UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

GARTNER, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		1-14443		04-3099750
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

P.O. Box 10212
56 Top Gallant Road
Stamford, CT 06902-7747
(Address of Principal Executive Offices, including Zip Code)

(203) 316-1111
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On October 27, 2005, Gartner, Inc. announced financial results for the quarter ended September 30, 2005. A copy of the Company’s press release is furnished as Exhibit 99.1.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(c) Exhibits

EXHIBIT NO.				DESCRIPTION
99.1				Press Release issued October 27, 2005, with respect to financial results for Gartner, Inc. (the “Company”) for the quarter ended September 30, 2005.

SIGNATURES

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

EXHIBIT INDEX

EXHIBIT NO.				DESCRIPTION
99.1				Press Release issued October 27, 2005, with respect to financial results for Gartner, Inc. for the quarter ended September 30, 2005.

EXHIBIT 99.1

Contacts
Investors		Media
Lisa Nadler (Lisa.Nadler@gartner.com)		Jamie Tully (jtully@sardverb.com)
203-316-6537		Robin Weinberg (rweinberg@sardverb.com)
		212-687-8080

GARTNER REPORTS THIRD QUARTER 2005 RESULTS

Contract Value of $567 Million, Up 16%
Company Authorizes $100 Million Share Repurchase Program

STAMFORD, Conn. — October 27, 2005 — Gartner, Inc. (NYSE: IT), the leading provider of research and analysis on the global information technology industry, today reported results for the third quarter ended September 30, 2005.

     Total revenue for the third quarter of 2005 was $225.3 million, representing a 12% increase from $201.9 million in the third quarter of 2004. Research contract value ended the quarter at $567 million, an increase of 16% over the same quarter last year. GAAP EPS for the third quarter of 2005 was $(0.02) and normalized EPS was $0.06. Normalized EPS excludes the following pre-tax items: a $6 million charge related to a previously announced employee stock option buyback; a $2 million charge related to the integration activities associated with the acquisition of META; and a $3.4 million charge for the amortization of intangible assets acquired in the META acquisition.

     For the first nine months of 2005, total revenue was $699.7 million, an increase of 10% from $638.4 million in the first nine months of 2004. GAAP EPS was $(0.15) and normalized EPS was $0.21. See “Non-GAAP Financial Measures” for a further discussion of normalized EPS.

     Excluding the effect of foreign currency and the impact of the META acquisition, total revenue for the 2005 third quarter and for the nine-month period ending September 30, 2005 would have increased approximately 4% for both periods. The impact of foreign currency on net income for each of the same time periods was less than $1 million. Excluding the effect of foreign currency, research contract value increased 13% from the third quarter of 2004.

     As previously announced, the Company successfully completed its tender offer for certain employee stock options during the quarter. The tender offer was implemented in order to reduce overhang resulting from the high number of stock options outstanding. The Company purchased approximately 6.4 million employee stock options at a total cost of $6.0 million.

$100 Million Share Repurchase Program

     In addition, Gartner announced that its board of directors has authorized up to $100 million for the repurchase of Company stock. Repurchases will be made from time-to-time in the open market and will be subject to the availability of stock, prevailing market conditions, the trading price of the stock, and the Company’s financial performance. Repurchases will be funded from cash flow from operations and possible borrowings under the Company’s existing credit facility.

Business Segment Highlights

     Research. At September 30, 2005, Research contract value, a leading indicator of future revenue, was $567 million, up 16% from $489 million at September 30, 2004. Research revenue was $132 million, an 11% increase compared to the same period in 2004. Client retention and wallet retention were at 78% and 92%, respectively, for the third quarter of 2005.

     Consulting. Consulting revenue was $72.8 million for the third quarter compared to $60.1 million for the same quarter in 2004. Utilization averaged 61% for the first nine months of 2005 and backlog was $118 million at September 30, 2005, up from $103 million at September 30, 2004.

