’s equity (deficit):
Ordinary stock		72,015			20,000			2,377			9,328			(31,705	)		72,015
Additional paid-in capital		35,000			46,561			29,964			9,028			(53,416	)		67,137
Deferred compensation		—			(20	)		—			—			—			(20	)
Accumulated deficit		(115,942	)		(20,133	)		(30,960	)		9,907			39,915			(117,213	)
Accumulated other comprehensive loss		—			(10	)		(27	)		(305	)		12			(330	)
Preferred shares held in Parent (Stratus SA)		—			—			(58,700	)		—			—			(58,700	)
Ordinary shares held in Parent (Stratus SA)		(35	)		—			(45,178	)		—			—			(45,213	)
Total stockholder’s equity (deficit)		(8,962	)		46,398			(102,524	)		27,958			(45,194	)		(82,324	)
Total liabilities and stockholder’s equity (deficit)	$	58,353		$	247,074		$	126,664		$	64,477		$	(284,406	)	$	212,162

As of November 27, 2005

12(Dollars in thousands)


	Stratus S.à.r.l.			Stratus Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	59		$	4,388		$	12,917		$	6,601		$	—		$	23,965
Accounts receivable, net		—			61,734			21,222			10,832			(53,809	)		39,979
Receivable from Parent		—			1,535			191			1,080			(2,806	)		—
Inventory		62			18,355			4,336			11,912			(13,595	)		21,070
Prepaid expenses and other current assets		—			2,540			853			3,897			—			7,290

Total current assets		121			88,552			39,519			34,322			(70,210	)		92,304
Property, plant and equipment, net		—			24,253			8,957			4,112			(3,548	)		33,774
Intangible assets, net		—			489			17,569			—			—			18,058
Goodwill		926			1,215			1,564			610			—			4,315
Long-term intercompany receivable		55,455			95,625			20,000			—			(171,080	)		—
Investment in subsidiaries		4,832			18,791			5,702			—			(29,325	)		—
Other assets		—			5,422			5,134			2,757			—			13,313

Total assets	$	61,334		$	234,347		$	98,445		$	41,801		$	(274,163	)	$	161,764

LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Accounts payable		23,540			6,727			35,663			2,654			(53,811	)		14,773
Accrued expenses		2,784			20,843			3,166			6,793			1			33,587
Deferred revenue		222			2,986			23,298			7,111			—			33,617
Other current liabilities		3,350			4,348			24			262			(2,842	)		5,142

Total current liabilities		29,896			34,904			62,151			16,820			(56,652	)		87,119
Long-term debt		—			150,101			—			—			—			150,101
Long-term intercompany payable		38,125			—			132,955			—			(171,080	)		—
Embedded derivatives		—			2,850			—			—			—			2,850
Other liabilities		—			1,178			1,332			—			—			2,510

Total liabilities		68,021			189,033			196,438			16,820			(227,732	)		242,580
Stockholder’s equity (deficit):
Ordinary stock		72,015			20,000			2,394			9,328			(31,722	)		72,015
Additional paid-in capital		35,000			46,541			29,969			7,389			(51,780	)		67,119
Accumulated deficit		(113,667	)		(21,352	)		(26,451	)		9,824			36,899			(114,747	)
Accumulated other comprehensive loss		—			125			(27	)		(1,560	)		172			(1,290	)
Preferred shares held in Parent (Stratus SA)		—			—			(58,700	)		—			—			(58,700	)
Ordinary shares held in Parent (Stratus SA)		(35	)		—			(45,178	)		—			—			(45,213	)

Total stockholder’s equity (deficit)		(6,687	)		45,314			(97,993	)		24,981			(46,431	)		(80,816	)

Total liabilities and stockholder’s equity (deficit)	$	61,334		$	234,347		$	98,445		$	41,801		$	(274,163	)	$	(161,764	)

~~STRATUS~~The ~~TECHNOLOGIES~~accompanying ~~INTERNATIONAL,~~notes are ~~S.à~~an rintegral part of these consolidating financial statements.l.

~~NOTES~~13 ~~TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued~~

~~(Unaudited)~~STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.

NOTES TO CONDENSED ~~CONSOLIDATING~~ ~~STATEMENTS~~CONSOLIDATED OFFINANCIAL ~~OPERATIONS~~STATEMENTS ~~(Unaudited)~~- continued

~~For the~~(Unaudited) ~~fiscal three-month period ended May 29, 2005~~

	StratusS.à.r.l.			StratusInc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
	(dollars in thousands)
REVENUE
Product	$	—		$	6,599		$	17,792		$	18,054		$	(16,020	)	$	26,425
Service		—			5,392			36,506			10,385			(13,387	)		38,896
Intercompany revenue		—			15,400			1,485			1,356			(18,241	)		—
Total revenue		—			27,391			55,783			29,795			(47,648	)		65,321
Product		—			3,064			10,789			12,584			(11,184	)		15,253
Service		—			5,338			13,611			10,823			(13,684	)		16,088
Intercompany cost of revenue		—			—			17,407			464			(17,871	)		—
Amortization of intangibles		—			—			502			—			—			502
Total cost of revenue		—			8,402			42,309			23,871			(42,739	)		31,843
Gross profit		—			18,989			13,474			5,924			(4,909	)		33,478
Research and development		—			9,168			1,423			—			(478	)		10,113
Sales, marketing, general and administrative		58			9,711			83			5,670			(149	)		15,373
Amortization of intangibles		—			—			1,150			—			—			1,150
Restructuring charges		—			—			407			—			—			407
Total operating expenses		58			18,879			3,063			5,670			(627	)		27,043
Profit (loss) from operations		(58	)		110			10,411			254			(4,282	)		6,435
Interest income		5			13			85			17			—			120
Interest expense		—			(5,282	)		(424	)		(4	)		—			(5,710	)
Interest income (expense), intercompany		(682	)		2,615			(1,926	)		(7	)		—			—
Other income (expense), net		(8	)		(1,456	)		(380	)		(30	)		51			(1,823	)
Other income (expense), intercompany		—			2,857			(2,396	)		842			(1,303	)		—
Profit (loss) before income taxes		(743	)		(1,143	)		5,370			1,072			(5,534	)		(978	)
Provision (benefit) for income taxes		3			33			295			426			(163	)		594
Equity in profit(loss) in subsidiaries		(1,126	)		646			—			—			480			—
Net income (loss)	$	(1,872	)	$	(530	)	$	5,075		$	646		$	(4,891	)	$	(1,572	)

CONDENSED CONSOLIDATING BALANCE SHEETS

13As of February 27, 2005

~~Table~~(Dollars ofin ~~Contents~~thousands)

STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.


	Stratus S.à.r.l.			Stratus Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	1,066		$	2,402		$	24,081		$	7,202		$	—		$	34,751
Accounts receivable, net		(7	)		64,123			32,804			21,137			(57,480	)		60,577
Receivable from Parent		—			1,372			—			1,073			(2,445	)		—
Inventory		62			19,721			5,621			22,690			(15,582	)		32,512
Prepaid expenses and other current assets		—			2,264			209			4,752			(3	)		7,222

Total current assets		1,121			89,882			62,715			56,854			(75,510	)		135,062
Property, plant and equipment, net		—			26,097			9,487			3,815			(4,149	)		35,250
Intangible assets, net		—			666			22,232			—			—			22,898
Goodwill		926			1,215			1,564			707			—			4,412
Long-term intercompany receivable		56,190			103,125			20,000			—			(179,315	)		—
Investment in subsidiaries		116			19,455			5,861			—			(25,432	)		—
Other assets		—			6,634			4,805			3,101			—			14,540

Total assets	$	58,353		$	247,074		$	126,664		$	64,477		$	(284,406	)	$	212,162

LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt	$	—		$	—		$	10,943		$	—		$	—		$	10,943
Accounts payable		22,947			4,860			41,046			4,532			(57,482	)		15,903
Accrued expenses		2,878			20,884			5,658			10,848			30			40,298
Deferred revenue		222			1,617			28,391			19,511			—			49,741
Other current liabilities		3,143			5,072			671			996			(2,445	)		7,437

Total current liabilities		29,190			32,433			86,709			35,887			(59,897	)		124,322
Long-term debt		—			163,292			—			—			—			163,292
Long-term intercompany payable		38,125			—			140,558			632			(179,315	)		—
Embedded derivatives		—			3,620			—			—			—			3,620
Other liabilities		—			1,331			1,921			—			—			3,252

Total liabilities		67,315			200,676			229,188			36,519			(239,212	)		294,486
Stockholder’s equity (deficit):
Ordinary stock		72,015			20,000			2,377			9,328			(31,705	)		72,015
Additional paid-in capital		35,000			46,561			29,964			9,028			(53,416	)		67,137
Deferred compensation		—			(20	)		—			—			—			(20	)
Accumulated deficit		(115,942	)		(20,133	)		(30,960	)		9,907			39,915			(117,213	)
Accumulated other comprehensive loss		—			(10	)		(27	)		(305	)		12			(330	)
Preferred shares held in Parent (Stratus SA)		—			—			(58,700	)		—			—			(58,700	)
Ordinary shares held in Parent (Stratus SA)		(35	)		—			(45,178	)		—			—			(45,213	)

Total stockholder’s equity (deficit)		(8,962	)		46,398			(102,524	)		27,958			(45,194	)		(82,324	)

Total liabilities and stockholder’s equity (deficit)	$	58,353		$	247,074		$	126,664		$	64,477		$	(284,406	)	$	212,162

~~NOTES~~The TOaccompanying ~~CONDENSED~~notes are ~~CONSOLIDATED~~an ~~FINANCIAL~~integral ~~STATEMENTS~~part -of ~~continued~~these consolidating financial statements.

~~(Unaudited)~~14

~~CONDENSED CONSOLIDATING~~STRATUS ~~STATEMENTS~~TECHNOLOGIES OFINTERNATIONAL, ~~OPERATIONS~~S.à ~~(Unaudited)~~r.l.

