QuickLinks -- Click here to rapidly navigate through this document

---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

---

FORM 10-Q

---

(Mark One)

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

For the quarterly period ended March 31, 2001

or

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

For the transition period                to               .

Commission file number 0-17111

---

PHOENIX TECHNOLOGIES LTD.
(Exact name of Registrant as specified in its charter)

411 East Plumeria Drive, San Jose, California 95134
(Address of principal executive offices, including zip code)

(408) 570-1000
(Registrant's telephone number, including area code)

---

    Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes /x/  No / /

    Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

---

---

---

PHOENIX TECHNOLOGIES LTD.

FORM 10-Q

INDEX

					Page
PART I. FINANCIAL INFORMATION
	Item 1.		Financial Statements
			Condensed Consolidated Balance Sheets as of March 31, 2001 and September 30, 2000		3
			Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2001 and 2000		4
			Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2001 and 2000		5
			Notes to Condensed Consolidated Financial Statements		6
	Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations		11
	Item 3.		Quantitative and Qualitative Disclosures about Market Risk		16
PART II. OTHER INFORMATION
	Item 4.		Submission of Matters to Vote of Security Holders		17
	Item 6.		Exhibits and Report on Form 8-K
			Exhibits		18
			Reports on Form 8-K		18

2

---

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

				March 31, 2001			September 30, 2000
				(unaudited)
Assets
Current Assets:
	Cash and cash equivalents			$	42,660		$	55,017
	Short-term investments				31,289			52,701
	Accounts receivable, net of allowances of $1,205 at March 31, 2001 and $790 at September 30, 2000				28,220			39,868
	Deferred income taxes				3,926			3,926
	Other current assets				5,104			4,494
		Total current assets			111,199			156,006
Investments					4,475			4,473
Property and equipment, net					13,323			13,272
Computer software cost, net					17,985			5,385
Goodwill and other intangible assets, net					28,956			7,937
Deferred Tax Assets—non current					10,287			10,287
Other assets					2,077			1,400
		Total assets		$	188,302		$	198,760
Liabilities and Stockholders' Equity
Current Liabilities:
	Accounts payable			$	3,540		$	3,945
	Accrued compensation and related liabilities				8,178			10,554
	Deferred revenue				6,199			4,733
	Other accrued liabilities				6,201			6,988
	Income taxes payable				1,643			5,254
		Total current liabilities			25,761			31,474
Long-term obligations					509			1,449
Deferred Income Taxes					3,277			3,865
		Total liabilities			29,547			36,788
Minority Interest					15,245			13,672
Stockholders' equity:
	Preferred stock, $.10 par value, 500 shares authorized, none issued or outstanding				—			—
	Common stock, $.001 par value, 60,000 shares authorized, 25,328 and 25,608 issued and outstanding at March 31, 2001 and September 30, 2000				25			26
	Additional paid-in capital				164,325			153,534
	Retained earnings				55,005			53,890
	Accumulated other comprehensive loss				(1,180	)		(380	)
	Less: Cost of treasury stock (4,405 shares at March 31, 2001 and 3,377 shares at September 30, 2000)				(74,665	)		(58,770	)
		Total stockholders' equity			143,510			148,300
		Total liabilities and stockholders' equity		$	188,302		$	198,760