     Events. Events revenue was $17.2 million for the third quarter of 2005 versus $18.7 million in the third quarter of 2004. This slight decrease in Events revenue is due to a shift in the timing of some events as compared to last year. The Company held 13 events in the third quarter of 2005 as compared to 15 events in the same period in 2004. For the first nine months of 2005, Events revenue was $82.2 million compared to $74.1 million in the same period last year.

     Gene Hall, Gartner’s chief executive officer, said, “The results for the third quarter of 2005 reflect the continued stabilization of our core Research business, which has been the major focus of Gartner’s

operational strategy and sales efforts this year, and our successful integration of META, which has strengthened both our research offering and sales coverage. We also benefited from the strong performance in our Executive Programs, Events and Consulting businesses during the quarter. The share repurchase program we announced today reflects our confidence in our ability to continue to deliver strong, consistent cash flow and our commitment to building value for our shareholders.”

Guidance

     The Company has tightened its previous guidance with respect to revenue and earnings. Total revenue is expected to be between $972 million and $984 million for 2005. By segment, for the full year 2005, the Company expects Research revenue to be between $523 million and $525 million, Consulting revenue to be between $281 million and $286 million, Events revenue to be between $157 million and $159 million, and other revenue to be between $11 million and $12 million.

     The Company anticipates GAAP EPS for 2005 to be between $(0.05) and ($0.02). Gartner expects normalized EBITDA of $98 million to $103 million for 2005 and normalized EPS of $0.34 to $0.37. The estimated fully diluted share count is 113 million shares. See “Non-GAAP Financial Measures” for a further discussion of normalized EBITDA and normalized EPS.

Conference Call Information

     Gartner has scheduled a conference call at 10 a.m. ET today, Thursday, October 27, 2005, to discuss the Company’s financial results. The conference call will be available via the Internet by accessing the Company’s web site at http://investor.gartner.com. A replay of the webcast will be available for 30 days following the call.

About Gartner

     Gartner, Inc. (NYSE: IT) is the leading provider of research and analysis on the global information technology industry. Gartner serves more than 9,000 clients, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company focuses on delivering objective, in-depth analysis and actionable advice to enable clients to make more informed business and technology decisions. The Company’s businesses consist of Research and Events for IT professionals; Gartner Executive Programs, membership programs and peer networking services; and Gartner Consulting, customized engagements with a specific emphasis on outsourcing and IT management. Founded in 1979, Gartner is headquartered in Stamford,

Connecticut, and has more than 3,900 associates, including more than 1,200 research analysts and consultants, in more than 75 countries worldwide. For more information, visit www.gartner.com.

Non-GAAP Financial Measures

     Investors are cautioned that normalized EBITDA and normalized EPS information contained in this press release are not financial measures under generally accepted accounting principles. In addition, they should not be construed as alternatives to any other measures of performance determined in accordance with generally accepted accounting principles. These non-GAAP financial measures are provided to enhance the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. We believe normalized EBITDA and normalized EPS are important measures of our recurring operations as they exclude items that may not be indicative of our core operating results and calculate earnings per share in a manner consistent with prior periods. Normalized EBITDA is based on operating income, excluding depreciation and amortization, goodwill impairments, and other charges. Normalized EPS is based on net income (loss) excluding other charges, non-cash charges, goodwill impairments, amortization of acquired intangible assets, and gains and losses on investments. See “Supplemental Information” at the end of this release for reconciliation of GAAP net income and loss and EPS to normalized net income and EPS.