~~For the~~NOTES ~~fiscal~~TO ~~three-month~~CONDENSED ~~period~~CONSOLIDATED ~~ended~~FINANCIAL ~~May~~STATEMENTS ~~30,~~- ~~2004~~continued

	StratusS.à.r.l.			StratusInc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
	(dollars in thousands)
REVENUE
Product	$	—		$	10,266		$	18,890		$	12,213		$	(13,412	)	$	27,957
Service		—			7,731			36,747			11,398			(16,282	)		39,594
Intercompany revenue		—			17,711			(13	)		1,128			(18,826	)		—
Total revenue		—			35,708			55,624			24,739			(48,520	)		67,551
Product		(10	)		7,090			15,252			8,865			(13,242	)		17,955
Service		—			7,260			16,496			10,827			(17,629	)		16,954
Intercompany cost of revenue		—			—			18,080			537			(18,617	)		—
Amortization of intangibles		—			—			502			—			—			502
Total cost of revenue		(10	)		14,350			50,330			20,229			(49,488	)		35,411
Gross profit		10			21,358			5,294			4,510			968			32,140
OPERATING EXPENSES
Research and development		—			10,512			2,253			—			(91	)		12,674
Sales, marketing, general and administrative		289			9,591			57			6,028			(260	)		15,705
Amortization of intangibles		—			—			1,150			—			—			1,150
Restructuring charges		—			(10	)		—			—			—			(10	)
Total operating expenses		289			20,093			3,460			6,028			(351	)		29,519
Profit (loss) from operations		(279	)		1,265			1,834			(1,518	)		1,319			2,621
Interest income		—			2			14			12			—			28
Interest expense		—			(4,776	)		(484	)		(12	)		—			(5,272	)
Interest income (expense), intercompany		(683	)		2,643			(1,953	)		(7	)		—			—
Other income (expense), net		(81	)		(341	)		(590	)		27			38			(947	)
Other income (expense), intercompany		—			—			(2,152	)		2,152			—			—
Profit (loss) before income taxes		(1,043	)		(1,207	)		(3,331	)		654			1,357			(3,570	)
Provision (benefit) for income taxes		—			48			219			303			(34	)		536
Equity in profit(loss) in subsidiaries		(3,063	)		351			—			—			2,712			—
Net income (loss)	$	(4,106	)	$	(904	)	$	(3,550	)	$	351		$	4,103		$	(4,106	)

(Unaudited)

14CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (Unaudited)

~~Table~~For ofthe ~~Contents~~fiscal three-month period ended November 27, 2005

~~STRATUS~~(Dollars in ~~TECHNOLOGIES~~thousands) ~~INTERNATIONAL, S.à r.l.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


	Stratus S.à.r.l.			Stratus Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
REVENUE
Product	$	—		$	10,124		$	9,788		$	13,573		$	(7,094	)	$	26,391
Service		—			6,511			58,192			8,432			(35,694	)		37,441
Intercompany revenue		—			14,210			1,464			513			(16,187	)		—

Total revenue		—			30,845			69,444			22,518			(58,975	)		63,832

COST OF REVENUE
Product		—			4,642			11,564			8,509			(9,403	)		15,312
Service		—			6,367			36,683			8,962			(36,170	)		15,842
Intercompany cost of revenue		—			—			16,059			94			(16,153	)		—
Amortization of intangibles		—			—			502			—			—			502

Total cost of revenue		—			11,009			64,808			17,565			(61,726	)		31,656

Gross profit		—			19,836			4,636			4,953			2,751			32,176
OPERATING EXPENSES
Research and development		—			8,369			1,381			—			(188	)		9,562
Sales, marketing, general and administrative		139			9,630			153			4,994			(249	)		14,667
Amortization of intangibles		—			—			1,150			—			—			1,150

Total operating expenses		139			17,999			2,684			4,994			(437	)		25,379

Profit (loss) from operations		(139	)		1,837			1,952			(41	)		3,188			6,797
Interest income		1			25			80			2			—			108
Interest (expense)		—			(4,843	)		(324	)		(4	)		—			(5,171	)
Interest income (expense), intercompany		(683	)		2,476			(1,787	)		(6	)		—			—
Other income (expense), net		(56	)		(1,675	)		(836	)		93			140			(2,334	)
Other income (expense), intercompany		—			277			(558	)		281			—			—

Profit (loss) before income taxes		(877	)		(1,903	)		(1,473	)		325			3,328			(600	)
Provision (benefit) for income taxes		3			(375	)		68			266			46			8
Equity in profit(loss) in subsdiaries		5,782			492			—			—			(6,274	)		—

Net income (loss)	$	4,902		$	(1,036	)	$	(1,541	)	$	59		$	(2,992	)	$	(608	)

~~(Unaudited)~~The accompanying notes are an integral part of these consolidating financial statements.

~~CONDENSED CONSOLIDATING~~15 ~~STATEMENTS OF CASH FLOWS (Unaudited)~~

~~For the~~STRATUS ~~fiscal~~TECHNOLOGIES ~~three-month period ended May 29~~INTERNATIONAL, ~~2005~~S.à r.l.

	StratusS.à.r.l.			StratusInc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
	(dollars in thousands)
OPERATING ACTIVITIES
Cash flows from operating activities:
Net income (loss)	$	(1,872	)	$	(530	)	$	5,075		$	646		$	(4,891	)	$	(1,572	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		—			3,986			2,045			559			(930	)		5,660
Amortization of deferred financing costs		—			330			254			—			—			584
Amortization of debt discount		—			445			—			—			—			445
Change in fair value of embedded derivatives		—			1,085			—			—			—			1,085
Inventory reserve provision		—			1,338			129			(74	)		(24	)		1,369
Other non-cash adjustments		—			477			—			—			—			477
Equity in profit (loss) subsidiaries		1,126			(646	)		—			—			(480	)		—
Changes in assets and liabilities		(160	)		(6,032	)		(4,286	)		942			6,275			(3,261	)
Net cash provided by (used in) operating activities		(906	)		453			3,217			2,073			(50	)		4,787
INVESTING ACTIVITIES
Cash flows from investing activities:
Acquisition of property and equipment		—			(2,279	)		(19	)		(379	)		327			(2,350	)
Other long-term assets		(57	)		1,802			—			—			(1,745	)		—
Net cash used in investing activities		(57	)		(477	)		(19	)		(379	)		(1,418	)		(2,350	)
FINANCING ACTIVITIES
Cash flows from financing activities:
Issuance of ordinary stock		—			—			18			(1,486	)		1,468			—
Payments on debt		—			—			(9,952	)		—			—			(9,952	)
Net cash used in financing activities		—			—			(9,934	)		(1,486	)		1,468			(9,952	)
Effect of exchange rate changes on cash		—			—			(33	)		162			—			129
Net increase (decrease) in cash and cash equivalents		(963	)		(24	)		(6,769	)		370			—			(7,386	)
Cash and cash equivalents at beginning of period		1,066			2,402			24,081			7,202			—			34,751
Cash and cash equivalents at end of period	$	103		$	2,378		$	17,312		$	7,572		$	—		$	27,365

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

15(Unaudited)

~~Table~~CONDENSED ofCONSOLIDATING ~~Contents~~STATEMENTS OF OPERATIONS (Unaudited)

~~STRATUS~~For ~~TECHNOLOGIES~~the ~~INTERNATIONAL,~~fiscal ~~S.à~~three-month ~~r.l.~~period ended November 28, 2004

~~NOTES~~(Dollars TOin ~~CONDENSED~~thousands) ~~CONSOLIDATED FINANCIAL STATEMENTS - continued~~

(Unaudited)


	Stratus S.à.r.l.			Stratus Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
REVENUE
Product	$	—		$	11,593		$	20,997		$	15,137		$	(19,398	)	$	28,329
Service		—			7,156			37,706			11,297			(16,259	)		39,900
Intercompany revenue		—			17,876			2,716			1,114			(21,706	)		—

Total revenue		—			36,625			61,419			27,548			(57,363	)		68,229

COST OF REVENUE
Product		—			6,832			12,244			9,821			(14,502	)		14,395
Service		—			7,278			16,559			10,444			(17,118	)		17,163
Intercompany cost of revenue		—			—			20,339			603			(20,942	)		—
Amortization of intangibles		—			—			502			—			—			502

Total cost of revenue		—			14,110			49,644			20,868			(52,562	)		32,060

Gross profit		—			22,515			11,775			6,680			(4,801	)		36,169

OPERATING EXPENSES
Research and development		—			10,306			2,488			—			(806	)		11,988
Sales, marketing, general and administrative		21			10,244			70			6,429			(208	)		16,556
Amortization of intangibles		—			—			1,150			—			—			1,150

Total operating expenses		21			20,550			3,708			6,429			(1,014	)		29,694

Profit (loss) from operations		(21	)		1,965			8,067			251			(3,787	)		6,475
Interest income		1			22			16			5			—			44
Interest (expense)		—			(5,112	)		(543	)		(15	)		—			(5,670	)
Interest income (expense), intercompany		(683	)		2,615			(1,925	)		(7	)		—			—
Other income (expense), net		97			(403	)		469			(28	)		17			152
Other income (expense), intercompany		—			605			(717	)		112			—			—

Profit (loss) before income taxes		(606	)		(308	)		5,367			318			(3,770	)		1,001
Provision (benefit) for income taxes		—			(725	)		164			265			87			(209	)
Equity in profit (loss) in subsdiaries		1,816			53			—			—			(1,869	)		—

Net income (loss)	$	1,210		$	470		$	5,203		$	53		$	(5,726	)	$	1,210

~~CONDENSED~~The accompanying notes ~~CONSOLIDATING~~are ~~STATEMENTS~~an OFintegral ~~CASH~~part ~~FLOWS~~of ~~(Unaudited)~~these consolidating financial statements.

~~For the~~16 ~~fiscal three-month period ended May 30, 2004~~

	StratusS.à.r.l.			StratusInc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations		Total
	(dollars in thousands)
OPERATING ACTIVITIES
Cash flows from operating activities:
Net income (loss)	$	(4,106	)	$	(904	)	$	(3,550	)	$	351		4,103		$	(4,106	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		—			4,345			2,058			1,072		(1,232	)		6,243
Amortization of deferred financing costs		—			318			221			—		—			539
Inventory reserve provision		(10	)		1,655			(237	)		(49	)	(257	)		1,102
Other non-cash adjustments		—			704			(75	)		17		(458	)		188
Equity in profit (loss) subsidiaries		3,063			(351	)		—			—		(2,712	)		—
Changes in assets and liabilities		986			(1,763	)		6,431			(581	)	107			5,180
Net cash provided by (used in) operating activities		(67	)		4,004			4,848			810		(449	)		9,146
INVESTING ACTIVITIES
Cash flows from investing activities:
Acquisition of property and equipment		—			(2,431	)		(80	)		(148	)	449			(2,210	)
Capitalized software		—			—			(446	)		—		—			(446	)
Net cash used in investing activities		—			(2,431	)		(526	)		(148	)	449			(2,656	)
FINANCING ACTIVITIES
Cash flows from financing activities:
Deferred financing fees		—			(758	)		—			—		—			(758	)
Decrease in cash over draft		—			(796	)		—			—		—			(796	)
Payments on long-term debt		—			—			(470	)		—		—			(470	)
Net cash used in financing activities		—			(1,554	)		(470	)		—		—			(2,024	)
Effect of exchange rate changes on cash		—			—			(132	)		213		—			81
Net increase (decrease) in cash and cash equivalents		(67	)		19			3,720			875		—			4,547
Cash and cash equivalents at beginning of period		186			193			17,120			5,599		—			23,098
Cash and cash equivalents at end of period	$	119		$	212		$	20,840		$	6,474		—		$	27,645

STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.

16NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

~~Table~~(Unaudited) ~~of Contents~~

~~STRATUS~~CONDENSED ~~TECHNOLOGIES~~CONSOLIDATING ~~INTERNATIONAL,~~STATEMENTS ~~S.à~~OF ~~r.l~~OPERATIONS (Unaudited)

~~Item~~For 2.the ~~MANAGEMENT’S~~fiscal ~~DISCUSSION~~nine-month ~~AND~~period ~~ANALYSIS~~ended OFNovember 27, ~~FINANCIAL~~2005 ~~CONDITION AND RESULTS OF OPERATIONS~~

~~Stratus Technologies International, S.à r.l.~~ (~~“Stratus~~Dollars ~~S.à~~in ~~r.l.” or “the Company”~~thousands) is a wholly-owned subsidiary of Stratus Technologies Group, S.A. (“Stratus SA” or the “Parent”). The terms “the Company”, “we”, “our” and “us” refer to Stratus Technologies International, S.à r.l. and its consolidated subsidiaries, unless otherwise specified.

The following discussion and analysis by management of our operating and financial results should be read in conjunction with our consolidated financial statements. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth below. Our consolidated financial statements and the financial information discussed below have been prepared in accordance with accounting principles generally accepted in the United States. Immaterial differences between numbers contained in the tables and in our unaudited financial statements are due to rounding.


