UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2006

OR

o		TRANSITION 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 (State or other jurisdiction of incorporation or organization)		04-3099750 (I.R.S. Employer Identification No.)
P.O. Box 10212 56 Top Gallant Road Stamford, CT. (Address of principal executive offices)		06902-7700 (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, $.0005 par value per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ      No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o      No þ

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 þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer:

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o      No þ

As of June 30, 2006, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $972,370,120 based on the closing sale price as reported on the New York Stock Exchange.

The number of shares outstanding of the issuer’s $0.005 par value per share common stock as of January 31, 2007 was 104,080,204.

DOCUMENTS INCORPORATED BY REFERENCE

Document		Parts Into Which Incorporated
Proxy Statement for the Annual Meeting of Stockholders to be held June 5, 2007 (Proxy Statement)		Part III

 

 

.GARTNER, INC.
2006 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

PART I
Item 1.		Business			3
Item 1A.		Risk Factors			6
Item 1B.		Unresolved Staff Comments			9
Item 2.		Properties			9
Item 3.		Legal Proceedings			9
Item 4.		Submission of Matters to a Vote of Security Holders			10
PART II
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			11
Item 6.		Selected Consolidated Financial Data			13
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk			26
Item 8.		Consolidated Financial Statements and Supplementary Data			26
Item 9.		Changes In and Disagreements With Accountants on Accounting and Financial Disclosure			26
Item 9A.		Controls and Procedures			27
Item 9B.		Other Information			27
PART III
Item 10.		Directors, Executive Officers and Corporate Governance			28
Item 11.		Executive Compensation			28
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			28
Item 13.		Certain Relationships and Related Transactions and Director Independence			28
Item 14.		Principal Accountant Fees and Services			28
PART IV
Item 15.		Exhibits and Financial Statement Schedules			29
Index to Consolidated Financial Statements					31
Report of Independent Registered Public Accounting Firm					32
Report of Independent Registered Public Accounting Firm					33
Consolidated Balance Sheets					34
Consolidated Statements of Operations					35
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss)					36
Consolidated Statements of Cash Flows					37
Notes to Consolidated Financial Statements					38
Signatures					60
EX-21.1: SUBSIDIARIES
EX-23.1: CONSENT OF KPMG LLP
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

PART I

ITEM 1. BUSINESS.

GENERAL

Gartner, Inc. is a leading research and advisory firm that helps executives use technology to build, guide and grow their enterprises. We offer independent and objective research and analysis on information technology, computer hardware, software, communications and related technology industries (the “IT industry”). We provide comprehensive coverage of the IT industry to approximately 10,000 client organizations, including approximately 400 Fortune 500 companies across 75 countries. Our client base consists primarily of chief information officers (“CIOs”) and other senior IT and business executives from a wide variety of enterprises, government agencies and the investment community. Unless otherwise indicated or unless the context requires otherwise, all references in this Form 10-K to “Gartner,” “Company,” “we,” “us,” “our” or similar terms mean Gartner, Inc. and its subsidiaries on a consolidated basis.

The foundation for all Gartner products is our independent research on IT issues. The findings from this research are delivered through our three customer channels, depending on a client’s specific business needs, preferences and objectives:

•

Research — provides research content and advice for IT professionals, technology companies and the investment community in the form of reports and briefings, as well as peer networking services and membership programs designed specifically for CIOs and other senior executives.

•

Consulting — consists primarily of consulting, measurement engagements and strategic advisory services (paid one-day analyst engagements) (“SAS”), which provide assessments of cost, performance, efficiency and quality focused on the IT industry.

•

Events — consists of various symposia, conferences and exhibitions focused on the IT industry.

Since its founding in 1979, Gartner has established a leading brand in the IT research marketplace.

MARKET OVERVIEW

Information technology has become increasingly critical to the operational and financial success of corporations and governments over the last two decades. Once a support function, IT is now viewed as a strategic component of growth and operating performance. Accordingly, it has become imperative for executives and IT professionals to manage efficiently and effectively their IT spending and purchasing decisions.

As the cost of IT solutions continues to rise, executives and technology professionals have realized the importance of making well-informed decisions and increasingly seek to maximize their returns on IT capital investments. As a result, any IT investment decision in an enterprise is subject to increased financial scrutiny. In addition, today’s IT marketplace is dynamic and complex. Technology providers continually introduce new products with a wide variety of standards and features that are prone to shorter life cycles. The users of technology – almost all organizations – must keep abreast of new developments in technology to ensure their IT systems are reliable, efficient and meet their needs.

Given the heightened emphasis organizations place on technology decision-making and spending, companies and governments are increasingly turning to outside experts for IT procurement, implementation and operation in order to maximize the value of their IT investments. Accordingly, it is critical that CIOs and other executives obtain value-added, independent and objective research and analysis of the IT market to assist in their IT related decisions.

OUR SOLUTION

We provide high quality independent and objective research and analysis of the IT industry. Through our entire product portfolio, our global research community provides thought leadership and insight about technology acquisition and deployment to CIOs, executives and other technology leaders.

We employ a diversified business model that utilizes and leverages the breadth and depth of our research intellectual capital. The foundation for our business model is our ability to create and distribute our proprietary research content as broadly as possible via published reports and briefings, consulting and advisory services and hosting symposia, conferences and exhibitions.

With a base of over 650 research analysts, we create timely and relevant technology-related research. In addition, we have over 500 experienced consultants that combine our objective, independent research, with a practical, business perspective focused on the IT industry. Our events are among the world’s largest of their kind; gathering highly qualified audiences of senior business executives, IT professionals, purchasers and vendors of IT products and services.