See notes to condensed consolidated financial statements

3

---

PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

				Three Months Ended March 31,						Six Months Ended March 31,
				2001			2000			2001			2000
Revenue:
	License fees			$	21,423		$	30,844		$	55,300		$	58,226
	Services				4,338			3,881			9,236			8,870
		Total revenue			25,761			34,725			64,536			67,096
Cost of revenue:
	License fees				715			244			1,132			1,722
	Services				3,758			4,692			7,391			8,714
	Amortization of purchased technology				322			314			636			628
		Total cost of revenue			4,795			5,250			9,159			11,064
Gross margin					20,966			29,475			55,377			56,032
Operating expenses:
	Research and development				11,510			9,704			22,444			20,208
	Sales and marketing				10,023			7,707			19,786			14,664
	General and administrative				6,350			4,849			11,840			9,565
	Amortization of goodwill and acquired intangible assets				1,085			562			1,640			1,110
	Stock-based compensation				181			125			625			452
		Total operating expenses			29,149			22,947			56,335			45,999
Income (loss) from operations					(8,183	)		6,528			(958	)		10,033
Interest and other income, net					746			810			1,336			1,345
Minority interest					661			25			769			25
Income (loss) before income taxes					(6,776	)		7,363			1,147			11,403
Income tax expense (benefit)					(2,380	)		2,356			32			3,647
Net income (loss)				$	(4,396	)	$	5,007		$	1,115		$	7,756
Earnings (Loss) per share:
	Basic			$	(0.17	)	$	0.20		$	0.04		$	0.31
	Diluted			$	(0.17	)	$	0.17		$	0.04		$	0.28
Weighted average number of shares used in computations:
	Basic				25,172			25,188			25,119			24,641
	Diluted				25,172			28,682			26,536			27,717

See notes to condensed consolidated financial statements

4

---

PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

					2001			2000
Cash flows from operating activities:
	Net income				$	1,115		$	7,756
	Reconciliation to net cash provided by operating activities:
		Depreciation and amortization				5,156			4,432
		Stock-based compensation				625			452
		Minority interest				(769	)		(25	)
		Deferred income tax				(588	)		—
		Change in operating assets and liabilities:
			Accounts receivable			11,648			(4,931	)
			Other assets			(1,525	)		433
			Accounts payable			(405	)		(508	)
			Accrued compensation and related liabilites			(2,376	)		(2,273	)
			Other accrued liabilities			(2,518	)		(6,299	)
			Deferred revenue			1,466			(190	)
			Income taxes payable			(3,611	)		(756	)
		Net cash provided by (used in) operating activities				8,218			(1,909	)
Cash flows from investing activities:
	Proceeds from sales of investments					224,959			33,234
	Purchases of investments					(203,547	)		(39,933	)
	Purchases of property and equipment					(2,962	)		(2,330	)
	Additions to computer software costs					(2,041	)		(144	)
	Acquisition of businesses, net of cash acquired					(23,687	)		—
		Net cash used in investing activities				(7,278	)		(9,173	)
Cash flows from financing activities:
	Proceeds from issuance of common stock, net of issuance costs					—			37,714
	Proceeds from common stock issuance under stock option and stock purchase plans					6,298			14,026
	Repurchases of common stock					(15,895	)		(6,289	)
	Repurchase of warrant					(2,900	)		—
		Net cash (used in) provided by financing activities				(12,497	)		45,451
Effect of exchange rate changes on cash and cash equivalents						(800	)		1,146
Net (decrease) increase in cash and cash equivalents						(12,357	)		35,515
Cash and cash equivalents at beginning of period						55,017			24,873
Cash and cash equivalents at end of period					$	42,660		$	60,388

See notes to condensed consolidated financial statements

5

---

PHOENIX TECHNOLOGIES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1. DESCRIPTION OF BUSINESS

    Phoenix Technologies Ltd. (together with its subsidiaries, "Phoenix" or the "Company") is a global leader in system-enabling software solutions for PCs and connected digital devices. Its software provides compatibility, connectivity, security and manageability of the various components and technologies used in such devices. Phoenix provides these products primarily to platform and peripheral manufacturers (collectively, "OEMs") that range from large PC manufacturers to small system integrators. Phoenix also provides training, consulting, maintenance and engineering services to its customers. It markets and licenses its products and services primarily through a direct sales force, as well as through regional distributors and sales representatives. The Company has three business units (one of which, inSilicon Corporation ("inSilicon"), is a majority-owned subsidiary), each of which delivers leading products and professional services that enable connected computing.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

    The accompanying condensed consolidated financial statements as of March 31, 2001 and for the three and six-months ended March 31, 2001 and 2000 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). All intercompany accounts and transactions have been eliminated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of September 30, 2000 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000.

    In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company's financial position, results of operations and cash flows for the interim periods presented. The operating results for the three and six-month periods ended March 31, 2001 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2001, or for any other future period.