	Stratus S.à.r.l.			Stratus Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
REVENUE
Product	$	—		$	24,601		$	40,091		$	49,141		$	(33,539	)	$	80,294
Service		—			18,170			155,047			27,405			(86,560	)		114,062
Intercompany revenue		—			44,061			4,735			2,876			(51,672	)		—

Total revenue		—			86,832			199,873			79,422			(171,771	)		194,356

COST OF REVENUE
Product		—			11,287			35,624			32,172			(33,799	)		45,284
Service		—			17,735			88,372			29,112			(87,771	)		47,448
Intercompany cost of revenue		—			—			49,877			1,025			(50,902	)		—
Amortization of intangibles		—			—			1,506			—			—			1,506

Total cost of revenue		—			29,022			175,379			62,309			(172,472	)		94,238

Gross profit		—			57,810			24,494			17,113			701			100,118

OPERATING EXPENSES
Research and development		—			26,675			4,508			—			(1,167	)		30,016
Sales, marketing, general and administrative		221			29,091			326			16,517			(530	)		45,625
Amortization of intangibles		—			—			3,450			—			—			3,450
Restructuring charges		—						186			—			—			186

Total operating expenses		221			55,766			8,470			16,517			(1,697	)		79,277

Profit (loss) from operations		(221	)		2,044			16,024			596			2,398			20,841
Interest income		6			58			208			28			—			300
Interest (expense)		—			(15,260	)		(1,008	)		(25	)		—			(16,293	)
Interest income (expense), intercompany		(2,047	)		7,706			(5,639	)		(20	)		—			—
Other income (expense), net		(89	)		86			(1,306	)		(163	)		188			(1,284	)
Other income (expense), intercompany		—			2,856			(3,247	)		1,694			(1,303	)		—

Profit (loss) before income taxes		(2,351	)		(2,510	)		5,032			2,110			1,283			3,564
Provision (benefit) for income taxes		12			(317	)		516			975			(88	)		1,098
Equity in profit (loss) in subsdiaries		4,656			1,138			—			—			(5,794	)		—

Net income (loss)	$	2,293		$	(1,055	)	$	4,516		$	1,135		$	(4,423	)	$	2,466

~~Statements~~The ~~contained~~accompanying in this section which are not historical statements constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934.notes Generally, the words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “project”, “seek”, “continue”, “will”, “may”, “could” and similar expressions identify forward-looking statements. Although we believe that the plans, intentions and expectations reflected in such statements are ~~reasonable,~~an weintegral ~~can~~part ~~give no assurance that such plans, intentions or expectations will be achieved. You are cautioned that such forward-looking statements are not guarantees~~ of ~~future~~these ~~performance~~consolidating ~~and~~financial ~~involve a number of risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking~~ statements. ~~Such risks and uncertainties include, but are not limited to:~~

•17 ~~the continued acceptance of our products by the market;~~

•STRATUS ~~our~~TECHNOLOGIES ~~ability~~INTERNATIONAL, toS.à ~~enter~~r.l. ~~into new service agreements and to retain customers under existing service contracts;~~

•NOTES ~~our~~TO ~~ability~~CONDENSED toCONSOLIDATED ~~source~~FINANCIAL ~~quality~~STATEMENTS ~~components~~- ~~and~~continued ~~key technologies without interruption and at acceptable prices;~~

•(Unaudited) ~~our reliance on sole source manufacturers and suppliers;~~

•CONDENSED ~~the~~CONSOLIDATING ~~presence~~STATEMENTS ofOF ~~existing~~OPERATIONS ~~competitors~~(Unaudited) ~~and the emergence of new competitors;~~

•For ~~our~~the ~~financial~~fiscal ~~condition~~nine-month ~~and~~period ~~liquidity~~ended ~~and~~November 28, ~~our~~2004 ~~leverage and debt service obligations;~~

•(Dollars ~~economic conditions globally and~~ in ~~our~~thousands) ~~most important markets;~~

• developments in the fault-tolerant and high-availability server markets;


	Stratus S.à.r.l.			Stratus Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
REVENUE
Product	$	—		$	35,317		$	61,087		$	41,109		$	(51,860	)	$	85,653
Service		—			24,254			111,404			35,027			(51,119	)		119,566
Intercompany revenue		—			53,083			5,717			3,275			(62,075	)		—

Total revenue		—			112,654			178,208			79,411			(165,054	)		205,219

COST OF REVENUE
Product		(10	)		23,028			40,669			27,944			(42,675	)		48,956
Service		17			23,349			51,829			32,238			(54,065	)		53,368
Intercompany cost of revenue		—			—			59,050			1,650			(60,700	)		—
Amortization of intangibles		—			—			1,506			—			—			1,506

Total cost of revenue		7			46,377			153,054			61,832			(157,440	)		103,830

Gross profit		(7	)		66,277			25,154			17,579			(7,614	)		101,389

OPERATING EXPENSES
Research and development		—			31,173			7,142			—			(1,438	)		36,877
Sales, marketing, general and administrative		325			30,086			163			18,258			(763	)		48,069
Amortization of intangibles		—			—			3,450			—			—			3,450
Restructuring charges		—			(10	)		—			—			—			(10	)

Total operating expenses		325			61,249			10,755			18,258			(2,201	)		88,386

Profit (loss) from operations		(332	)		5,028			14,399			(679	)		(5,413	)		13,003
Interest income		1			26			46			28			—			101
Interest (expense)		—			(14,645	)		(1,511	)		(24	)		—			(16,180	)
Interest income (expense), intercompany		(2,049	)		7,873			(5,803	)		(21	)		—			—
Other income (expense), net		78			(604	)		(122	)		(13	)		64			(597	)
Other income (expense), intercompany		—			605			(3,616	)		3,011			—			—

Profit (loss) before income taxes		(2,302	)		(1,717	)		3,393			2,302			(5,349	)		(3,673	)
Provision (benefit) for income taxes		—			(629	)		700			859			37			967
Equity in profit(loss) in subsdiaries		(2,338	)		1,443			—			—			895			—

Net income (loss)	$	(4,640	)	$	355		$	2,693		$	1,443		$	(4,491	)	$	(4,640	)

•The ~~claims~~accompanying bynotes are ~~third~~an ~~parties~~integral ~~that~~part weof ~~infringe~~these ~~upon~~consolidating ~~their~~financial ~~intellectual~~statements. ~~property rights;~~

•18 ~~our success in adequately protecting our intellectual property rights;~~

•STRATUS ~~our~~TECHNOLOGIES ~~success~~INTERNATIONAL, inS.à ~~maintaining~~r.l. ~~efficient manufacturing and logistics operations;~~

•NOTES ~~our~~TO ~~ability~~CONDENSED toCONSOLIDATED ~~recruit,~~FINANCIAL ~~retain~~STATEMENTS ~~and~~- ~~develop~~continued ~~appropriately skilled employees;~~

•(Unaudited) ~~exposure for systems and service failures;~~

•CONDENSED ~~fluctuations~~CONSOLIDATING inSTATEMENTS ~~exchange~~OF ~~rates;~~CASH FLOWS (Unaudited)

•For ~~current~~the ~~risks~~fiscal nine-month ofperiod ~~terrorist~~ended ~~activity~~November 27, ~~and~~2005 ~~acts of war; and~~

~~• the impact of changes~~ (Dollars in ~~policies,~~thousands) ~~laws, regulations or practices of foreign governments on our international operations.~~

Current information in this quarterly report has been updated to May 29, 2005, and Stratus undertakes no duty to further update this information. All other information contained herein is presented as of the specific date noted and has not been updated since that time.


	Stratus S.à.r.l.			Stratus Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
OPERATING ACTIVITIES
Cash flows from operating activities:
Net income (loss)	$	2,293		$	(1,055	)	$	4,516		$	1,135		$	(4,423	)	$	2,466
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		—			11,219			6,031			1,523			(2,327	)		16,446
Amortization of deferred financing costs and debt discount		—			2,293			736			—			—			3,029
Provision for doubtful accounts								(75	)		(44	)		—			(119	)
Change in fair value of embedded derivatives		—			(594	)		—			—			—			(594	)
Inventory reserve provision		—			4,501			389			494			(2,069	)		3,315
Loss on debt repurchase		—			1,046			271			—			—			1,317
Gain on sale of subsidiary		—			(500	)		—			—						(500	)
Other non-cash adjustments		—			574			—			(190	)		(141	)		243
Equity in profit (loss) subsidiaries		4,656			1,138			—			—			(5,794	)		—
Changes in assets and liabilities		(2,110	)		3,451			(11,231	)		(669	)		7,195			(3,364	)

Net cash provided by (used in) operating activities		4,839			22,073			637			2,249			(7,559	)		22,239

INVESTING ACTIVITIES
Cash flows from investing activities:
Acquisition of property and equipment		—			(6,667	)		(93	)		(1,693	)		1,566			(6,887	)
Capitalized software		—			—			(711	)		—			—			(711	)
Proceeds from sale of subsidiary					650						(285	)					365
Other long-term assets		(5,846	)		1,380			(71	)		(2	)		4,525			(14	)

Net cash used in investing activities		(5,846	)		(4,637	)		(875	)		(1,980	)		6,091			(7,247	)

FINANCING ACTIVITIES
Cash flows from financing activities:
Issuance of ordinary stock		—			—			18			(1,486	)		1,468			—
Payments on debt		—			(15,450	)		(10,911	)		—			—			(26,361	)

Net cash used in financing activities		—			(15,450	)		(10,893	)		(1,486	)		1,468			(26,361	)
Effect of exchange rate changes on cash		—			—			(33	)		616			—			583

Net increase (decrease) in cash and cash equivalents		(1,007	)		1,986			(11,164	)		(601	)		—			(10,786	)
Cash and cash equivalents at beginning of period		1,066			2,402			24,081			7,202			—			34,751

Cash and cash equivalents at end of period	$	59		$	4,388		$	12,917		$	6,601		$	—		$	23,965

The ~~foregoing~~accompanying ~~list~~notes are ofan ~~important~~integral ~~factors~~part isof ~~not~~these ~~all-inclusive~~consolidating financial statements.

~~Overview~~19

WeSTRATUS ~~are~~TECHNOLOGIES ~~a global provider of fault-tolerant computer servers~~INTERNATIONAL, ~~technologies and services, with more than 25 years of experience focused in the fault-tolerant server market~~S.à ~~Our servers provide high levels of reliability relative to the server industry, delivering 99~~r.~~999% uptime or better (equivalent to less than 5 minutes of downtime annually in continuous operation)~~l. ~~Our customers, who include some of the most recognizable companies in the world, purchase Stratus servers and support services for their critical computer-based operations.~~

WeNOTES ~~currently~~TO ~~provide~~CONDENSED ~~two~~CONSOLIDATED ~~lines~~FINANCIAL ofSTATEMENTS ~~fault~~-~~tolerant~~ ~~servers,~~continued ~~the Continuum® system family and the ftServer® system family, each of which is supported by a technologically advanced worldwide service offering.~~

17(Unaudited)

~~Table~~CONDENSED ofCONSOLIDATING ~~Contents~~STATEMENTS OF CASH FLOWS (Unaudited)

~~STRATUS~~For ~~TECHNOLOGIES~~the ~~INTERNATIONAL,~~fiscal ~~S.à~~nine-month ~~r.l.~~period ended November 28, 2004

• Product revenue consists primarily of revenue generated from the sale of our servers, which include our proprietary and other operating systems. In fiscal 2002, we launched our ftServer systems. We expect our future product revenue growth largely to derive from sales of ftServer systems, which support the Microsoft Windows® operating system, Linux operating system and our own proprietary VOS® operating system. In the first half of fiscal 2005 we introduced the ftServer T-Series, which is our fault tolerant server for the telecommunications market and uses Linux as the operating system. In addition, we continue to generate product sales from our installed base. With the successful porting of our proprietary VOS® operating system to the ftServer (~~“ftServer~~Dollars ~~V-Series”)~~ in ~~the~~thousands) second quarter of fiscal 2005 we now have a migration path that enables our Continuum system customers to leverage their investments in their applications written on VOS and continue to achieve performance improvements as their businesses grow. We believe our ftServer V-Series systems will also extend the longevity and revenue-producing capacity of our Continuum system customer base. The ftServer V-Series product has been well accepted by many of our Continuum system customers. We have experienced a decline in the number of units sold and the revenue generated from sales of Continuum systems over the last three fiscal years. We believe that several key factors have contributed to this decline, including the emergence of newer and more competitive high-availability server products, the proprietary nature of the operating systems running on the Continuum systems, migration of Continuum customers to the V-Series and a shift in our business focus to sales of ftServer systems. Although we intend to leverage our current base of Continuum system customers through add-on sales, our growth plans are focused on the promotion and sale of ftServer systems. As these lower-cost servers generate lower margin dollars per unit than our Continuum systems, we will need to increase our market penetration in order to increase our profitability.