Safe Harbor Statement

     Statements contained in this press release regarding the growth and prospects of the Company’s business, including those of the acquired META Group, Inc. business, the Company’s full year 2005 financial guidance, future pre-tax charges and all other statements in this release other than the recitation of historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). Such forward-looking statements include risks and uncertainties; consequently, actual results may differ materially from those expressed or implied thereby. Factors that could cause actual results to differ materially include, but are not limited to, ability to expand or even retain the Company’s customer base; ability to grow or even sustain revenue from individual customers; ability to attract and retain professional staff of research analysts and consultants upon whom the Company is dependent; ability to achieve and effectively manage growth; ability to pay the Company’s debt obligations; ability to achieve continued customer renewals and achieve new contract value, backlog and deferred revenue growth in light of competitive pressures; ability to integrate META’s operations and businesses; ability to expand or even retain META’s customers; ability to carry out the Company’s strategic initiatives and manage associated costs; substantial competition from existing competitors and potential new competitors; additional risks associated

with international operations including foreign currency fluctuations; the impact of restructuring and other charges on the Company’s businesses and operations; and other risks listed from time to time in the Company’s reports filed with the Securities and Exchange Commission. These filings can be found on Gartner’s Web site at www.gartner.com/investors and the SEC’s Web site at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and the Company disclaims any obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.

(Tables to Follow)

GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
		2005				2004								2005				2004
Revenues:
Research		$	131,896			$	119,004				11	%		$	392,018			$	360,212				9	%
Consulting			72,747				60,073				21	%			215,849				192,308				12	%
Events			17,199				18,675				-8	%			82,203				74,057				11	%
Other			3,469				4,136				-16	%			9,634				11,835				-19	%
Total revenues			225,311				201,888				12	%			699,704				638,412				10	%
Costs and expenses:
Cost of services and product development			112,104				100,196				12	%			347,899				310,058				12	%
Selling, general and administrative			94,330				85,090				11	%			288,603				254,312				13	%
Depreciation			6,214				6,589				-6	%			18,716				21,370				-12	%
Amortization of intangibles			3,451				203				U				6,849				590				U
Goodwill impairments			—				—				0	%			—				739				F
META integration charges			2,046				—				100	%			13,619				—				100	%
Other charges			5,980				4,333				38	%			28,480				23,909				19	%
Total costs and expenses			224,125				196,411				14	%			704,166				610,978				15	%
Operating income (loss)			1,186				5,477				U				(4,462	)			27,434				U
Gain (loss) from investments			30				(2,184	)			F				(5,339	)			(2,145	)			U
Interest (expense) income, net			(3,120	)			(602	)			U				(7,783	)			13				U
Other expense, net			(169	)			(189	)			F				(2,531	)			(3,625	)			F
(Loss) income before income taxes			(2,073	)			2,502				U				(20,115	)			21,677				U
(Benefit) provision for income taxes			(352	)			2,342				F				(2,868	)			10,025				F
Net (loss) income		$	(1,721	)		$	160				U			$	(17,247	)		$	11,652				U
(Loss) income per common share:
Basic		$	(0.02	)		$	0.00				U			$	(0.15	)		$	0.09				U
Diluted		$	(0.02	)		$	0.00				U			$	(0.15	)		$	0.09				U
Weighted average shares outstanding:
Basic			112,542				121,767				-8	%			111,915				128,044				-13	%
Diluted			112,542				124,318				-9	%			111,915				130,923				-15	%
SUPPLEMENTAL INFORMATION
Normalized EPS (1)		$	0.06			$	0.05				20	%		$	0.21			$	0.26				-19	%

GARTNER, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)

		September 30,				December 31,
		2005				2004
Assets
Current assets:
Cash and cash equivalents		$	80,459			$	160,126				-50	%
Fees receivable, net			238,744				257,689				-7	%
Deferred commissions			28,081				32,978				-15	%
Prepaid expenses and other current assets			53,638				37,052				45	%
Total current assets			400,922				487,845				-18	%
Property, equipment and leasehold improvements, net			56,090				63,495				-12	%
Goodwill			410,591				231,759				77	%
Intangible assets, net			19,249				138				> 100	%
Other assets			74,731				77,957				-4	%
Total Assets		$	961,583			$	861,194				12	%
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities		$	229,399			$	181,502				26	%
Deferred revenues			330,095				307,696				7	%
Current portion of long term debt			65,000				40,000				63	%
Total current liabilities			624,494				529,198				18	%
Long term debt			185,000				150,000				23	%
Other liabilities			28,214				51,948				-46	%
Total Liabilities			837,708				731,146				15	%
Total Stockholders’ Equity			123,875				130,048				-5	%
Total Liabilities and Stockholders’ Equity		$	961,583			$	861,194				12	%