PRODUCTS AND SERVICES

Our principal products and services are Research, Consulting, and Events:

§		RESEARCH. Gartner’s global research product is the fundamental building block for all Gartner services. We combine our proprietary research methodologies with extensive industry and academic relationships to create the Gartner solution. Our research agenda is defined by clients’ needs, focusing on the critical issues, opportunities and challenges they face every day. Our research analysts are in regular contact with technology vendors and research users, thereby enabling them to identify the most pertinent topics in the IT marketplace and develop relevant product enhancements to meet the evolving needs of users of our research. Our proprietary research content, presented in the form of reports, briefings, updates and related tools, is delivered directly to the client’s desktop via our website. Our research analysts provide in-depth analysis on all aspects of technology including: hardware, software and systems, services, IT management, market data and forecasts, and vertical industry issues. Clients typically sign contracts that provide access to our research content for individual users. The research contracts are renewed on an ongoing basis; to date, we have enjoyed strong research client retention, with 81% of users renewing their contracts in 2006, as well as 96% wallet retention, a measure of the amount of contract value we have retained with clients over 2006.
		Our strategy is to align our service and product offerings around targeted key client groups. For example, Executive Programs (EP) are exclusive membership programs designed to help CIOs, senior IT executives and other business executives become more effective in their enterprises. An EP membership leverages the knowledge and expertise of Gartner in ways that are specific to the CIOs needs, and offers role-based offerings and members-only communities for peer-based collaboration. Our 3,600 EP members also receive advice and counsel from a personal relationship manager who understands their goals and can ensure the most effective level of support from Gartner.
		Our Best Practices Councils are exclusive peer exchange communities focused on specific functional areas of IT that bring together senior business and IT leaders in major U.S. and international companies for exclusive events, multi-client research studies and ad hoc peer exchange forums. These programs allow clients to learn from the experiences of their peers and share best practices in functional areas such architecture and IT planning, emerging technology management, enterprise application, information security, infrastructure management and IT sourcing management in order to solve common business problems, improve corporate performance and drive greater effectiveness.
		Our End User Programs focus on the needs of the IT end user market with a variety of product offerings. Gartner for IT Leaders, a new product suite that we rolled out in 2006, currently provides eight role-based research offerings for end user IT leaders to assist in effective decision-making. These products align a client’s specific job related challenges with appropriate Gartner analysts and insight, and connect IT leaders to IT peers who share common business and technology issues.
		Our High Tech & Telecom Programs focus on the needs of our clients who are high technology and telecommunications service providers, professional service firms and IT investors to help them be more successful in their specific job roles within their specific sub-industry. We leverage Gartner research and other information into industry specific expertise and solutions.
§		CONSULTING. Gartner consultants provide fact-based consulting services to help our clients use and manage IT to enable business performance. We seek to accomplish three major outcomes for our clients: applying IT to drive improvements in business performance; creating sustainable IT efficiency that ensures a constant return on IT; and strengthening the IT organization and operations to ensure high-value services to the client’s lines of business and to enable the client to adapt to business changes.
		We utilize our benchmarking capabilities and our business solutions to drive these outcomes. Our benchmarking capabilities are provided as information offerings. Our business solutions, enabled by benchmarking, include IT Transformation, IT Optimization, Sourcing Optimization and Business Enablement. We deliver our consulting solutions by capitalizing on Gartner assets that are invaluable to IT decision-making, including Gartner research that ensures our consulting analyses and advice is based on a deep understanding of the IT environment and the business of IT, Gartner’s market independence which keeps our consultants focused on our client’s success and our benchmarking capability that provides relevant comparisons and best practices to assess and improve performance.
§		EVENTS. Gartner symposia and conferences are gatherings of technology’s most senior IT and business strategists and practioners. Symposia and conferences give clients live access to insights developed from our latest proprietary research in a concentrated way. Informative sessions led by Gartner analysts are augmented with technology showcases, peer exchange, analyst one-on-one meetings, workshops and keynotes by technology’s top leaders. Symposia and conferences also provide participants with a networking opportunity to interact with business executives of the world’s leading technology companies. Except for certain invitation only events, attendance is not limited to Gartner clients. In 2006, Gartner’s 74 events throughout the United States, Europe, Latin America and the Asia-Pacific region attracted over 41,000 attendees.
		Gartner conferences attract high-level IT and business professionals ready to buy technology products and services, and provide a commercial opportunity for attendees to interact with this audience. Gartner Symposium, offered each spring and fall in various international locations, is a large, strategic conference for senior IT and business professionals. Symposium is combined with ITxpo, an exhibition where the latest technology products and solutions are demonstrated. We also offer conferences on specialized topics such as security, outsourcing, wireless technology and the impact of IT on the public sector, utilities, media and financial services industries in many locations around the world.

Note 14 – Segment Information in the Notes to the Consolidated Financial Statements contained within this Form 10-K includes financial information about our geographic areas and our three business segments: Research, Consulting and Events.

COMPETITION

We believe that the principal competitive factors that differentiate us from our competitors are:

•

Superior IT Research Content — We believe that we create the broadest, highest quality and most relevant research coverage of the IT industry. Our research analysis generates unbiased IT research that we believe is timely, thought-provoking and comprehensive, and that is known for its high quality, independence and objectivity.

•

Our Leading Brand Name — For more than a quarter of a century, we have been providing critical, trusted insight under the Gartner name.

•

Our Global Footprint and Established Customer Base — We have a global presence with operations in over 75 countries on six continents. Sales outside of North America accounted for approximately 40% of our 2006 revenues.

•

Substantial Operating Leverage in Our Business Model — We have the ability to distribute our intellectual property and expertise across multiple platforms, including research publications, consulting engagements, conferences and executive programs, to derive incremental revenues and profitability.

•

Experienced Management Team — Our management team is composed of IT research veterans and experienced industry executives.

Nothwithstanding these differentiating factors, we face competition from a significant number of independent providers of information products and services. We compete indirectly against consulting firms and other information providers, including electronic and print media companies. These indirect competitors could choose to compete directly with us in the future. Additionally, we face competition from free sources of information that are available to our clients through the Internet. Limited barriers to entry exist in the markets in which we do business. As a result, new competitors may emerge and existing competitors may start to provide additional or complementary services. However, we believe the breadth and depth of our research assets position us well versus our competition. Increased competition may result in us losing market share, diminished value in our products and services, reduced pricing, and increased sales and marketing expenditures.

INTELLECTUAL PROPERTY

Our success has resulted in part from proprietary methodologies, software, reusable knowledge capital and other intellectual property rights. We rely on a combination of copyright, patent, trademark, trade secret, confidentiality, non-compete and other contractual provisions to protect our intellectual property rights. We have policies related to confidentiality, ownership and the use and protection of Gartner’s intellectual property, and we also enter into agreements with our employees as appropriate that protect our intellectual property.

We recognize the value of our intellectual property in the marketplace and vigorously identify, create and protect it. Additionally, we actively monitor and enforce contract compliance by our end users.