• Service revenue consists of revenue primarily generated from our customer support activities, which consist of maintenance contracts for which revenue typically is recognized ratably over the contractual period, one-time services such as parts repair, billable time and materials activities, and installation, education and professional consulting services. In the first three months of fiscal 2006, over 96% of Continuum server sales and 83% of ftServer system sales included service contracts. Our systems tend to remain under service and in operation for long periods of time, historically resulting in a predictable service revenue stream. As our sales focus shifts to the lower-priced ftServer systems with correspondingly lower-priced service offerings, we intend to seek new sources of service revenue by increasing the breadth and scope of our service offerings, containing or reducing costs and leveraging our existing service infrastructure to support all of our product lines.


	Stratus S.à.r.l.			Stratus Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
OPERATING ACTIVITIES
Cash flows from operating activities:
Net income (loss)	$	(4,640	)	$	355		$	2,693		$	1,443		$	(4,491	)	$	(4,640	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		—			12,698			6,157			2,935			(3,460	)		18,330
Amortization of deferred financing costs and debt discount		—			1,421			727			—			—			2,148
Change in fair value of embedded derivatives		—			785			—			—			—			785
Provision for doubtful accounts		—			367			(183	)		(295	)		—			(111	)
Inventory reserve provision		(10	)		3,567			150			(107	)		(1,224	)		2,376
Other non-cash adjustments		—			1,504			21			31			(458	)		1,098
Equity in profit (loss) subsidiaries		2,338			(1,443	)		—			—			(895	)		—
Changes in assets and liabilities		2,196			(6,280	)		(4,253	)		(993	)		8,254			(1,076	)

Net cash provided by (used in) operating activities		(116	)		12,974			5,312			3,014			(2,274	)		18,910

INVESTING ACTIVITIES
Cash flows from investing activities:
Acquisition of property and equipment		—			(9,693	)		(358	)		(797	)		2,388			(8,460	)
Capitalized software		—			—			(1,182	)		—			—			(1,182	)
Other long-term assets		—			(37	)		(202	)		—			—			(239	)

Net cash used in investing activities		—			(9,730	)		(1,742	)		(797	)		2,388			(9,881	)

FINANCING ACTIVITIES
Cash flows from financing activities:
Issuance of ordinary stock		—			—			—			114			(114	)		—
Deferred financing fees		—			(1,358	)		—			—			—			(1,358	)
Payments on debt		—			—			(1,395	)		—			—			(1,395	)

Net cash used in financing activities		—			(1,358	)		(1,395	)		114			(114	)		(2,753	)
Effect of exchange rate changes on cash		—			—			35			(927	)		—			(892	)

Net increase (decrease) in cash and cash equivalents		(116	)		1,886			2,210			1,404			—			5,384
Cash and cash equivalents at beginning of period		186			193			17,120			5,599			—			23,098

Cash and cash equivalents at end of period	$	70		$	2,079		$	19,330		$	7,003		$	—		$	28,482

The ~~table~~accompanying ~~set~~notes are ~~forth~~an ~~below~~integral ~~shows~~part ~~our consolidated revenue for each~~ of ~~our~~these ~~product~~consolidating ~~lines~~financial ~~and~~statements. ~~our service offering:~~

	Three MonthsEnded
	May 29,2005		May 30,2004
	(dollars in millions)
Continuum products	$	9.7	$	15.1
FtServer products		16.7		12.8
Total product revenue		26.4		27.9
Service revenue		38.9		39.6
Total revenue	$	65.3	$	67.5

18STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l

~~Table~~Item 2. ofMANAGEMENT’S ~~Contents~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~STRATUS~~Stratus ~~TECHNOLOGIES~~Technologies ~~INTERNATIONAL~~International, S.à r.l. (“Stratus S.à r.l.” or “the Company”) is a wholly-owned subsidiary of Stratus Technologies Group, S.A. (“Stratus SA” or the “Parent”). The terms “the Company”, “we”, “our” and “us” refer to Stratus Technologies International, S.à r.l. and its consolidated subsidiaries, unless otherwise specified.

~~Critical~~The ~~Accounting~~following ~~Policies~~discussion and analysis by management of our operating and financial results should be read in conjunction with our consolidated financial statements. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth below. Our consolidated financial statements and the financial information discussed below have been prepared in accordance with accounting principles generally accepted in the United States. Immaterial differences between numbers contained in the tables and in our unaudited financial statements are due to rounding.

~~There~~Statements ~~have~~contained ~~been~~in nothis ~~significant~~section ~~changes~~which toare ~~our~~not ~~critical~~historical ~~accounting~~statements ~~policies~~constitute “forward-looking statements” within the meaning of asSection 27A ~~disclosed~~of inthe ~~our~~Securities ~~latest~~Act ~~annual~~and ~~report~~Section 21E ~~for~~of the ~~fiscal~~Securities ~~year~~Exchange ~~ended~~Act ~~February~~of 271934. Generally, ~~2005~~the words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “project”, “seek”, “continue”, “will”, “may”, “could” and similar expressions identify forward-looking statements. Although we believe that the plans, intentions and expectations reflected in such statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. You are cautioned that such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements. Such risks and uncertainties include, but are not limited to:

~~Certain~~• ~~of our accounting policies require~~ the ~~application~~continued ofacceptance ~~judgment by management in selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree~~ of ~~uncertainty. Management~~our ~~bases~~products ~~its~~by ~~estimates on historical experience and various other assumptions that are believed to be reasonable under~~ the circumstances, the results of which form the basis for making judgments about the reported carrying values of assets and liabilities and the reported amounts of revenue and expenses that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following are some of the more critical accounting policies and related judgments and estimates used in the preparation of consolidated financial statements. market;

~~Revenue~~• ~~Recognition~~our ability to enter into new service agreements and to retain customers under existing service contracts;

~~The~~• ~~Company~~our ~~sells~~ability ~~its products and services~~ to ~~end~~source ~~users,~~quality ~~resellers,~~components and ~~original~~key ~~equipment~~technologies ~~manufacturers.~~without ~~The~~interruption Company’s products are integrated with software that is essential to the functionality of the equipment. Accordingly, the Company accounts for revenue in accordance with Statement of Position No. 97-2, Software Revenue Recognition, and ~~all~~at ~~related~~acceptable ~~interpretations. The Company’s transactions frequently include the sale of products and services under multiple element arrangements.~~ prices;

~~Revenue~~• isour ~~recognized~~reliance when persuasive evidence of an arrangement exists, delivery of the product or performance of the services has occurred, title and risk of loss has passed to the customer, the fee is fixed or determinable, and collection is probable. The Company uses the residual method to allocate revenue when a transaction includes one or more elements to be delivered and vendor specific objective evidence (“VSOE”) of the fair value of all undelivered elements exists. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. VSOE is based on ~~the~~sole ~~fee~~source ~~charged~~manufacturers ~~when these elements are sold separately. If evidence of the fair value of one or more undelivered elements does not exist, all revenue is deferred~~ and recognized when delivery of all elements occurs or when fair value can be established. Arrangements with customers generally include standard acceptance provisions that provide the customer with typically ten to fifteen days to notify the Company that delivered product does not conform to our standard published specifications. Customers may not cancel orders due to non-acceptance. Arrangements do not generally include subjective or other provisions involving acceptance over and above the published specifications. If a customer arrangement includes such an acceptance provision, revenue recognition occurs upon the earlier of receipt of a written customer acceptance or expiration of the acceptance period. suppliers;

~~Transactions~~• ~~may include trade-in rights, upgrade rights or other related provisions. Revenue recognition on transactions involving trade-in or upgrade rights is deferred until such rights have lapsed or~~ the ~~original~~presence ~~product~~of ~~has~~existing ~~been~~competitors ~~returned~~ and~~/or~~ the ~~related~~emergence ~~products~~of ~~have~~new been delivered and all other revenue recognition criteria have been met. For coupons and specified future discounts, the related amount is deferred until such rights have lapsed or the related products have been delivered. competitors;

~~When~~• ~~product~~our isfinancial ~~sold~~condition ~~together with services, product revenue is recognized upon delivery, provided that (1) the above criteria have been met, (2) payment for product is not dependent upon the performance of the services,~~ and ~~(3)~~liquidity ~~the services do not involve significant customization, implementation, or integration of the product~~ and ~~are~~our ~~not~~leverage ~~essential to the functionality of the product that was delivered. If services involve significant customization, implementation or integration, revenue for the services~~ and ~~the~~debt ~~related~~service product is generally recognized as the services are performed using the percentage of completion method. Estimates of total labor hours required to perform the related services and actual labor hours pertaining to the related services incurred during a period and to date are used in applying the percentage of completion method. If customer acceptance is uncertain at the outset of the arrangement, revenue for services and the related product is recognized under the completed contract method. Significant judgment is required to determine whether customer acceptance is uncertain at the outset of the arrangement. The Company considers the following factors in making this determination: the Company’s history with similar arrangements, the Company’s history with the customer, the level of risk involved in integrating the product into the customer’s IT environment, the customers participation in the endeavor, and the economic penalty the customer could face if the product and payment terms were not accepted. obligations;

If• ~~the~~economic ~~fee~~conditions ~~due~~globally from the customer is not fixed or determinable, revenue is recognized as payment is due from the customer, assuming all other revenue recognition criteria have been met. At the time of the transaction, the Company assesses whether the fee associated with the revenue transaction is fixed or determinable and ~~whether~~in orour ~~not~~most ~~collection~~important is probable. The fee is considered fixed or determinable based on the payment terms associated with the transaction. If a significant portion of a fee is due after the normal payment terms, which are usually 30 to 90 days from invoice date, depending upon the region, the fee is generally deemed as not fixed or determinable. In these cases, revenue is recognized as the fees become due. Collection is assessed based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. The Company does not request markets;

19• developments in the fault-tolerant and high-availability server markets;

~~Table~~• ofclaims ~~Contents~~by third parties that we infringe upon their intellectual property rights;

~~STRATUS~~• ~~TECHNOLOGIES~~our ~~INTERNATIONAL,~~success ~~S.à~~in ~~r.l.~~adequately protecting our intellectual property rights;

~~collateral~~• ~~from~~our ~~its~~success ~~customers.~~in Ifmaintaining itefficient ismanufacturing ~~determined that collection of a fee is not probable, associated revenue is deferred~~ and ~~recognized~~logistics upon receipt of cash. In certain regions or countries where collection risk is considered to be high, such as Latin America, and certain Asian and Eastern European countries, revenue is generally recognized only when full cash payment is received from the customer or when a formal letter of credit has been put in place. operations;

~~Revenue~~• ~~for~~our ~~arrangements~~ability ~~with resellers is generally recognized when the Company delivers product as designated by the reseller and all other revenue recognition criteria have been met. Delivery is generally directly~~ to ~~end users or to the reseller if the reseller is integrating the product into its offering or otherwise designates such. If the Company continues to participate in sales to the end user~~recruit, ~~revenue~~retain ~~is deferred~~ and ~~recognized~~develop ~~when~~appropriately ~~product~~skilled is sold through to the end user based on evidence from the reseller provided all other revenue recognition criteria have been met (“sell through”). This is typically the case in Europe and, accordingly, transactions with resellers in Europe are recognized upon sell through. This is not the case in Japan where the Company deals exclusively with the reseller and has no involvement with the end user. Sales with resellers in other geographies are evaluated on a case-by-case basis. In Japan the reseller may from time to time order product and request that Stratus hold the product pending final delivery instructions. In these instances the Company maintains risk of loss while the product is being held and revenue is deferred until delivery is made to the reseller or the end user as instructed. Additionally, in some reseller transactions in Japan title does not pass until product acceptance by the customeremployees; accordingly revenue recognition for these transactions is delayed until evidence of product acceptance is received. On a limited basis when the Company provides a reseller with stock rotation rights or any other return rights, revenue is deferred until the rights have lapsed.