GARTNER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)

		Nine Months Ended
		September 30,
		2005				2004
Operating activities:
Net (loss) income		$	(17,247	)		$	11,652
Adjustments to reconcile net (loss) income to net cash provided by operating activies:
Depreciation and amortization of intangibles			25,565				21,960
Non-cash compensation			661				1,273
Tax benefit associated with employees’ exercise of stock options			983				8,262
Deferred taxes			(5,631	)			409
Loss from investments			5,339				2,145
Amortization and writeoff of debt issuance costs			1,228				744
Charge for stock option buy back			5,980				—
Goodwill impairments			—				739
Non-cash charges associated with impairment of long-lived assets			—				2,943
Changes in assets and liabilities, excluding effect of acquisition and sale of investment:
Fees receivable, net			41,412				49,352
Deferred commissions			4,888				698
Prepaid expenses and other current assets			(9,246	)			(6,215	)
Other assets			3,572				(1,320	)
Deferred revenues			(4,046	)			(14,107	)
Accounts payable and accrued liabilities			(25,858	)			(32,261	)
Cash provided by operating activities			27,600				46,274
Investing activities:
Proceeds from sale of investment			1,300				—
Additions to property, equipment and leasehold improvements			(11,252	)			(19,036	)
Acquisition of META (net of cash acquired)			(161,323	)			—
Other investing activities, net			614				—
Cash used in investing activities			(170,661	)			(19,036	)
Financing activities:
Proceeds from stock issued for stock plans			14,226				56,472
Proceeds from debt issuance			327,000				200,000
Payments for debt issuance costs			(1,082	)			(2,821	)
Payments on debt			(267,958	)			—
Purchases of stock via tender offer, including costs			—				(346,148	)
Purchases of treasury stock			—				(6,114	)
Purchases of options via stock option buy back, including costs			(4,532	)			—
Cash provided (used) by financing activities			67,654				(98,611	)
Net decrease in cash and cash equivalents			(75,407	)			(71,373	)
Effects of exchange rates on cash and cash equivalents			(4,260	)			(1,948	)
Cash and cash equivalents, beginning of period			160,126				229,962
Cash and cash equivalents, end of period		$	80,459			$	156,641

SELECTED STATISTICAL DATA

		September 30,				September 30,
		2005				2004
Research contract value		$	567,342	(1)		$	489,223	(1)
Research client retention			78	%			78	%
Research wallet retention			92	%			93	%
Research client organizations			9,095				8,506
Consulting backlog		$	118,092	(1)		$	103,383	(1)
Consulting utilization			61	%			62	%
Consulting billable headcount			527				469
Events—number of events			52				44
Events attendees			21,254				17,705

BUSINESS SEGMENT DATA
(Dollars in thousands)

						Direct				Gross				Contrib.
		Revenue				Expense				Contribution				Margin
Three Months Ended 9/30/05
Research		$	131,896			$	53,248			$	78,648				60	%
Consulting			72,747				42,913				29,834				41	%
Events			17,199				10,678				6,521				38	%
Other			3,469				326				3,143				91	%
TOTAL		$	225,311			$	107,165			$	118,146				52	%
Three Months Ended 9/30/04
Research		$	119,004			$	46,954			$	72,050				61	%
Consulting			60,073				39,335				20,738				35	%
Events			18,675				12,104				6,571				35	%
Other			4,136				383				3,753				91	%
TOTAL		$	201,888			$	98,776			$	103,112				51	%
Nine Months Ended 9/30/05
Research		$	392,018			$	155,398			$	236,620				60	%
Consulting			215,849				131,281				84,568				39	%
Events			82,203				45,592				36,611				45	%
Other			9,634				1,068				8,566				89	%
TOTAL		$	699,704			$	333,339			$	366,365				52	%
Nine Months Ended 9/30/04
Research		$	360,212			$	136,130			$	224,082				62	%
Consulting			192,308				121,492				70,816				37	%
Events			74,057				43,520				30,537				41	%
Other			11,835				1,312				10,523				89	%
TOTAL		$	638,412			$	302,454			$	335,958				53	%