Earnings Per Share

    Basic earnings per share is computed using the weighted-average number of common shares outstanding during each period. Diluted earnings per share is computed using the weighted-average number of common and dilutive common-equivalent shares outstanding during the period. Dilutive common-equivalent shares primarily consist of employee stock options, computed using the treasury stock method. The Company reported net loss for the three months ended March 31, 2001, the effects of outstanding options and warrant were not considered when calculating diluted net loss per share, as their inclusion would be anti-dilutive.

Reclassifications

    Certain prior year amounts have been reclassified to conform to the current year presentation.

6

---

New Accounting Pronouncements

    In the first quarter of fiscal year 2001, the Company adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities", which establish accounting and reporting standards for derivative instruments and for hedging activities. The Company does not hold any derivative financial instrument and does not engage in hedging activities. Accordingly, the adoption of SFAS 133 does not have an impact on the Company's financial position, results of operations or cash flows.

NOTE 3. PURCHASE COMBINATIONS

    During the first six months of fiscal 2001, the Company completed a number of purchase acquisitions, which were accounted for as purchases. The amount allocated to goodwill and purchased intangible assets are amortized on a straight-line basis over periods not exceeding six years. The following is a summary of purchased transactions completed in fiscal 2001 (in millions):

Acquired Company			Total Purchase Consideration			Net Tangible Assets			Goodwill and Purchased Intangibles			Form of Consideration
By Phoenix:
	Integrity Sciences, Inc.		$	3.8			—		$	3.8		$2.5 in cash and the balance in the Company's shares
	Ravisent Technologies, Inc.		$	17.8		$	0.4		$	17.4		$17.8 in cash
By inSilicon:
	Xentec, Inc.		$	11.8		$	0.3		$	11.6		$2.9 in cash and the balance in inSilicon shares and options
	HD Lab, K.K.		$	1.6			—		$	1.6		$1.6 in cash

    The following unaudited, pro forma information shows the results of operations of the Company for the six month periods ended March 31, 2001 and 2000, as if the above acquisitions had occurred at the beginning of the period and at the purchase costs established at the time of acquisition.

7

---

NOTE 4. EARNINGS (LOSS) PER SHARE

    The following table presents the calculations of basic and diluted earnings per share under Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share" (in thousands, except per share amounts):

NOTE 5. COMPREHENSIVE INCOME (LOSS)

    Following are the components of comprehensive income (loss) (in thousands):

8

---

NOTE 6. SEGMENT REPORTING

    Segment information is presented in accordance with Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information." This standard requires segmentation based upon the Company's internal organization and disclosure of revenue and operating income based upon internal accounting methods. The Company has three reportable segments: Platform Enabling, inSilicon and PhoenixNet™.

    Platform Enabling:  Provides system-enabling software that is used in the design, deployment and ongoing operation of personal computers, Internet appliances, embedded systems, and other connected devices. The platform Enabling's flagship software products provide support for current technologies and industry standards, allowing systems and device manufacturers to base new product designs on a range of microprocessors, chipsets and operating systems combinations.

    inSilicon:  Provides communications technology that is used by semiconductor and systems companies to design complex semiconductors called systems-on-a-chip that are critical components of digital devices. inSilicon provides cores, related silicon subsystems and firmware to customers that use its technologies in hundreds of different digital devices ranging from network routers to cellular phones.

    PhoenixNet™:  Provides security infrastructure that offers practical solutions to secure network access through strong password technology and easy-to-deploy device authentication.

    The Company evaluates operating segment performance based on revenue and operating income (in thousands):

			Three Months Ended March 31,						Six Months Ended March 31,
			2001			2000			2001			2000
Revenue:
	Platform Enabling		$	20,398		$	29,158		$	53,256		$	56,272
	inSilicon			5,289			5,428			10,344			10,685
	PhoenixNet			74			139			936			139
Total			$	25,761		$	34,725		$	64,536		$	67,096

			Three Months Ended March 31,						Six Months Ended March 31,
			2001			2000			2001			2000
Income (Loss) from operations:
	Platform Enabling		$	(406	)	$	9,031		$	10,617		$	16,671
	inSilicon			(3,576	)		(750	)		(4,513	)		(1,808	)
	PhoenixNet			(4,201	)		(2,353	)		(7,062	)		(5,430	)
	Reversal of Y2K accrual			—			600			—			600
	Total		$	(8,183	)	$	6,528		$	(958	)	$	10,033

9

---

NOTE 7. STOCK REPURCHASE PROGRAM

    During the quarter ended December 31, 2000, the Company repurchased 1,028,400 shares of its common stock at a cost of $15.9 million, under a program that was authorized by the Board of Directors in fiscal 2000. As of December 31, 2000, the fiscal 2000 repurchase program was completed and terminated.