EMPLOYEES

As of December 31, 2006, we had 3,784 employees, of which 642 were located at our headquarters in Stamford, Connecticut; 1,581 were located at our other facilities in the United States; and 1,561 were located outside of the United States. Our employees may be subject to collective bargaining agreements at a company or industry level in those countries where this is part of the local labor law or practice. We have experienced no work stoppages and consider our relations with our employees to be favorable.

AVAILABLE INFORMATION

Our Internet address is www.gartner.com and the investor relations section of our Web site is located at www.investor.gartner.com. We make available free of charge, on or through the investor relations section of our Web site, printable copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”).

Also available at www.investor.gartner.com , under the “Corporate Governance” link, are printable and current copies of our (i) CEO & CFO Code of Ethics which applies to our Chief Executive Officer, Chief Financial Officer, controller and other financial managers, (ii) Code of Business Conduct, which applies to all Gartner officers, directors and employees, (iii) Principles of Ethical Conduct which applies to all Gartner employees, (iv) Board Principles and Practices, the corporate governance principles that have been adopted by our Board and (v) charters for each of the Board’s standing committees: Audit, Compensation and Governance/Nominating. This information is also available in print to any shareholder who makes a written request to Investor Relations, Gartner, Inc., 56 Top Gallant Road, P.O. Box 10212, Stamford, CT 06904-2212.

ITEM 1A. RISK FACTORS

Factors That May Affect Future Performance.

We operate in a very competitive and rapidly changing environment that involves numerous risks and uncertainties, some of which are beyond our control. In addition, we and our clients are affected by the economy. The following section discusses many, but not all, of these risks and uncertainties.

Risks related to our business

Our operating results could be negatively impacted if the IT industry experiences an economic down cycle.

Our revenues and results of operations are influenced by economic conditions in general and more particularly by business conditions in the IT industry. A general economic downturn or recession, anywhere in the world, could negatively affect demand for our products and services and may substantially reduce existing and potential client information technology-related budgets. Such a downturn could materially and adversely affect our business, financial condition and results of operations, including the ability to maintain client retention, wallet retention and consulting utilization rates, and achieve contract value and consulting backlog growth.

We face significant competition and our failure to compete successfully could materially adversely affect our results of operations and financial condition.

We face direct competition from a significant number of independent providers of information products and services, including information that can be found on the Internet free of charge. We also compete indirectly against consulting firms and other information providers, including electronic and print media companies, some of which may have greater financial, information gathering and marketing resources than we do. These indirect competitors could also choose to compete directly with us in the future. In addition, limited barriers to entry exist in the markets in which we do business. As a result, additional new competitors may emerge and existing competitors may start to provide additional or complementary services. Additionally, technological advances may provide increased competition from a variety of sources. However, we believe the breadth and depth of our research assets position us well versus our competition. There can be no assurance that we will be able to successfully compete against current and future competitors and our failure to do so could result in loss of market share, diminished value in our products and services, reduced pricing and increased marketing expenditures. Furthermore, we may not be successful if we cannot compete effectively on quality of research and analysis, timely delivery of information, customer service, and the ability to offer products to meet changing market needs for information and analysis, or price.

We may not be able to maintain our existing products and services.

We operate in a rapidly evolving market, and our success depends upon our ability to deliver high quality and timely research and analysis to our clients. Any failure to continue to provide credible and reliable information that is useful to our clients could have a material adverse effect on future business and operating results. Further, if our predictions prove to be wrong or are not substantiated by appropriate research, our reputation may suffer and demand for our products and services may decline. In addition, we must continue to improve our methods for delivering our products and services in a cost-effective manner. Failure to increase and improve our electronic delivery capabilities could adversely affect our future business and operating results.

We may not be able to introduce the new products and services that we need to remain competitive.

The market for our products and services is characterized by rapidly changing needs for information and analysis. To maintain our competitive position, we must continue to enhance and approve our products and services, develop or acquire new products and services in a timely manner, and appropriately position and price new products and services relative to the marketplace and our costs of producing them. Any failure to achieve successful client acceptance of new products and services could have a material adverse effect on our business, results of operations or financial position.

We depend on renewals of subscription based services and sales of new subscription based services for a significant portion of our revenue, and our failure to renew at historical rates or generate new sales of such services could lead to a decrease in our revenues.

A large portion of our success depends on our ability to generate renewals of our subscription-based research products and services and new sales of such products and services, both to new clients and existing clients. These products and services constituted 54% and 53% of our revenues for 2006 and 2005, respectively. If we are not able to renew at historical rates, and do not generate new sales in an amount sufficient to account for the shortfall arising from a decrease in renewals, our revenues will be negatively affected.

Our research subscription agreements have terms that generally range from twelve to thirty months. Our ability to maintain contract renewals is subject to numerous factors, including the following:

	•		delivering high-quality and timely analysis and advice to our clients;
	•		understanding and anticipating market trends and the changing needs of our clients; and
	•		delivering products and services of the quality and timeliness necessary to withstand competition.

Additionally, as we implement our strategy to realign our business to client needs, we may shift the type and pricing of our products which may impact client renewal rates. While research client retention rates were 81% at both December 31, 2006 and 2005, respectively, there can be no guarantee that we will continue to maintain this rate of client renewals.

Generating new sales of our subscription based products and services, both to new and existing clients, is often a time consuming process. If we are unable to generate new sales, due to competition or other factors, our revenues will be adversely affected.

We depend on non-recurring consulting engagements and our failure to secure new engagements could lead to a decrease in our revenues.

Consulting segment revenues constituted 29% and 30% of our revenues for 2006 and 2005, respectively. These consulting engagements typically are project-based and non-recurring. Our ability to replace consulting engagements is subject to numerous factors, including the following:

	•		delivering consistent, high-quality consulting services to our clients;
	•		tailoring our consulting services to the changing needs of our clients; and
	•		our ability to match the skills and competencies of our consulting staff to the skills required for the fulfillment of existing or potential consulting engagements.

Any material decline in our ability to replace consulting arrangements could have an adverse impact on our revenues and our financial condition.

The profitability and success of our conferences, symposia and events could be adversely affected if we are unable to obtain desirable dates and locations.

The market for desirable dates and locations for conferences, symposia and events is highly competitive. If we cannot secure desirable dates and locations for our conferences, symposia and events their profitability could suffer, and our financial condition and results of operations may be adversely affected. In addition, because our events are scheduled in advance and held at specific locations, the success of these events can be affected by circumstances outside of our control, such as labor strikes, transportation shutdowns, economic slowdowns, terrorist attacks, natural disasters and other world events impacting the global economy, the occurrence of any of which could negatively impact the success of the event.