~~Maintenance~~• ~~and~~exposure support services are recognized ratably over the life of the maintenance and support service period, which typically is one year. Maintenance and support services include telephone support, remote network monitoring, advance parts exchange and unspecified rights to product upgrades and enhancements. VSOE for ~~maintenance~~systems and ~~support services is determined at the customer level based on the price charged for subsequent year renewals. Installation and other consulting~~ service ~~revenues are recognized when performed. VSOE for installation and other consulting services is based on the price charged when similar services are sold separately.~~ failures;

In• ~~the~~fluctuations ~~absence~~in ofexchange a master purchasing agreement or signed contract, the Company uses either a purchase order or purchase order equivalent as evidence of an arrangement. Sales to resellers are usually evidenced by a master agreement governing the relationship together with purchase orders on a transaction-by-transaction basis. Sales to OEM’s are usually evidenced by a master agreement governing the relationship together with a shipping report on a transaction-by-transaction basis. rates;

~~The~~• ~~majority~~current ofrisks our sales transactions are completed using standard terms and conditions; however, there are agreements that contain non-standard terms and conditions. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of ~~accounting~~terrorist ~~for~~activity ~~revenue recognition purposes,~~ and ifacts ~~so, how the price should be allocated among the deliverable elements and when to recognize the revenue for each element. Changes in the allocation~~ of ~~the~~war; ~~sales price among deliverable elements might impact the timing of revenue recognition, but would not change the total revenue recognized for the transaction.~~ and

~~Stratus records~~• ~~deferred~~the ~~revenue~~impact ~~for~~of ~~product~~changes ~~shipped~~in topolicies, ~~customers~~laws, ~~and~~regulations ~~related services where amounts are billed pursuant to a contractual right and collection occurs~~ or ispractices ~~probable~~of ~~prior~~foreign togovernments ~~satisfying~~on ~~revenue~~our ~~recognition~~international ~~criteria~~operations.

~~Inventory-Related~~Current ~~Provisions~~information in this quarterly report has been updated to November 27, 2005, and Stratus undertakes no duty to further update this information. All other information contained herein is presented as of the specific date noted and has not been updated since that time.

WeThe ~~state~~foregoing ~~our~~list ~~inventories at the lower~~ of ~~cost~~important ~~(first-in,~~factors ~~first-out)~~is ~~or market.~~not ~~We periodically review our inventory for obsolescence and declines in market value below cost and write~~all-~~down our inventory for any such declines~~inclusive. We consider recent historic usage and future demand in estimating the realizable value of our inventory. Possible changes in these estimates could result in downward revisions to the valuation of inventory, which would be included in cost of revenue for the period in which the revision is identified. As we continue to migrate our server offerings to industry standard components we may need to revise the estimated useful life of certain component parts.

~~Valuation~~Overview ~~of Long-Lived and Intangible Assets and Goodwill~~

We ~~assess~~are ~~the~~a ~~carrying~~global ~~value~~provider of ~~identifiable~~fault-tolerant ~~intangible~~computer ~~assets~~servers, ~~long-lived~~technologies ~~assets~~ and ~~goodwill annually~~services, orwith more ~~frequently if~~than ~~events~~25 oryears ~~changes~~of experience focused in ~~circumstances~~the ~~indicate~~fault-tolerant ~~that~~server ~~such~~market. ~~carrying~~Our ~~value~~servers ~~may~~provide ~~not~~high belevels ~~recoverable.~~of ~~Factors~~reliability werelative ~~consider~~to ~~important~~the server industry, ~~which~~delivering ~~could~~99.999% ~~trigger~~uptime anor ~~impairment~~better ~~review~~(equivalent to less than five minutes of downtime annually in continuous operation). Our customers, who include some of the ~~following:~~most recognizable companies in the world, purchase Stratus servers and support services for their critical computer-based operations.

•We ~~significant~~currently ~~underperformance~~provide ~~relative~~two tolines ~~expected~~of ~~historical~~fault-tolerant orservers, ~~projected~~the ~~future~~Continuum® ~~results;~~system family and the ftServer® system family, each of which is supported by a technologically advanced worldwide service offering.

2021

~~Table~~STRATUS ofTECHNOLOGIES ~~Contents~~INTERNATIONAL, S.à r.l.

~~STRATUS~~• ~~TECHNOLOGIES~~Product ~~INTERNATIONAL~~revenue consists primarily of revenue generated from the sale of our servers, Swhich include our proprietary and other operating systems.à rIn fiscal 2002, we launched our ftServer systems.l We expect our future product revenue growth largely to derive from sales of ftServer systems, which support the Microsoft Windows® operating system, Linux operating system and our own proprietary VOS® operating system. In the first half of fiscal 2005, we introduced the ftServer T-Series, which is our fault-tolerant server for the telecommunications market and uses Linux as the operating system. In addition, we continue to generate product sales from our installed base. With the successful porting of our proprietary VOS® operating system to the ftServer (“ftServer V-Series”) in the second quarter of fiscal 2005, we now have a migration path that enables our Continuum system customers to leverage their investments in their applications written on VOS and continue to achieve performance improvements as their businesses grow. We believe our ftServer V-Series systems will also extend the longevity and revenue-producing capacity of our Continuum system customer base. The ftServer V-Series product has been well accepted by many of our Continuum system customers. We have experienced a decline in the number of units sold and the revenue generated from sales of Continuum systems over the last three fiscal years. We believe that several key factors have contributed to this decline, including the emergence of newer and more competitive high-availability server products, the proprietary nature of the operating systems running on the Continuum systems, migration of Continuum customers to the ftServer V-Series and a shift in our business focus to sales of ftServer systems. Although we intend to leverage our current base of Continuum system customers through add-on sales, our growth plans are focused on the promotion and sale of ftServer systems. With the exception of ftServer V-Series, these lower-cost servers generate lower margin dollars per unit than our Continuum systems; therefore, we will need to increase our market penetration in order to increase our profitability.

• ~~significant~~Service ~~changes~~revenue inconsists of revenue primarily generated from our customer support activities, which consist of maintenance contracts for which revenue typically is recognized ratably over the ~~manner~~contractual period, one-time services such as parts repair, billable time and materials activities, and installation, education and professional consulting services. Our systems tend to remain under service and in operation for long periods of time, historically resulting in a predictable service revenue stream. As our ~~use~~sales offocus shifts to the ~~acquired~~lower-priced ~~assets~~ftServer orsystems with correspondingly lower-priced service offerings, we intend to seek new sources of service revenue by increasing the ~~strategy~~breadth ~~for~~and scope of our ~~overall~~service ~~business;~~offerings, containing or reducing costs and leveraging our existing service infrastructure to support all of our product lines.

•The ~~significant~~table ~~negative~~set ~~industry~~forth orbelow ~~economic~~shows ~~trends.~~our consolidated revenue for each of our product lines and our service offering:

When we determine that the carrying value of intangible assets, long-lived assets or goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we review and measure any impairment based on the fair value of the asset. Fair value is primarily determined using a discounted cash flow methodology. While we believe that our assumptions are appropriate, such amounts estimated could differ materially from what will actually occur in the future.


	Three Months Ended (Dollars in millions)				Nine Months Ended (Dollars in millions)
	November 27, 2005		November 28, 2004		November 27, 2005		November 28, 2004
Continuum products	$	9.9	$	16.9	$	29.5	$	45.6
ftServer products		16.5		11.4		50.8		40.0

Total product revenue		26.4		28.3		80.3		85.6
Service revenue		37.4		39.9		114.0		119.6

Total revenue	$	63.8	$	68.2	$	194.3	$	205.2

~~Deferred~~Critical ~~Taxes~~Accounting ~~and Tax Liability~~ Policies

WeThere ~~currently~~ have ~~significant~~been ~~deferred~~no ~~tax~~significant ~~assets~~changes ~~resulting~~to ~~from net operating loss carryforwards, and deductible temporary differences, which may reduce taxable income in future periods. Based on~~ our review of several significant developments (including cumulative losses, the continuing market decline, uncertainty and lack of visibility in the technology market as a whole), we have determined that acritical ~~valuation~~accounting ~~allowance~~policies is required since it is more likely that a portion of a deferred tax asset will not be realized. Forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as ~~cumulative~~disclosed ~~losses~~ in ~~recent~~our ~~years.~~latest Weannual ~~have~~report ~~not~~for ~~provided~~the afiscal ~~valuation~~year ~~allowance~~ended ~~on net deferred tax assets in certain jurisdictions due to their historical and projected profitability. As of May 29, 2005 and~~ February 27, 2005~~, our net deferred tax assets were approximately $2~~.9 ~~million and $3.0 million, net of total valuation allowances of $26.6 million, respectively.~~

~~The~~Certain ~~calculation~~ of ~~the~~our ~~Company’s~~accounting ~~tax~~policies ~~liabilities~~require ~~involves dealing with uncertainties in~~ the application of ~~complex tax regulations in a multitude of jurisdictions across our global operations. Significant~~ judgment isby ~~required~~management in ~~evaluating~~selecting ~~our~~appropriate ~~tax~~assumptions ~~positions~~for ~~and~~calculating ~~determining our income tax expense. During the ordinary course of business~~financial estimates, ~~there are many transactions and calculations for~~ which ~~the ultimate~~inherently ~~tax~~contain ~~determination~~some isdegree ~~uncertain.~~of ~~The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the U~~uncertainty.S. ~~and~~Management ~~other~~bases ~~tax~~its ~~jurisdictions~~estimates ~~based~~ on ~~the~~historical ~~Company’s~~experience ~~estimate of whether,~~ and ~~the extent~~various toother ~~which,~~assumptions ~~additional taxes will be due. These reserves are established when, despite our belief~~ that ~~our tax return positions~~ are ~~fully~~believed ~~supportable, we believe that certain positions are likely~~ to be ~~challenged~~reasonable ~~and~~under ~~may~~the ~~not be sustained on review by tax authorities. These reserves are adjusted in light of changing facts and~~ circumstances., ~~Our income tax expense includes~~ the ~~impact~~results of ~~reserve~~which ~~provisions~~form ~~and changes to reserves that are considered appropriate, as well as~~ the ~~related~~basis ~~net~~for ~~interest.~~making ~~The~~judgments ~~Company~~about ~~is currently undergoing a routine tax examination of~~ the ~~income~~reported ~~tax~~carrying ~~return’s~~values of aassets ~~subsidiary~~and inliabilities aand ~~foreign~~the ~~jurisdiction.~~reported ~~The~~amounts ~~outcome~~ of ~~this~~revenue ~~examination~~and ~~cannot~~expenses bethat ~~determined~~may atnot ~~this~~be ~~time~~readily ~~since~~apparent ~~fieldwork~~from isother ~~still underway~~sources. ~~The~~ ~~Company~~Actual ~~anticipates~~results ~~that~~may ~~the~~differ ~~examination~~from ~~may~~these beestimates ~~completed~~under ~~during~~different assumptions ~~fiscal~~or ~~2006~~conditions. ~~Unfavorable~~We ~~settlement~~believe ofthe ~~any~~following ~~particular~~are ~~issue~~some ~~would~~of ~~require~~ the ~~use~~more ofcritical ~~cash.~~accounting ~~Favorable~~policies ~~resolution~~and ~~would~~related ~~result~~judgments inand aestimates ~~reduction~~used ~~of the Company’s effective tax rate~~ in the ~~quarter~~preparation of ~~resolution.~~consolidated ~~Any~~financial ~~additional impact of the Company’s liability for income taxes cannot presently be determined; however the Company believes its accrued income tax liabilities are adequate~~statements.