    In February 2001, the Board of Directors authorized an additional program to repurchase up to $30 million of outstanding shares of common stock over a 12-month period. No repurchase of shares have been made under this authorization as of March 31, 2001. Also, in February, the Company repurchased from Intel Corporation an outstanding warrant during fiscal 2001 to purchase 1,073,965 shares of Phoenix Technologies common stock for approximately $2.9 million.

NOTE 8. SUBSEQUENT EVENTS

Workforce Reduction

    In April 2001, the Company approved a plan to reduce its global workforce by approximately 10%. As a result of this workforce reduction, the Company expects to incur a charge to operations of approximately $2.0 million in the third quarter of fiscal 2001.

inSilicon

    In April 2001, the Company announced its decision to seek strategic alternatives with respect of its investment in inSilicon.

10

---

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

    This Report on Form 10-Q, including without limitation the Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21 (E) of the Securities Exchange Act 1934, as amended. These statements include, but are not limited to, statements concerning increases in research and development activities, future liquidity and financing requirements, expected price erosion, plans to make acquisitions, dispositions or strategic investments, expectation of increased sales to original equipment manufacturers, and plans to improve and enhance existing products and develop new products.

    These forward-looking statements of the Company are subject to risks and uncertainties. Some of the factors that could cause future results to materially differ from the recent results or those projected in the forward-looking statements include, but are not limited to, significant increases or decreases in demand for Phoenix's products, increased competition, lower prices and margins, failure to successfully develop and market new product and technologies, competitor introductions of superior products, continued industry consolidation, instability and currency fluctuations in international markets, product defects, failure to secure intellectual property rights, results of litigation, and failure to retain and recruit key employees. For a more detailed discussion of certain risks associated with the Company's business, see the "Business Risks" section of the Company's Annual Report on Form 10-K for the year ended September 30, 2000.

Company Overview

    Phoenix Technologies Ltd. (together with its subsidiaries, "Phoenix" or the "Company") is a global leader in system-enabling software solutions for PCs and connected digital devices. Its software provides compatibility, connectivity, security and manageability of the various components and technologies used in such devices. Phoenix provides these products primarily to platform and peripheral manufacturers (collectively, "OEMs") that range from large PC manufacturers to small system integrators. Phoenix also provides training, consulting, maintenance and engineering services to its customers. It markets and licenses its products and services primarily through a direct sales force, as well as through regional distributors and sales representatives. The Company has three business units (one of which, inSilicon Corporation ("inSilicon"), is a majority-owned subsidiary), each of which delivers leading products and professional services that enable connected computing.

    The Company's operations include the following:

    Platform Enabling:  Provides system-enabling software that is used in the design, deployment and ongoing operation of PCs, internet appliances, embedded systems, and other connected digital devices. The Platform Enabling's flagship software products provide support for current technologies and industry standards, allowing systems and device manufacturers to base new product designs on a range of microprocessors, chipsets and operating systems combinations.

    inSilicon:  Provides communications technology that is used by semiconductor and systems companies to design complex semiconductors called systems-on-a-chip that are critical components of digital devices. inSilicon provides cores, related silicon subsystems and firmware to customers that use its technologies in hundreds of different digital devices ranging from network routers to cellular phones.

    PhoenixNet™:  Provides security infrastructure that offers practical solutions to secure network access through strong password technology and easy-to-deploy device authentication.