We may not be able to attract and retain qualified personnel which could jeopardize the quality of our products and services.

Our success depends heavily upon the quality of our senior management, research analysts, consultants, sales and other key personnel. We face competition for the limited pool of these qualified professionals from, among others, technology companies, market research firms, consulting firms, financial services companies and electronic and print media companies, some of which have a greater ability to attract and compensate these professionals. Some of the personnel that we attempt to hire are subject to non-compete agreements that could impede our short-term recruitment efforts. Any failure to retain key personnel or hire and train additional qualified personnel as required to support the evolving needs of clients or growth in our business, could adversely affect the quality of our products and services, and our future business and operating results.

We may not be able to maintain the equity in our brand name.

We believe that our “Gartner” brand, including our independence, is critical to our efforts to attract and retain clients and that the importance of brand recognition will increase as competition increases. We may expand our marketing activities to promote and strengthen the Gartner brand and may need to increase our marketing budget, hire additional marketing and public relations personnel, expend additional sums to protect the brand and otherwise increase expenditures to create and maintain client brand loyalty. If we fail to effectively promote and maintain the Gartner brand, or incur excessive expenses in doing so, our future business and operating results could be materially and adversely impacted.

Our international operations expose us to a variety of risks which could negatively impact our future revenue and growth.

Approximately 40% of our revenues for 2006 and 38% for 2005 were derived from sales outside of North America. As a result, our operating results are subject to the risks inherent in international business activities, including general political and economic conditions in each country, changes in foreign currency exchange rates, changes in market demand as a result of tariffs and other trade barriers, challenges in staffing and managing foreign operations, changes in regulatory requirements, compliance with numerous foreign laws and regulations, differences between U.S. and foreign tax rates, and the difficulty of enforcing client agreements, collecting accounts receivable and protecting intellectual property rights in international jurisdictions. Furthermore, we rely on local distributors or sales agents in some international locations. If any of these arrangements are terminated by our agent or us, we may not be able to replace the arrangement on beneficial terms or on a timely basis, or clients of the local distributor or sales agent may not want to continue to do business with us or our new agent.

The costs of servicing our outstanding debt obligations could impair our future operating results.

In January 2007, we refinanced our debt and we now have a $180.0 million term loan as well as a $300.0 million revolving credit facility (which we can increase to $400.0 million). The affirmative, negative and financial covenants of the credit facility could limit our future financial flexibility. The associated debt service costs of these facilities could impair our future operating results. The outstanding debt may limit the amount of cash or additional credit available to us, which could restrain our ability to expand or enhance products and services, respond to competitive pressures or pursue future business opportunities requiring substantial investments of additional capital.

If we are unable to enforce and protect our intellectual property rights our competitive position may be harmed.

We rely on a combination of copyright, patent, trademark, trade secret, confidentiality, non-compete and other contractual provisions to protect our intellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized third parties may obtain and use technology or other information that we regard as proprietary. Our intellectual property rights may not survive a legal challenge to their validity or provide significant protection for us. The laws of certain countries do not protect our proprietary rights to the same extent as the laws of the United States. Accordingly, we may not be able to protect our intellectual property against unauthorized third-party copying or use, which could adversely affect our competitive position. Our employees are subject to non-compete agreements. When the non-competition period expires, former employees may compete against us. If a former employee chooses to compete against us prior to the expiration of the non-competition period, there is no assurance that we will be successful in our efforts to enforce the non-compete provision.

We have grown, and may continue to grow, through acquisitions and strategic investments, which could involve substantial risks.

We have made and may continue to make acquisitions of, or significant investments in, businesses that offer complementary products and services, including our acquisition of META that we completed on April 1, 2005. The risks involved in each acquisition or investment include the possibility of paying more than the value we derive from the acquisition, dilution of the interests of our current stockholders or decreased working capital, increased indebtedness, the assumption of undisclosed liabilities and unknown and unforeseen risks, the ability to retain key personnel of the acquired company, the time to train the sales force to market and sell the products of the acquired business, the potential disruption of our ongoing business and the distraction of management from our business. The realization of any of these risks could adversely affect our business.

We face risks related to litigation.

We are, and may in the future be, subject to a variety of legal actions, such as employment, breach of contract, intellectual property-related, and business torts, including claims of unfair trade practices and misappropriation of trade secrets. Given the nature of our business, we are also subject to defamation (including libel and slander), negligence, or other claims relating to the information we publish. Regardless of the merits, responding to any such claim could be time consuming, result in costly litigation and require us to enter into settlements, royalty and licensing agreements which may not be offered or available on reasonable terms. If a successful claim is made against us and we fail to settle the claim on reasonable terms, our business, results of operations or financial position could be materially adversely affected.

Risks related to our common stock

Our operating results may fluctuate from period to period and may not meet the expectations of securities analysts or investors, which may cause the price of our common stock to decline.

Our quarterly and annual operating results may fluctuate in the future as a result of many factors, including the timing of the execution of research contracts, which typically occurs in the fourth calendar quarter, the extent of completion of consulting engagements, the timing of symposia and other events, which also occur to a greater extent in the fourth calendar quarter, the amount of new business generated, the mix of domestic and international business, changes in market demand for our products and services, the timing of the development, introduction and marketing of new products and services, and competition in the industry. An inability to generate sufficient earnings and cash flow, and achieve our forecasts, may impact our operating and other activities. The potential fluctuations in our operating results could cause period-to-period comparisons of operating results not to be meaningful and may provide an unreliable indication of future operating results. Furthermore, our operating results may not meet the expectations of securities analysts or investors in the future. If this occurs, the price of our stock would likely decline.

Interests of certain of our significant stockholders may conflict with yours.

ValueAct Capital Master Fund L.P. and affiliates (“ValueAct”) owned approximately 19.9% of our common stock as of December 31, 2006, while Silver Lake Partners, L.P. and affiliates (“Silver Lake”) owned approximately 12.7% on the same date. While neither Silver Lake nor ValueAct individually holds a majority of our outstanding shares, they may be able, either individually or together, to exercise significant influence over matters requiring stockholder approval, including the election of directors and the approval of mergers, consolidations and sales of our assets. Their interests may differ from the interests of other stockholders. Additionally, representatives of Silver Lake and ValueAct in the aggregate presently hold three seats on our Board of Directors.