~~Business~~Revenue ~~Restructuring~~Recognition

~~During~~The ~~fiscal~~Company ~~2005,~~sells ~~2004~~its products and ~~2003,~~services weto ~~recorded~~end ~~significant~~users, ~~charges in connection with the 2005~~resellers, ~~the 2004~~ and ~~the~~original ~~2003~~equipment ~~Restructuring Programs~~manufacturers. The Company’s ~~related~~products ~~reserves~~are ~~reflect~~integrated ~~many~~with ~~estimates,~~software ~~including~~that ~~those~~is ~~related~~essential to ~~termination~~the ~~benefits~~functionality ~~and settlements~~ of ~~contractual obligations. We review~~ the ~~reserve requirements to complete each restructuring periodically throughout the year~~equipment. ~~Actual experience has been and may continue to be different from these estimates. For example~~Accordingly, wethe ~~revised~~Company ~~our~~accounts ~~estimates~~ for ~~certain~~revenue ~~fiscal 2002 restructuring plans during fiscal 2003, which resulted~~ in aaccordance ~~net~~with ~~credit~~Statement of ~~$0.3~~Position ~~million~~No. 97-2, AsSoftware ofRevenue ~~May 29~~Recognition, ~~2005~~ and ~~February~~all ~~27,~~related ~~2005,~~interpretations. ~~liabilities~~The ~~associated~~Company’s ~~with~~transactions ~~our~~frequently ~~restructuring~~include ~~program~~the ~~were~~sale ~~$5.1~~of ~~million~~products and ~~$10.3~~services ~~million,~~under ~~respectively~~multiple element arrangements.

~~Stock~~22 ~~Plans~~

~~The~~STRATUS ~~Company’s~~TECHNOLOGIES ~~capitalization includes authorization for the issuance of stock options for the purchase of shares of the Parent’s ordinary stock to employees~~INTERNATIONAL, ~~management, directors, or consultants of its direct and indirect subsidiaries under the Stratus Technologies, Inc~~S.à ~~(“Stratus Inc~~r.~~”) Stock Incentive Plan~~l. Stratus Inc. is a wholly-owned subsidiary of the Company. The Company accounts for stock-based compensation granted to employees using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation cost for stock options granted to employees is measured as the excess, if any, of the fair market value of the Parent’s stock at the date of grant over the exercise price. The fair value of options granted to employees is disclosed in accordance with SFAS No. 123, Accounting for Stock-Based Compensation. The Company records stock-based compensation issued to non-employees using the fair value method prescribed by SFAS No. 123.

21Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product or performance of the services has occurred, title and risk of loss has passed to the customer, the fee is fixed or determinable, and collection is probable. The Company uses the residual method to allocate revenue when a transaction includes one or more elements to be delivered and vendor specific objective evidence (“VSOE”) of the fair value of all undelivered elements exists. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. VSOE is based on the fee charged when these elements are sold separately. If evidence of the fair value of one or more undelivered elements does not exist, all revenue is deferred and typically recognized when delivery of all elements occurs or when fair value can be established. Arrangements with customers generally include standard acceptance provisions that provide the customer with typically ten to fifteen days to notify the Company that delivered product does not conform to our standard published specifications. Customers may not cancel orders due to non-acceptance. Arrangements do not generally include subjective or other provisions involving acceptance over and above the published specifications. If a customer arrangement includes such an acceptance provision, revenue recognition occurs upon the earlier of receipt of a written customer acceptance or expiration of the acceptance period.

~~Table~~Transactions ofmay ~~Contents~~include trade-in rights, upgrade rights or other related provisions. Revenue recognition on transactions involving trade-in or upgrade rights is deferred until such rights have lapsed or the original product has been returned and/or the related products have been delivered and all other revenue recognition criteria have been met. For coupons and specified future discounts, the related amount is deferred until such rights have lapsed or the related products have been delivered.

~~STRATUS~~When ~~TECHNOLOGIES~~product ~~INTERNATIONAL~~is sold together with services, Sproduct revenue is recognized upon delivery, provided that (1) the above criteria have been met, (2) payment for product is not dependent upon the performance of the services, and (3) the services do not involve significant customization, implementation, or integration of the product and are not essential to the functionality of the product that was delivered.à rIf services involve significant customization, implementation or integration, revenue for the services and the related product is generally recognized as the services are performed using the percentage of completion method.l Estimates of total labor hours required to perform the related services and actual labor hours pertaining to the related services incurred during a period and to date are used in applying the percentage of completion method. If customer acceptance is uncertain at the outset of the arrangement, revenue for services and the related product is recognized under the completed contract method. Significant judgment is required to determine whether customer acceptance is uncertain at the outset of the arrangement. The Company considers the following factors in making this determination: the Company’s history with similar arrangements, the Company’s history with the customer, the level of risk involved in integrating the product into the customer’s IT environment, the customers participation in the endeavor, and the economic penalty the customer could face if the product and payment terms were not accepted.

~~Our~~If ~~stock~~the ~~option~~fee ~~program~~due from the customer is anot ~~broad-based,~~fixed ~~long-term~~or ~~retention~~determinable, ~~program~~revenue ~~that~~is recognized as payment is ~~intended~~due tofrom ~~attract~~the ~~and~~customer, ~~retain~~assuming ~~talented~~all ~~employees~~other ~~and~~revenue ~~align~~recognition ~~stockholder~~criteria ~~and~~have ~~employee~~been ~~interests~~met. ~~Our~~At ~~1999~~the ~~Stratus~~time ~~Technologies~~of the transaction, ~~Inc.~~the ~~Stock~~Company ~~Incentive~~assesses ~~Plan~~whether isthe fee associated with the ~~plan~~revenue ~~under~~transaction ~~which~~is ~~our~~fixed ~~options~~or ~~are~~determinable ~~granted~~and whether or not collection is probable. ~~This~~The ~~plan~~fee ~~provides~~is ~~broad~~considered ~~discretion~~fixed toor ~~our board~~determinable based on the payment terms associated with the transaction. If a significant portion of ~~directors~~a fee is due after the normal payment terms, which are usually 30 to 90 days ~~create~~from ~~appropriate~~invoice ~~equity~~date, ~~incentives~~depending ~~for~~upon ~~our~~the ~~employees~~region, the fee is generally deemed as ~~well~~not fixed or determinable. In these cases, revenue is recognized as ~~members~~the fees become due. Collection is assessed based on a number of ~~our~~factors, ~~board~~including past transaction history with the customer and the credit-worthiness of ~~directors~~the customer. ~~Substantially~~The ~~all~~Company does not request collateral from its customers. If it is determined that collection of ~~our~~a ~~employees~~fee ~~participate~~is innot ~~our~~probable, ~~stock~~associated ~~option~~revenue ~~program~~is deferred and recognized upon receipt of cash. In ~~addition,~~certain ~~many~~regions ~~employees~~or ~~terminated~~countries ~~under~~where ~~the 2005,~~collection ~~2004~~risk ~~and~~is ~~2003~~considered ~~Restructuring~~to ~~Programs~~be ~~retained~~high, ~~the~~such ~~vested~~as ~~portion~~Latin ofAmerica, ~~their~~and ~~stock~~certain ~~option~~Asian ~~awards~~and Eastern European countries, ~~for~~revenue ais ~~period~~generally ~~not~~recognized toonly ~~exceed~~when full cash payment is received from the ~~contractual~~customer ~~expiration~~or when a formal letter of ~~the~~credit ~~options~~has been put in place.

AsRevenue ~~our~~for ~~Parent’s~~arrangements ~~stock~~with resellers is ~~not~~generally ~~listed~~recognized onwhen anthe ~~exchange,~~Company delivers product as designated by the ~~determination~~reseller ofand ~~fair~~all ~~market~~other ~~value~~revenue recognition criteria have been met. Delivery is generally directly to end users or to the reseller if the reseller is integrating the product into its offering or otherwise designates such. If the Company continues to participate in sales to the end user, revenue is deferred and recognized when product is sold through to the end user based on evidence from the reseller provided all other revenue recognition criteria have been met (“sell through”). This is typically the case in Europe and, accordingly, transactions with resellers in Europe are ~~management’s~~recognized ~~assessment~~upon assell ~~determined~~through. byThis anis ~~independent~~not ~~valuation~~the ~~analysis~~case in Japan where the Company deals exclusively with the reseller and ~~approved~~has byno ~~Stratus~~involvement ~~SA’s~~with ~~Board~~the ofend ~~Directors~~user. ~~Management’s~~Sales ~~assessment~~with ~~utilizes~~resellers in other geographies are evaluated on a ~~number~~case-by-case ofbasis. ~~common~~In ~~valuation~~Japan ~~techniques~~the reseller may from time to time order product and request that Stratus hold the product pending final delivery instructions. ~~The~~In ~~accounting~~these ~~for~~instances the Company’s ~~stock~~maintains ~~option~~risk ~~program~~of loss while the product is being held and ~~related~~revenue ~~stock-based~~is ~~compensation~~deferred ~~charges~~until delivery is ~~impacted~~made byto ~~this~~the ~~fair~~reseller ~~market~~or ~~value~~the ~~determination~~end user as instructed. ~~The~~Additionally, ~~statutory~~in ~~minimum~~some ~~value~~reseller ~~for~~transactions in Japan title does not pass until product acceptance by the ~~purchase~~customer; accordingly revenue recognition for these transactions is delayed until evidence of ~~Stratus~~product ~~SA’s~~acceptance ~~shares,~~is inreceived. ~~compliance~~On a limited basis when the Company provides a reseller with ~~Luxembourg requirements~~stock ~~for~~rotation ~~“societes~~rights ~~anonymes”~~or ~~(SA)~~any ~~companies~~other return rights, revenue is ~~U.S.~~deferred ~~$1.50~~until ~~per~~the ~~share~~rights have lapsed.