11

---

Results of Operations

Revenue

    The Company's products are generally designed into personal computer systems, information appliances and semiconductors. License fees and services revenue by segment for the three and six-month periods ended March 31, 2001 and 2000, were as follows (dollars in thousands):

    The decline in consolidated revenue is primarily attributable to a slower global economy, particularly in Asia in the Platform Enabling segment. Platform Enabling revenue in the second quarter and first six months of fiscal 2001 decreased by 30.0% and 5.4%, respectively, from comparable periods of fiscal 2000, due primarily to lower revenue particularly from Japanese PC makers. inSilicon revenue, net of intercompany transactions, declined due primarily to semiconductor and systems customers experiencing slower demand and uncertainty in the US market. PhoenixNet revenue decreased in the second quarter of fiscal 2001 primarily due to decreased Internet activity on the websites of PhoenixNet's customers. PhoenixNet first generated revenue in the second quarter of fiscal 2000.

    Revenue by geographic region for the three and six-month periods ended March 31, 2001 and 2000, was as follows (dollars in thousands):

12

---

    During the three-month period ended March 31, 2001, North America revenues were flat, Japan and Taiwan revenues decreased while Europe and rest of Asia revenue increased compared to fiscal 2000. The PC markets in Japan and Taiwan were more sensitive to the changes in the economic conditions compared to other regions.

    One customer accounted for 13% of total revenue for the six-month period ended March 31, 2001. For the three and six-month periods ended March 31, 2000, another customer accounted for 12% of total revenue.

Gross Margin

    Gross margin as a percentage of revenue for the three-month period ended March 31, 2001 decreased to 81.4% from 84.9% for the comparable period in fiscal 2000, primarily attributable to a decline in license revenue, partially offset by a decrease in services costs. Gross margins as a percentage of revenue for the six-month period ended March 31, 2001 increased to 85.8% from 83.5% compared to fiscal 2000, primarily due to a shift in revenue mix to higher margin product.

    Cost of revenue included amortization of purchased technology from the acquisition of Sand Microelectronics, Inc. of $0.3 million and $0.6 million for the three and six-month periods ended March 31, 2001 and 2000, respectively, and a reversal of non-recurring Y2K support costs of $0.6 million. Gross margin as a percentage of revenue before the amortization of purchased technology and the Y2K support costs reversal, was 82.6% and 86.8% for the three and six-month periods ended March 31, 2001, respectively, and 84.1% and 83.6% for the comparable periods of fiscal 2000.

Research and Development Expenses

    Research and development expenses for the second quarter of 2001 increased 19% to $11.5 million from $9.7 million in the same quarter a year ago. Research and development expenses in the first six months of 2001 increased by 12% to $22.4 million from $20.2 million in the first six months of 2000. The increases between the periods reflected additional inSilicon expenses related to its recent acquisitions, on-going incremental development efforts associated with the Company's system enabling software, and the Company's additional investment in information appliance technologies. As a percentage of revenue, research and development expenses increased to 44.7% and 34.8% from 28.0% and 30.1% for the comparable periods of fiscal 2000, primarily due to higher expenses as noted above and a decline in revenue.

13

---

Sales and Marketing Expenses

    Sales and marketing expenses for the three and six-month periods ended March 31, 2001 increased by $2.3 million and $5.1 million, respectively, from the comparable periods in fiscal 2000. As a percentage of revenue, sales and marketing expenses in the three and six-month periods ended March 31, 2001 increased to 38.9% and 30.7% from the 22.2% and 21.9% for the comparable periods of fiscal 2000. The increase is due primarily to an increase in the size of the Company's direct sales force to position the Company for growth in security and information appliance markets. Management has made a conscious effort to increase sales and marketing efforts through the reallocation of resources.

General and Administrative Expenses

    General and administrative expenses for the three and six month periods ended March 31, 2001 increased by $1.5 million and $2.3 million, respectively, from the comparable periods in fiscal 2000. The increase in the second quarter of fiscal year 2001 is mainly attributable to higher inSilicon expenses related primarily to an increase in the bad debt provision and addition of new personnel and investment in infrastructure. As a percentage of revenue, general and administrative expenses in the three and six-month periods ended March 31, 2001 increased to 24.6% and 18.3%, respectively, from the 14.0% and 14.3% for the comparable periods of fiscal 2000, primarily due to lower revenue in fiscal 2001.