Our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid.

The trading prices of our common stock could be subject to significant fluctuations in response to, among other factors, variations in operating results, developments in the industries in which we do business, general economic conditions, changes in securities analysts’ recommendations regarding our securities and our performance relative to securities analysts’ expectations for any quarterly period. Such volatility may adversely affect the market price of our common stock.

Future sales of our common stock in the public market could lower our stock price.

Sales of a substantial number of shares of common stock in the public market by our current stockholders, or the threat that substantial sales may occur, could cause the market price of our common stock to decrease significantly or make it difficult for us to raise additional capital by selling stock. Furthermore, we have various equity incentive plans that provide for awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock based awards. As of December 31, 2006, the aggregate number of shares of our common stock issuable pursuant to outstanding grants awarded under these plans was approximately 23.9 million shares (approximately 9.1 million of which have vested). In addition, approximately 10.5 million shares may be issued in connection with future awards under our equity incentive plans. Shares of common stock issued under these plans are freely transferable without further registration under the Securities Act of 1933, as amended (the “Securities Act”), except for any shares held by an affiliate (as that term is defined in Rule 144 under the Securities Act). We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock.

Our anti-takeover protections may discourage or prevent a change of control, even if a change in control would be beneficial to our stockholders.

Provisions of our restated certificate of incorporation and bylaws and Delaware law may make it difficult for any party to acquire control of us in a transaction not approved by our Board of Directors. These provisions include:

	•		the ability of our Board of Directors to issue and determine the terms of preferred stock;
	•		advance notice requirements for inclusion of stockholder proposals at stockholder meetings;
	•		a preferred shares rights agreement; and
	•		the anti-takeover provisions of Delaware law.

These provisions could discourage or prevent a change of control or change in management that might provide stockholders with a premium to the market price of their common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

There are no material unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Exchange Act.

ITEM 2. PROPERTIES.

Our corporate headquarters is located in approximately 213,000 square feet of leased office space in three buildings located in Stamford, Connecticut, USA. These facilities accommodate research and analysis, marketing, sales, client support, production, and corporate administration. The leases on these facilities expire in 2010 but the leases do contain renewal options. We have a significant presence in the United Kingdom with approximately 72,000 square feet of leased office space in two buildings located in Egham, UK, for which the leases expire in 2020 and 2025, respectively. We have an additional 20 domestic and 44 international locations that support our research and analysis, domestic and international sales efforts, and other functions. We continue to constantly assess our space needs as our business changes, but we believe that our existing facilities are adequate for our current needs and that additional space will be available as needed.

ITEM 3. LEGAL PROCEEDINGS.

The Company received Examination Reports from the Internal Revenue Service (“IRS”) in October 2005 and October 2006 in connection with audits of the Company’s federal income tax returns for the tax years ended September 30, 1999 through December 31, 2004. The IRS proposed adjustments relating primarily to the valuation of intangible assets licensed by Gartner to a foreign subsidiary and the calculation of payments made pursuant to a cost sharing arrangement between Gartner and a foreign subsidiary. Gartner appealed the initial findings and has reached an agreement on the issues with the IRS Appeals Office. With respect to the audits, the Company had recorded provisions in prior periods based on estimates of the amount for which the claim would be settled. Based on the outcome of our negotiations, we released reserves and recorded a benefit of $1.5 million in 2006. The Company is considering the future impact of the settlement of the IRS examination in connection with the implementation of FASB Interpretation No. 48 as described in Recently Issued Accounting Standards below.

On December 23, 2003, Gartner was sued in an action entitled Expert Choice, Inc. v. Gartner, Inc., Docket No. 3:03cv02234, United States District Court for the District of Connecticut. The plaintiff, Expert Choice, Inc., seeks an unspecified amount of damages for claims

relating to royalties for the development, licensing, marketing, sale and distribution of certain computer software and methodologies. In January 2004, an arbitration demand was filed against Decision Drivers, Inc., one of our subsidiaries, and against Gartner, Inc., by Expert Choice. The arbitration demand described the claim as being in excess of $10.0 million, but did not provide further detail. On February 22, 2006, we were informed of an offer from Expert Choice’s counsel to settle the matter for $35.0 million. We immediately rejected Expert Choice’s settlement offer. The case is currently in the discovery phase. We believe we have meritorious defenses against the claims and we continue to vigorously defend the case.

In addition to the matters discussed above, we are involved in legal proceedings and litigation arising in the ordinary course of business. We believe that the potential liability, if any, in excess of amounts already accrued from all proceedings, claims and litigation will not have a material effect on our financial position or results of operations when resolved in a future period.

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

We did not submit any matter to a vote of our stockholders during the fourth quarter of the year covered by this Annual Report.

Our 2007 Annual Meeting of Stockholders will be held on June 5, 2007 at the Company’s offices in Stamford, Connecticut.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

As of January 31, 2007, there were approximately 2,900 holders of record of our common stock, which trades on the New York Stock Exchange under the symbol IT. The following table sets forth the high and low sale prices for our common stock as reported on the New York Stock Exchange for the periods indicated:

		2006								2005
		High				Low				High				Low
Quarter ended March 31		$	14.62			$	12.66			$	12.68			$	9.05
Quarter ended June 30			16.63				12.65				11.29				8.06
Quarter ended September 30			17.73				12.80				11.83				10.11
Quarter ended December 31			21.40				17.12				14.16				11.02

DIVIDEND POLICY

We currently do not pay cash dividends on our common stock. While subject to periodic review, the current policy of our Board of Directors is to retain all earnings primarily to provide funds for continued growth. Our Credit Agreement, dated as of January 31, 2007, contains a negative covenant which may limit our ability to pay dividends. In addition, our Amended and Restated Security Holders Agreement with Silver Lake requires us to obtain Silver Lake’s consent prior to declaring or paying dividends.

The equity compensation plan information set forth in Part III, Item 12 of this Form 10-K is hereby incorporated by reference into this Part II, Item 5.