~~Embedded~~23 ~~Derivatives~~

~~The~~STRATUS ~~Company~~TECHNOLOGIES ~~does not hold or issue derivative instruments for trading purposes. However~~INTERNATIONAL, ~~the Company’s New Senior Notes due December 1, 2008 contain embedded derivatives that require separate valuation from the New Senior Notes~~S.à ~~The Company recognizes the derivatives as liabilities in the consolidated balance sheet and measures the derivatives at their estimated fair value, which is determined by a third party valuation~~r. ~~Changes in the estimated fair value of the derivative are recorded through other income in the period of change~~l. The initial bifurcation of the embedded derivatives from the New Senior Notes, at their effective date, resulted in a difference between the estimated fair value and the face value of the New Senior Notes. This difference is recorded as a debt discount and will be amortized to interest expense over the life of the debt. Valuing the embedded derivatives involves significant estimates and judgments, including assessing the likelihood of an Initial Public Offering or a Change in Control of the Company. The valuation is also significantly impacted by the price at which our New Senior Notes are trading. Accordingly, changes in assumptions or volatility in the price that our bonds trade at could have a material impact on the value of the derivatives and the income statement.

~~Results~~Maintenance and support services are recognized ratably over the life of ~~Operations~~the maintenance and support service period, which typically is one year. Maintenance and support services include telephone support, remote network monitoring, advance parts exchange and unspecified rights to product upgrades and enhancements. VSOE for maintenance and support services is determined at the customer level based on the price charged for subsequent year renewals. Installation and other consulting service revenues are recognized when performed. VSOE for installation and other consulting services is based on the price charged when similar services are sold separately.

~~The~~In ~~most~~the ~~important drivers~~absence of ~~our~~a ~~results~~master ofpurchasing ~~operations~~agreement ~~are~~or ~~the~~signed ~~successful~~contract, ~~acceptance of our product lines in~~ the ~~intensely~~Company ~~competitive~~uses ~~high-availability~~either ~~server~~a ~~market~~purchase ~~and~~order ~~our~~or ~~ability~~purchase toorder ~~meet~~equivalent ~~the~~as ~~rapidly~~evidence ~~changing demands~~ of ~~our~~an ~~customers through continued evolution of our product and service offerings~~arrangement. WeSales ~~believe that the combination of our ftServer systems and our commitment~~ to ~~maintaining~~resellers ~~the~~are ~~longevity~~usually ofevidenced ~~our~~by ~~Continuum~~a ~~systems,~~master ~~both~~agreement governing in the ~~field~~relationship ~~and~~together ~~the~~with ~~associated~~purchase ~~customer~~orders ~~service~~on ~~bases,~~a ~~has~~transaction-by-transaction ~~enhanced our ability to be competitive in this market~~basis. WeSales ~~plan~~ to ~~continue~~OEM’s toare ~~focus~~usually onevidenced ~~our~~by ~~value~~a ~~proposition~~master ofagreement ~~providing~~governing the ~~highest~~relationship ~~levels~~together ofwith ~~continuous~~a ~~availability,~~shipping ~~operational~~report ~~simplicity~~on ~~and compelling financial advantage versus the alternatives of our~~a ~~competitors~~transaction-by-transaction basis.

22The majority of our sales transactions are completed using standard terms and conditions; however, there are agreements that contain non-standard terms and conditions. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and if so, how the price should be allocated among the deliverable elements and when to recognize the revenue for each element. Changes in the allocation of the sales price among deliverable elements might impact the timing of revenue recognition, but would not change the total revenue recognized for the transaction.

~~Table~~Stratus ofrecords ~~Contents~~deferred revenue for product shipped to customers and related services where amounts are billed pursuant to a contractual right and collection occurs or is probable prior to satisfying revenue recognition criteria.

~~STRATUS~~Inventory-Related ~~TECHNOLOGIES~~Provisions ~~INTERNATIONAL, S.à r.l~~

~~The~~We ~~following~~state ~~tables~~our ~~summarizes~~inventories ~~our~~at ~~results~~the lower of ~~operations~~cost (first-in, first-out) or market. We periodically review our inventory for ~~the~~obsolescence ~~fiscal~~and decline in market ~~three~~value below cost and write-~~month~~down ~~periods~~our ~~ended~~inventory ~~May~~for ~~29,~~any ~~2005~~such ~~and~~declines. ~~May~~We ~~30,~~consider ~~2004,~~recent historic usage and isfuture ~~used~~demand ~~for~~in estimating the ~~purpose~~realizable value of ~~calculating~~our ~~changes~~inventory. ~~from~~Possible ~~prior~~changes ~~year~~in tothese ~~current~~estimates ~~year~~could result in downward revisions to the ~~Management’s~~valuation ~~Discussion~~of ~~and~~inventory, ~~Analysis~~which ofwould ~~Financial~~be ~~Condition~~included ~~and~~in ~~Results~~cost of ~~Operations~~revenue for the period in which the revision is identified. ~~Immaterial differences~~As we continue to ~~the~~migrate ~~Consolidated~~our ~~Statements~~server ofofferings ~~Operations~~to ~~are~~industry ~~due~~standard components, we may need to ~~rounding~~revise the estimated useful life of certain component parts.

~~Results~~Deferred ofTaxes ~~operations for the periods ended May 29, 2005~~ and ~~May~~Tax ~~30, 2004 (unaudited)~~ Liability

	May 29,2005			May 30, 2004			$Change			%Change
	(dollars in millions, except percentages)
Revenue
Product revenue	$	26.4		$	27.9			(1.5	)	-5.4	%
Service revenue		38.9			39.6			(0.7	)	-1.8	%
Total revenue		65.3			67.5			(2.2	)	-3.3	%
Product cost of revenue		15.2			18.0			(2.8	)	-15.6	%
Service cost of revenue		16.1			16.9			(0.8	)	-4.7	%
Amortization of intangibles		0.5			0.5			—		0.0	%
Total cost of revenue		31.8			35.4			(3.6	)	-10.2	%
Gross profit		33.5			32.1			1.4		4.4	%
Research and development		10.1			12.6			(2.5	)	-19.8	%
Sales, marketing, general and administrative		15.4			15.7			(0.3	)	-1.9	%
Amortization of intangibles		1.2			1.2			—		0.0	%
Restructuring and asset impairment charges		0.4			—			0.4
Total operating expenses		27.1			29.5			(2.4	)	-8.1	%
Profit from operations		6.4			2.6			3.8		146.2	%
Interest income		0.1			—			0.1
Interest expense		(5.7	)		(5.3	)		(0.4	)	7.5	%
Other income (expense), net		(1.8	)		(0.9	)		(0.9	)	100.0	%
Loss before income taxes		(1.0	)		(3.6	)		2.6		72.2	%
Provision for income taxes		0.6			0.5			0.1		20.0	%
Net loss	$	(1.6	)	$	(4.1	)	$	2.5		61.0	%

We currently have significant deferred tax assets resulting from net operating loss carry-forwards, and deductible temporary differences, which may reduce taxable income in future periods. Based on our review of several significant developments (including cumulative losses, the continuing market decline, uncertainty and lack of visibility in the technology market as a whole), we have determined that a valuation allowance is required since it is more likely that a portion of a deferred tax asset will not be realized. Forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years. We have not provided a valuation allowance on net deferred tax assets in certain jurisdictions due to their historical and projected profitability. As of November 27, 2005 and February 27, 2005, our net deferred tax assets were approximately $2.6 million and $3.0 million, net of total valuation allowances of $26.6 million, respectively.

23The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. Significant judgment is required in evaluating our tax positions and determining our income tax expenses. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on the Company’s estimate of whether, and the extent to which, additional taxes will be due. These reserves are established when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged and may not be sustained on review by tax authorities. These reserves are adjusted in light of changing facts and circumstances. Our income tax expense includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest. The Company is currently undergoing a routine tax examination of the income tax returns of a subsidiary in a foreign jurisdiction. The outcome of this examination cannot be determined at this time since fieldwork is still underway. The Company anticipates that the examination may be completed during fiscal 2006 or early fiscal 2007. Unfavorable settlement of any particular issue would require the use of cash. Favorable resolution would result in a reduction of the Company’s effective tax rate in the quarter of resolution. Any additional impact of the Company’s liability for income taxes cannot presently be determined; however, the Company believes its accrued income tax liabilities are adequate.

~~Table~~24 ~~of Contents~~

STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.

~~Three~~Business ~~months~~Restructuring ~~ended May 29, 2005 Compared to Three months ended May 30, 2004~~

~~Total~~During ~~revenue~~fiscal ~~for~~2005 ~~the~~and ~~three~~2004, ~~months~~we ~~ended~~recorded ~~May~~significant ~~29,~~charges in connection with the 2005 and the 2004 Restructuring Programs. The related reserves reflect many estimates, including those related to termination benefits and settlements of ~~$65~~contractual obligations.3 ~~million~~We ~~decreased~~review bythe ~~$2.2~~reserve ~~million~~requirements orto 3complete each restructuring periodically throughout the year.3% Actual inexperience ~~comparison~~has been and may continue to ~~the~~be ~~same~~different ~~period~~from inthese ~~fiscal~~estimates. As of November 27, 2005 and February 27, 2005, liabilities associated with our restructuring program were $1.5 million and $10.3 million, respectively.

	Three months ended				$Change			%Change
	May 29,2005		May 30,2004
	(dollars in millions, except percentages)
Product revenue	$	26.4	$	27.9	$	(1.5	)	-5.4	%
Service revenue		38.9		39.6		(0.7	)	-1.8	%
Total revenue	$	65.3	$	67.5	$	(2.2	)	-3.3	%

Stock Plans

~~Product~~The ~~Revenue~~Company’s capitalization includes authorization for the issuance of stock options for the purchase of shares of the Parent’s ordinary stock to employees, management, directors, or consultants of its direct and indirect subsidiaries under the Stratus Technologies, Inc. (“Stratus Inc.”) Stock Incentive Plan. Stratus Inc. is a wholly-owned subsidiary of the Company. The Company accounts for stock-based compensation granted to employees using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation cost for stock options granted to employees is measured as the excess, if any, of the fair market value of the Parent’s stock at the date of grant over the exercise price. The fair value of options granted to employees is disclosed in accordance with SFAS No. 123, Accounting for Stock-Based Compensation. The Company records stock-based compensation issued to non-employees using the fair value method prescribed by SFAS No. 123.

~~Product~~Our ~~revenue~~stock ~~for~~option program ~~the~~is ~~first~~a ~~three~~broad-based, ~~months~~long-term ~~ended~~retention ~~fiscal~~program ~~2006~~that ~~decreased~~is ~~by 5.4%~~intended to ~~$26~~attract and retain talented employees and align stockholder and employee interests.4 ~~million~~Our ~~from~~1999 ~~$27~~Stratus Technologies, Inc.9 ~~million~~Stock Incentive Plan is the plan under which our options are granted. This plan provides broad discretion to our board of directors to create appropriate equity incentives for ~~fiscal~~our ~~2005~~employees as well as members of our board of directors. ~~Partially~~Substantially ~~offsetting~~all ~~this~~of ~~decrease~~our ~~was~~employees $0participate in our stock option program.8 ~~million~~In ~~related~~addition, many employees terminated under the 2005, 2004 and 2003 Restructuring Programs retained the vested portion of their stock option awards, for a period not to ~~favorable~~exceed ~~foreign~~the ~~exchange~~contractual ~~rate~~expiration ~~movement~~of the options.