Amortization of goodwill and acquired intangible assets

    Amortization of goodwill and acquired intangible assets included in operating expense was $1.1 million and $1.6 million for the three and six-month periods of fiscal 2001, respectively, as compared to $0.6 million and $1.1 million for the comparable periods of fiscal 2000. Amortization of goodwill and acquired intangible assets relates primarily to various purchase acquisitions (see Note 3 of Notes to Condensed Consolidated Financial Statements).

Stock-Based Compensation

    The stock-based compensation charges in both the three and six-month periods ended during fiscal years' 2001 and 2000 were mostly due to the granting of options to purchase inSilicon stock at exercise prices less than the fair market value of inSilicon common stock on the grant date.

Interest and Other Income, Net

    Interest and other income, net, for the three and six-month periods ended March 31, 2001, decreased 7.9% and 0.7%, respectively, from the comparable periods in fiscal 2000, primarily due to a decrease in cash balance as the Company continues to fund the stock repurchase program and to make additional acquisitions.

Provision for Income Taxes

    The Company's effective tax rates, excluding minority interest, for the three and six months ended March 31, 2001 were 32% and 8%, respectively, compared with 32% for each of the same periods of 2000. The amount associated with the difference in tax rates for the six-month periods ended March 31, 2001 and 2000 is immaterial. For federal income tax purposes, the Company does not file a consolidated return with inSilicon as the Company owns less than 80% of the voting stock issued and outstanding as of March 31, 2001.

14

---

Liquidity and Capital Resources

    At March 31, 2001, the Company's principal source of liquidity consisted of cash and cash equivalents, and short-term investments totaling $73.9 million. Cash and cash equivalents of $42.6 million as of March 31, 2001 included $33.0 million restricted and owned by inSilicon. The primary sources of cash during the first six months of fiscal 2001 were $8.2 million from operating activities, net sales of short-term investments of $21.4 million and proceeds from issuance of common stock under various stock plans of $6.3 million. The primary uses of cash during the first six months of fiscal 2001 were $23.7 million to fund certain acquisitions (see Note 3 to Condensed Financial Statements), $18.8 million for the repurchase of common stock and warrant, and $5.0 million for the purchase of property, equipment and computer software.

    The Company believes that current cash, short-term investment balances and cash flow from operations will be sufficient to meet its operating and capital requirements on a short-term and long-term basis.

15

---

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    For financial market risks related to changes in interest rate, foreign currency exchange rates, and investment, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Company's Annual Report on Form 10-K for the year ended September 30, 2000.

16

---

PART II. OTHER INFORMATION

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

    The Company held an Annual Meeting of its Stockholders on February 6, 2001, at which the following occurred:

ELECTION OF DIRECTORS: The stockholders elected Taher Elgamal and Anthony Sun as Class 2 Directors to serve until the 2004 Annual Meeting of Stockholders. The vote on the matter was as follows:

    The following individuals continue their term as directors:

George C. Huang
Edmund P. Jensen
Anthony P. Morris
Albert E. Sisto
Shih-Chien Yang

APPROVAL OF THE AMENDMENT TO THE 1999 STOCK PLAN: The stockholders approved the amendment to the 1999 Stock Plan to increase the number of shares reserved for issuance thereunder by an additional 850,000 shares. The vote on the matter was as follows:

APPROVAL OF THE AMENDMENT TO THE 1999 DIRECTOR OPTON PLAN: The stockholders approved the amendment to the 1999 Director Option Plan to increase the number of shares reserved for issuance thereunder by an additional 90,000 shares. The vote on the matter was as follows:

APPOINTMENT OF INDEPENDENT AUDITORS: The stockholders ratified the selection of Ernst & Young LLP as the Company's independent public accountants for the current fiscal year. The vote on the matter was as follows:

17

---

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)

None



(b)

Reports on Form 8-K.

The Company filed no reports on Form 8-K during the six months ended March 31, 2001.

18

---

SIGNATURE

    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.

				PHOENIX TECHNOLOGIES LTD.
Date:		May 14, 2001
				By:		/s/ JOHN M. GREELEY    John M. Greeley Senior Vice President and Chief Financial Officer

19

---

QuickLinks

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

SIGNATURE