SHARE REPURCHASES

The following table provides detail related to repurchases of our common stock in the fourth quarter of 2006. All shares purchased were added to treasury stock. With the exception of the Company’s repurchase in December 2006 of 10,389,610 shares directly from Silver Lake, all repurchases were made pursuant to a publicly announced share repurchase program authorized in October 2005 that provided $100.0 million to be used to repurchase shares of common stock in the open market from time to time. This program was suspended and terminated in December 2006 in connection with the Silver Lake transaction, and has been superseded by a $200.0 million share repurchase program that was authorized by the Board of Directors in February 2007. All open market purchases were made by brokers pursuant to purchase programs that complied with Rules 10b5-1 and 10b-18 under the Exchange Act.

										Total Number of				Maximum Approximate
										Shares Purchased as				Dollar Value of Shares
										Part of Publicly				that May Yet Be
		Total Number of				Average Price				Announced Plans or				Purchased Under the
		Shares Purchased				Paid Per Share				Programs				Plans or Programs
Period		(#)				($)				(#)				($ 000’s)
October			—				—				—				36,905
November			772,600				19.41				772,600				21,906
December (1)			10,502,910				19.25				113,300				19,711
Total fourth quarter 2006			11,275,510				19.26				885,900				0

COMPARISON OF TOTAL CUMULATIVE SHAREHOLDER RETURN

The following graph compares the cumulative 63 - month total return on our common stock to the performance of Standard & Poors Midcap 400 Index and a Peer Group Index for the same period.

Our Peer Group consists of The Corporate Executive Board Company and Forrester Research Inc. These companies represent the most significant publicly traded companies that we believe compete with us in our most important line of business: independent IT research and analysis. To our knowledge, there are no publicly traded information technology research companies that also compete with us in our consulting and events businesses.

The graph tracks the performance of a $100 investment in our common stock in the Peer Group and the S & P Midcap 400 Index (with the reinvestment of all dividends) from 9/30/2001 to 12/31/2006. In 2003, Gartner changed its fiscal year-end from September 30 to December 31.

The comparisons in the graph are provided in response to SEC disclosure requirements and are not intended to forecast or be indicative of the future.

		9/01		9/02		12/03		12/04		12/05		12/06
Gartner, Inc.		100.00		89.50		124.97		137.68		142.54		218.67
S & P Midcap 400		100.00		95.30		136.79		159.34		179.34		197.85
Peer group		100.00		103.79		158.10		215.41		281.68		291.93

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The fiscal years presented below are for the respective twelve-month period from January 1 through December 31. For the years ended and as of December 31, 2006, 2005, 2004 and 2003, the information was derived or compiled from our audited consolidated financial statements included herein or in submissions of our Form 10-K in prior years. Effective January 1, 2003, we changed our fiscal year-end from September 30 to December 31. As a result, the 2002 data has been derived from our fiscal year ended September 30, 2002, adjusted for certain transition and quarterly data. The selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes contained in this Form 10-K.

(In thousands, except per share data)		2006				2005				2004				2003				2002
STATEMENT OF OPERATIONS DATA
Revenues:
Research		$	571,217			$	523,033			$	480,486			$	466,907			$	486,967
Consulting			305,231				301,074				259,419				258,628				276,059
Events			169,434				151,339				138,393				119,355				109,694
Other			14,439				13,558				15,523				13,556				14,873
Total revenues			1,060,321				989,004				893,821				858,446				887,593
Operating income			103,250				25,280				42,659				47,333				49,541
Income (loss) from continuing operations			58,192				(2,437	)			16,889				23,589				15,118
Net income (loss)		$	58,192			$	(2,437	)		$	16,889			$	23,589			$	15,118
PER SHARE DATA
Basic income (loss) per share:		$	0.51			$	(0.02	)		$	0.14			$	0.26			$	0.18
Diluted income (loss) per share:		$	0.50			$	(0.02	)		$	0.13			$	0.25			$	0.18
Weighted average shares outstanding
Basic			113,071				112,253				123,603				91,123				83,329
Diluted			116,203				112,253				126,326				92,579				85,040
OTHER DATA
Cash, cash equivalents and marketable equity securities		$	67,801			$	70,282			$	160,126			$	229,962			$	109,657
Total assets			1,039,793				1,026,617				861,194				918,732				808,909
Long-term debt			150,000				180,000				150,000				—				351,539
Stockholders’ equity (deficit)			26,318				146,588				130,048				374,790				(29,408	)

The following items impact the comparability of our consolidated data from continuing operations:

•

The results of META, which we acquired on April 1, 2005, are included in our consolidated results beginning on that date.

•

We repurchased 14.9 million, 0.8 million, 26.6 million, 5.0 million, and 1.4 million of our common shares in 2006, 2005, 2004, 2003, and 2002, respectively.

•

In 2003 our long-term debt was converted into equity.

•

We recorded $16.7 million of pre-tax stock compensation expense in 2006 under Statement of Financial Accounting Standards 123(R), “Share-Based Payment.” We adopted this statement on January 1, 2006, under the modified prospective transition method.

•

During 2006 and 2005 we recorded $1.5 million and $15.0 million, respectively, in pre-tax charges related to the integration of META.

•

Other charges, which included costs for severance, excess facilities, and other items, on a pre-tax basis, of $0 in 2006, $29.2 million in 2005, $35.8 million in 2004, $29.7 million in 2003, and $49.4 million in 2002.

•

Pre-tax goodwill impairment charges of $2.7 million in 2004. In the same year, $3.1 million of pre-tax foreign currency charges related to the closing of certain operations in South America.

•

Pre-tax charges for the impairment of investments of $5.3 million in 2005, $3.0 million in 2004, $0.9 million for 2003, and $4.2 million for 2002.

•

Pre-tax losses (gains) on investments or assets and associated insurance claims of $(0.5) million in 2005, $5.5 million in 2003, and $0.5 million in 2002.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Annual Report contains forward-looking statements. Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “expect,” “should,” “could,” “believe,” ‘plan,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” or other words of similar meaning. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed under Part 1, Item 1A, Risk Factors. Readers should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur. Readers should review carefully any risk factors described in our reports filed with the SEC.

OVERVIEW

Gartner, Inc. is a leading research and advisory firm that helps executives use technology to build, guide and grow their enterprises. We offer independent and objective research and analysis on the information technology, computer hardware, software, communications and related technology industries. We provide comprehensive coverage of the IT industry to approximately 10,000 client organizations, including approximately 400 Fortune 500 companies, across 75 countries. Our client base consists primarily of CIOs and other senior IT and business executives from a wide variety of enterprises, government agencies and the investment community.