~~The~~As ~~decrease~~our inParent’s ~~product~~stock ~~revenue~~is ~~was~~not ~~mainly~~listed ~~attributable~~on toan ~~decreases~~exchange, in the ~~unit sales~~ determination of ~~our~~fair ~~Continuum~~market ~~product~~value ~~line~~is ~~due~~based ~~to the~~on ~~continued~~management’s ~~acceptance~~assessment ofas ~~V-Series~~determined ~~which~~by ~~was~~an ~~introduced~~independent invaluation ~~the~~analysis ~~second~~and ~~quarter~~approved ofby ~~fiscal~~Stratus ~~2005.~~SA’s ~~Continuum~~Board ~~product~~of ~~revenue~~Directors. ~~decreased~~Management’s inassessment ~~the~~utilizes ~~first~~a ~~quarter~~number of ~~fiscal~~common ~~2006,~~valuation intechniques. ~~comparison~~The accounting tofor the ~~same~~Company’s ~~period~~stock ~~last~~option ~~year,~~program aand ~~35.8%~~related ~~decrease~~stock-based tocompensation ~~$9.7~~charges ~~million from~~is ~~$15.1~~impacted ~~million.~~by ~~Our~~this ~~Continuum~~fair ~~products~~market ~~are~~value ~~now sold exclusively into our installed customer base~~determination. ~~Given~~The ~~this~~statutory ~~limited~~minimum ~~market~~value ~~potential~~for ~~and~~ the ~~continued~~purchase ~~acceptance~~ of ~~the~~Stratus ~~V-Series~~SA’s ~~by our Continuum installed base~~shares, wein ~~expect~~compliance ~~the revenue from our~~with ~~Continuum~~Luxembourg ~~product~~requirements ~~line~~for to“societes ~~continue~~anonymes” to(SA) ~~decline~~companies, ~~over~~is ~~time~~U. ~~ftServer revenue increased 30~~S.5% ~~in comparison to the same period last year, to~~ $161.750 ~~million~~per ~~from $12~~share.8 ~~million.~~

~~Service~~Embedded ~~Revenue~~Derivatives

~~Service~~The ~~revenue~~Company does not hold or issue derivative instruments for trading purposes. However, the ~~first~~Company’s ~~three~~Senior ~~months~~Notes ~~ended~~due ~~fiscal~~December 1, ~~2006~~2008 ~~decreased~~contain byembedded ~~1.8%~~derivatives tothat ~~$38.9~~require ~~million~~separate valuation from ~~$39~~the Senior Notes.6 ~~million~~The Company ~~for~~recognizes ~~fiscal~~the ~~2005~~derivatives as liabilities in the consolidated balance sheet and measures the derivatives at their estimated fair value, which is determined by a third party valuation. ~~The~~Changes ~~decrease~~in ~~was~~the estimated fair value of the derivatives ~~primarily~~are ~~due~~recorded tothrough aother $2income in the period of change.1 ~~million~~The ~~net~~initial ~~erosion~~bifurcation ~~and~~of ~~transition~~the embedded derivatives from the Senior Notes, at their effective date, resulted in a difference between the ~~Continuum~~estimated ~~system~~fair ~~customer~~value ~~base~~and the face value of the Senior Notes. This ~~decrease~~difference ~~was~~is ~~offset~~recorded byas ~~the~~a ~~favorable~~debt ~~impact~~discount ofand ~~foreign~~will ~~exchange~~be ~~rate~~amortized ~~movement~~to interest expense over the life of $1the debt.0 ~~million~~Valuing the embedded derivatives involves significant estimates and judgments, including assessing the likelihood of an Initial Public Offering or a $0Change in Control of the Company.4 ~~million~~The ~~increase~~valuation is also significantly impacted by the price at which our Senior Notes are trading. Accordingly, changes in assumptions or volatility in the price that our ~~professional~~bonds trade at ~~services~~could ~~business~~have a material impact on the value of the derivatives and the income statement.

~~Gross~~Results ~~Profit~~of Operations

~~Gross~~The ~~profit~~most ~~for~~important drivers of our results of operations are the ~~first~~successful ~~three~~acceptance ~~months~~of ~~ended~~our ~~fiscal~~product ~~2006~~lines ~~increased~~in bythe ~~4.4%~~ intensely competitive high-availability server market and our ability to ~~$33.5~~meet ~~million~~the ~~from~~rapidly ~~$32~~changing demands of our customers through continued evolution of our product and service offerings.1 ~~million~~We ~~for~~believe that the ~~same~~combination ~~period~~of our ftServer systems and our commitment to maintaining the longevity of our Continuum systems, both in ~~fiscal~~the ~~2005.~~field ~~Gross~~and ~~profit~~the ~~margin~~associated ~~for~~customer ~~those~~service ~~time~~bases, ~~periods~~has ~~increased~~enhanced our ability to 51be competitive in this market.3% ~~from~~We 47plan to continue to focus on our value proposition of providing the highest levels of continuous availability, operational simplicity and compelling financial advantage versus the alternatives of our competitors.~~6%.~~

~~Product~~The ~~gross~~following ~~profit~~tables summarize our results of operations for the ~~first~~fiscal three-month ~~months~~periods ~~ended~~and ~~fiscal~~nine-month ~~2006~~periods ~~increased~~ended byNovember 27, ~~12.6%~~2005 toand ~~$10.7~~November 28, ~~million~~2004, ~~from~~and ~~$9.5~~are ~~million~~used for the ~~same~~purpose ~~period~~of incalculating ~~fiscal 2005.~~changes ~~Product~~from ~~gross~~prior ~~profit~~year ~~margin for those time periods increased~~ to ~~40.5%~~current ~~from~~year ~~34.1%~~in ~~mainly~~the asManagement’s aDiscussion ~~result~~and Analysis of aFinancial ~~greater~~Condition ~~mix~~and Results of ~~higher margin V-Series sales~~Operations. ~~Included~~Immaterial indifferences ~~this~~to ~~increase~~the ~~was~~Consolidated aStatements ~~favorable~~of ~~foreign~~Operations ~~exchange~~are ~~impact~~due ofto $0rounding.8 ~~million.~~

~~Service~~25 gross profit for first three months ended fiscal 2006 increased by 0.9% to $22.8 million from $22.6 million for the same period in fiscal 2005. Service gross profit margin for those time periods increased to 58.6% from 57.1% mainly as a result of a favorable foreign exchange impact of $0.5 million and lower service costs due to the 2005 Restructuring.

24STRATUS TECHNOLOGIES INTERNATIONAL, S.à r.l.

~~Table~~Results of ~~Contents~~operations for the three-month periods ended November 27, 2005 and November 28, 2004 (unaudited)

~~STRATUS~~(In ~~TECHNOLOGIES INTERNATIONAL~~millions, ~~S.à~~except percentages) ~~r.l.~~

Research and Development


	November 27, 2005			November 28, 2004			$ Change			% Change
Revenue
Product revenue	$	26.4		$	28.3		$	(1.9	)	-6.7	%
Service revenue		37.4			39.9			(2.5	)	-6.3	%

Total revenue		63.8			68.2			(4.4	)	-6.5	%
Product cost of revenue		15.3			14.4			0.9		6.3	%
Service cost of revenue		15.8			17.1			(1.3	)	-7.6	%
Amortization of intangibles		0.5			0.5			—		—

Total cost of revenue		31.6			32.0			(0.4	)	-1.3	%

Gross profit		32.2			36.2			(4.0	)	-11.0	%

Research and development		9.5			12.0			(2.5	)	-20.8	%
Sales, marketing, general and administrative		14.7			16.5			(1.8	)	-10.9	%
Amortization of intangibles		1.2			1.2			—		—

Total operating expenses		25.4			29.7			(4.3	)	-14.5	%

Profit from operations		6.8			6.5			0.3		4.6	%
Interest income		0.1			0.0			0.1		100.0	%
Interest (expense)		(5.2	)		(5.7	)		0.5		8.8	%
Other income (expense), net		(2.3	)		0.2			(2.5	)	-1250.0	%

Income (loss) before income taxes		(0.6	)		1.0			(1.6	)	-160.0	%
Provision for income taxes		0.0			(0.2	)		0.2		100.0	%

Net income (loss)	$	(0.6	)	$	1.2		$	(1.8	)	-150.0	%

~~Research~~26 and development expenses for the first three months ended fiscal 2006 decreased by 20.5% to $10.1 million from $12.7 million for the same period in fiscal 2005. Research and development expenses as a percentage of total revenue decreased for the first three months ended fiscal 2006 to 15.5% from 18.8% for the same period in fiscal 2005. The decreases are a result of payroll savings realized from the 2005 Restructuring, partially offset by merit salary increases and funding fiscal 2006 variable compensation programs in comparison to the same period in fiscal 2005.

WeSTRATUS ~~incurred~~TECHNOLOGIES ~~research and development expenses primarily in connection with design and engineering work on third-generation ftServer system technology~~INTERNATIONAL, development of Linux-based systems and the porting of our proprietary operating system, VOS, onto our current ftServer system architecture, the ftServer V-Series product, which reached technological feasibility in the April of fiscal 2005 and was made generally available for sale in August of fiscal 2005S.à ~~As a result of reaching technological feasibility on the porting of VOS to our ftServer platform, we capitalized $0~~r.~~4 million in related software development costs in the first three months of fiscal 2005 compared to no capitalization of costs in fiscal 2006~~l.

~~Sales,~~Results ~~Marketing~~of operations for the nine-month periods ended November 27, ~~General~~2005 and ~~Administrative~~November 28, 2004 ~~Expenses~~(unaudited)

~~Sales,~~(In ~~marketing~~millions, ~~general~~except ~~and administrative expenses for the first three months ended fiscal 2006 decreased by 1.9% to~~percentages) $15.4 million from $15.7 million for the same period in fiscal 2005. The expenses decreased as a result of payroll savings realized from the 2005 Restructuring partially offset by unfavorable foreign exchange rate movement of $0.2 million, salary merit increases, variable compensation and other expenses in comparison to the same period in fiscal 2005. Sales, marketing, general and administrative expenses as a percentage of total revenue increased for the first three months ended fiscal 2006 to 23.6% from 23.3% for the same period in fiscal 2005.

Restructuring Charges


	November 27, 2005				November 28, 2004			$ Change			% Change
Revenue
Product revenue	$	80.3			$	85.6		$	(5.3	)	-6.2	%
Service revenue		114.0				119.6			(5.6	)	-4.7	%

Total revenue		194.3				205.2			(10.9	)	-5.3	%
Product cost of revenue		45.3				48.9			(3.6	)	-7.4	%
Service cost of revenue		47.4				53.4			(6.0	)	-11.2	%
Amortization of intangibles		1.5				1.5			—		—

Total cost of revenue		94.2				103.8			(9.6	)	-9.2	%

Gross profit		100.1				101.4			(1.3	)	-1.3	%

Research and development		30.0				36.9			(6.9	)	-18.7	%
Sales, marketing, general and administrative		45.6				48.0			(2.4	)	-5.0	%
Amortization of intangibles		3.5				3.5			—		—
Restructuring		0.2				(0.0	)		0.2		100.0	%

Total operating expenses		79.3				88.4			(9.1	)	-10.3	%

Profit from operations		20.8				13.0			7.8		60.0	%
Interest income		0.3				0.1			0.2		200.0	%
Interest (expense)		(16.3	)			(16.2	)		(0.1	)	-0.6	%
Other expense, net		(1.2	)			(0.6	)		(0.6	)	-100.0	%
				&nb

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Filing Compare · STRATUS TECHNOLOGIES INTERNATIONAL SARL