SUPPLEMENTAL INFORMATION
GAAP to Normalized Reconcilations
(in thousands, except per share data)

Reconciliation — GAAP to Normalized EBITDA (1):

		Three Months Ended
		September 30,
		2005				2004
Net (loss) income		$	(1,721	)		$	160
Interest expense, net			3,120				602
Other expense, net			169				189
(Gain) loss on investments			(30	)			2,184
Tax (benefit) provision			(352	)			2,342
Operating income		$	1,186			$	5,477
Depreciation and amortization			9,665				6,792
Normalizing adjustments:
Other charges (2)			5,980				4,333
META integration charges (4)			2,046				—
Normalized EBITDA		$	18,877			$	16,602

Reconciliation — GAAP to Normalized Net Income and EPS (1):

		Three Months Ended September 30,
		2005												2004
		After-												After-
		Tax												Tax
		Income				Shares				EPS				Income				Shares				EPS
GAAP Basic EPS		$	(1,721	)			112,542			$	(0.02	)		$	160				121,767			$	0.00
Share equivalents from stock compensation shares			—				—				—				—				2,551				—
GAAP Diluted EPS		$	(1,721	)			112,542			$	(0.02	)		$	160				124,318			$	0.00
Other charges (2)			4,230				—				0.04				3,698				—				0.03
Non-cash charges (3)			—				—				—				2,186				—				0.02
META integration charges (4)			1,456				—				0.02				—				—				—
Amortization of META intangibles (5)			2,510				—				0.02				—				—				—
(Gain) from investments (7)			—				—				—				(1	)			—				—
Normalized net income & EPS (8)		$	6,475				112,542			$	0.06			$	6,043				124,318			$	0.05

SUPPLEMENTAL INFORMATION
GAAP to Normalized Reconcilations
(in thousands, except per share data)

Reconciliation — GAAP to Normalized EBITDA (1):

		Nine Months Ended
		September 30,
		2005				2004
Net (loss) income		$	(17,247	)		$	11,652
Interest expense (income), net			7,783				(13	)
Other expense, net			2,531				3,625
Loss on investments			5,339				2,145
Tax (benefit) provision			(2,868	)			10,025
Operating (loss) income		$	(4,462	)		$	27,434
Depreciation and amortization			25,565				21,960
Normalizing adjustments:
Other charges (2)			28,480				23,909
META integration charges (4)			13,619				—
Goodwill impairments (6)			—				739
Normalized EBITDA		$	63,202			$	74,042

Reconciliation — GAAP to Normalized Net Income and EPS (1):

		Nine Months Ended September 30,
		2005												2004
		After-												After-
		Tax												Tax
		Income				Shares				EPS				Income				Shares				EPS
GAAP Basic EPS		$	(17,247	)			111,915			$	(0.15	)		$	11,652				128,044			$	0.09
Share equivalents from stock compensation shares			—				—				—				—				2,879				—
GAAP Diluted EPS		$	(17,247	)			111,915			$	(0.15	)		$	11,652				130,923			$	0.09
Other charges (2)			20,138				—				0.18				16,953				—				0.13
Non-cash charges (3)			—				—				—				5,129				—				0.04
META integration charges (4)			9,778				—				0.09				—				—				—
Amortization of META intangibles (5)			4,972				—				0.04				—				—				—
Goodwill impairments (6)			—				—				—				739				—				—
Loss (gain) from investments (7)			5,377				—				0.05				(27	)			—				—
Normalized net income & EPS (8)		$	23,018				111,915			$	0.21			$	34,446				130,923			$	0.26