We employ a diversified business model that utilizes and leverages the breadth and depth of our research intellectual capital while enabling us to maintain and grow our market-leading position and brand franchise. The foundation for our business model is our ability to create and distribute our unique, proprietary research content as broadly as possible via:

	•		published reports and briefings,
	•		consulting and advisory services, and
	•		hosting symposia, conferences and exhibitions.

In early 2005, we undertook an initiative to better utilize the intellectual capital associated with our core research product. Our diversified business model provides multiple entry points and synergies that facilitate increased client spending on our research, consulting and events. A critical part of our long-term strategy is to increase business volume with our most valuable clients, identifying relationships with the greatest sales potential and expanding those relationships by offering strategically relevant research and analysis. We also seek to extend the Gartner brand name to develop new client relationships, and augment our sales capacity and expand into new markets around the world. In addition, we seek to increase our revenue and operating cash flow through more effective pricing of our products and services. These initiatives have created additional revenue streams through more effective packaging, campaigning and cross-selling of our products and services.

We intend to maintain a balance between (1) pursuing opportunities and applying resources with a strict focus on growing our three core businesses and (2) generating profitability through a streamlined cost structure.

We have three business segments: Research, Consulting and Events.

•

Research provides insight for CIOs, IT professionals, technology companies and the investment community through reports and briefings, access to our analysts, as well as peer networking services and membership programs designed specifically for CIOs and other senior executives.

•

Consulting consists primarily of consulting, measurement engagements and strategic advisory services (paid one-day analyst engagements) (“SAS”), which provide assessments of cost, performance, efficiency and quality focused on the IT industry.

•

Events consists of various symposia, conferences and exhibitions focused on the IT industry.

We believe the following business measurements are important performance indicators for our business segments:

BUSINESS SEGMENT		BUSINESS MEASUREMENTS
Research		Contract value represents the value attributable to all of our subscription-related research products that recognize revenue on a ratable basis. Contract value is calculated as the annualized value of all subscription research contracts in effect at a specific point in time, without regard to the duration of the contract.
		Client retention rate represents a measure of client satisfaction and renewed business relationships at a specific point in time. Client retention is calculated on a percentage basis by dividing our current clients, who were also clients a year ago, by all clients from a year ago.
		Wallet retention rate represents a measure of the amount of contract value we have retained with clients over

BUSINESS SEGMENT		BUSINESS MEASUREMENTS
		a twelve-month period. Wallet retention is calculated on a percentage basis by dividing the contract value of clients, who were clients one year earlier, by the total contract value from a year earlier. When wallet retention exceeds client retention, it is an indication of retention of higher-spending clients, or increased spending by retained clients, or both.
		Number of executive program members represents the number of paid participants in executive programs.
Consulting		Consulting backlog represents future revenue to be derived from in-process consulting, measurement and strategic advisory services engagements.
		Utilization rates represent a measure of productivity of our consultants. Utilization rates are calculated for billable headcount on a percentage basis by dividing total hours billed by total hours available to bill.
		Billing Rate represents earned billable revenue divided by total billable hours.
		Average annualized revenue per billable headcount represents a measure of the revenue generating ability of an average billable consultant and is calculated periodically by multiplying the average billing rate per hour times the utilization percentage times the billable hours available for one year.
Events		Number of events represents the total number of hosted events completed during the period.
		Number of attendees represents the number of people who attend events.

EXECUTIVE SUMMARY OF OPERATIONS AND FINANCIAL POSITION

Our 2006 results continue to reflect our focused execution on our strategy to grow our research business and improve our operational margins.

We continue to invest in our sales capability, and our sales force of 663 associates is up approximately 21% from the prior year. The Research segment benefited strongly from this investment, with revenue up 9% in 2006, to $571.2 million from $523.0 million in 2005. Contract value at December 31, 2006 was the highest in the Company’s history, at $640.3 million, up 11% over the prior year excluding the impact of foreign currency. Contract value has now increased for 12 consecutive quarters. Both our research client retention rate and wallet retention remained strong at year-end 2006, at 81% and 96%, respectively.

Revenue from our Consulting segment was $305.2 million in 2006, up 1% compared to the prior year. Consulting backlog at December 31, 2006 was $109.8 million, up about 2% from September 30, 2006, but down about 8% from December 31, 2005. The consultant utilization rate increased 2 points, to 64% in 2006 from 62% in 2005. Both the average hourly billing rate and the average annualized revenue per billable headcount remained strong. Billable headcount was down about 2% from the prior year, reflecting our planned focus on operational effectiveness over growth.

Our Events segment continues to deliver strong revenue growth. Our continuing emphasis on managing the Events portfolio to retain successful events and introduce promising new events continues to yield increasing revenue performance. Revenue for this segment in 2006 was up 12% over the prior year, with increases in both our on-going events and new events. We held 74 events in 2006 compared to 70 in the prior year period and had an overall increase in attendance of 17%.

For a more detailed discussion of our segment results, see Segment Results below.

We also continue our focus on enhancing shareholder value through the continued evolution of our capital structure. During 2006, we repurchased 15.8 million shares of our common stock through both open market purchases and direct share repurchases from Silver Lake. In addition, in January 2007 we closed on a new credit facility which increased our total debt capacity to $480.0 million, and in February 2007 our Board of Directors approved a new $200.0 million share buyback program.

On January 1, 2006, we adopted the new accounting rule for stock-based compensation, SFAS No. 123(R), and as a result we are now recording compensation expense for all stock-based compensation awards granted to employees. The Company awards stock-based compensation as an incentive for employees to contribute to our long-term success and to better align the interests of our employees and our shareholders.

We had net income of $58.2 million in 2006, or $0.50 per diluted share, compared to a loss of $(0.02) per diluted share for the prior year period, and we ended the year with $67.8 million of cash.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

Our quarterly and annual revenue, operating income, and cash flow fluctuate as a result of many factors, including: the timing of Symposium, our flagship event that normally occurs during the fourth calendar quarter, and other events; the amount of new business generated; the mix of domestic and international business; changes in market demand for our products and services; changes in foreign

currency rates; the timing of the development, introduction and marketing of new products and services; and competition in the industry. The potential fluctuations in our operating income could cause period-to-period comparisons of operating results not to be meaningful and could provide an unreliable indication of future operating results.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements requires the application of appropriate accounting policies. Our significant accounting policies are described in Note 1 in the Notes to Consolidated Financial Statements. Management considers the policies discussed below to be critical to an understanding of our financial statements because their application requires complex and subjective judgments and estimates. Specific risks for these critical accounting policies are described below.

Revenue recognition — We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”), and SEC Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”). Revenue by significant source is accounted for as follows:

	•		Research revenues are derived from subscription contracts for research products. Revenues from research products are deferred and recognized ratably over the applicable contract term;
	•		Consulting revenues are generated from fixed fee and time and material engagements. Revenue from fixed fee contracts is recognized on a percentage of completion basis. Revenues from time and materials engagements is recognized as work is delivered and/or services are provided;
	•		Events revenues are deferred and recognized upon the completion of the related symposium, conference or exhibition;
	•		Other revenues consist primarily of fees from research reprints and software licensing. Reprint fees are recognized when the reprint is shipped. Fees from software licensing are recognized when a signed non-cancelable software license exists, delivery has occurred and collection is probable, and the fees are fixed or determinable;
	•		The majority of research contracts are billable upon signing, absent special terms granted on a limited basis from time to time. All research contracts are non-cancelable and non-refundable, except for government contracts that have a 30-day cancellation clause, but have not produced material cancellations to date. It is our policy to record the entire amount of the contract that is billable as a fee receivable at the time the contract is signed with a corresponding amount as deferred revenue, since the contract represents a legally enforceable claim. For those government contracts that permit termination, we bill the client the full amount billable under the contract but only record a receivable equal to the earned portion of the contract. In addition, we only record deferred revenue on these government contracts when cash is received. Deferred revenues attributable to government contracts were $47.9 million and $41.7 million at December 31, 2006 and December 31, 2005, respectively. In addition, at December 31, 2006 and December 31, 2005, we had not recognized uncollected receivables or deferred revenues, relating to government contracts that permit termination, of $9.6 million and $7.1 million, respectively.

Uncollectible fees receivable — The allowance for losses is composed of a bad debt and a sales and allowance reserve. Provisions are charged against earnings. The measurement of likely and probable losses and the allowance for uncollectible fees receivable is based on historical loss experience, aging of outstanding receivables, an assessment of current economic conditions and the financial health of specific clients. This evaluation is inherently judgmental and requires material estimates. These valuation reserves are periodically re-evaluated and adjusted as more information about the ultimate collectibility of fees receivable becomes available. Circumstances that could cause our valuation reserves to increase include changes in our clients’ liquidity and credit quality, other factors negatively impacting our clients’ ability to pay their obligations as they come due, and the effectiveness of our collection efforts. The following table provides our total fees receivable, along with the related allowance for losses (in thousands):

		December 31,
		2006				2005
Total fees receivable		$	337,083			$	321,095
Allowance for losses			(8,700	)			(7,900	)
Fees receivable, net		$	328,383			$	313,195

Impairment of goodwill and other intangible assets — The evaluation of goodwill is performed in accordance with Statement of Financial Accounting Standards No. 142, — “Goodwill and Other Intangible Assets” (”SFAS 142”). Among other requirements, this standard eliminated goodwill amortization upon adoption and requires ongoing annual assessments of goodwill impairment. The evaluation of other intangible assets is performed on a periodic basis. These assessments require management to estimate the fair values of our reporting units based on estimates of future business operations and market and economic conditions in developing long-term forecasts. If we determine that the fair value of any reporting unit is less than its carrying amount, we must recognize an impairment charge, for the associated goodwill of that reporting unit, to earnings in our financial statements. Goodwill is evaluated for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important that could trigger a review for impairment include the following:

	•		Significant under-performance relative to historical or projected future operating results;
	•		Significant changes in the manner of our use of acquired assets or the strategy for our overall business;
	•		Significant negative industry or economic trends;
	•		Significant decline in our stock price for a sustained period; and

•

Our market capitalization relative to net book value.

Due to the numerous variables associated with our judgments and assumptions relating to the valuation of the reporting units and the effects of changes in circumstances affecting these valuations, both the precision and reliability of the resulting estimates are subject to uncertainty, and as additional information becomes known, we may change our estimates. During 2004, we recorded an impairment charge of $0.7 million in the first quarter relating to goodwill associated with certain operations in South America that were closed, and in the fourth quarter we recorded a goodwill impairment charge of $2.0 million related to the exit from certain non-core product lines.

Accounting for income taxes — As we prepare our consolidated financial statements, we estimate our income taxes in each of the jurisdictions where we operate. This process involves estimating our current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We record a valuation allowance to reduce our deferred tax assets when future realization is in question. We consider the availability of loss carryovers, existing deferred tax liabilities, future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event we determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged against income in the period such determination was made.

We operate in numerous foreign taxing jurisdictions and our level of operations and profitability in each jurisdiction could have an impact upon the amount of income taxes that we provide in any given year. In addition, our tax filings for various tax years are subject to audit by the tax authorities in jurisdictions where we conduct business. These audits may result in assessments of additional taxes. We have provided for the amounts we believe will ultimately result from these audits. However, resolution of these matters involves uncertainties and there are no assurances that the ultimate resolution will not exceed the amounts provided.

In October 2005 and October 2006 we received IRS Examination Reports showing proposed changes that primarily relate to the valuation of intangible assets licensed to a foreign subsidiary and the calculation of payments under a cost sharing arrangement. The Company appealed the initial findings and has reached an agreement on the issues with IRS Appeals Office. See Item 3. Legal Proceedings for additional information

Accounting for stock-based compensation — On January 1, 2006, we adopted Statement of Financial Accounting Standards 123(R), “Share-Based Payment” (“SFAS No. 123(R)”), as interpreted by SEC Staff Accounting Bulletin No. 107 (“SAB No. 107”). Effective with the adoption of SFAS No. 123(R), the Company is recognizing stock-based compensation expense, which is based on the fair value of the award on the date of grant, over the related service period, net of estimated forfeitures (See Note 10 — Stock-Based Compensation in the Notes to the Consolidated Financial Statements).

Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain highly complex and subjective assumptions, including the expected life of the stock compensation awards and the Company’s common stock price volatility. In addition, determining the appropriate amount of associated periodic expense requires management to estimate the rate of employee forfeitures and the likelihood of achievement of certain performance targets. The assumptions used in calculating the fair value of stock compensation awards and the associated periodic expense represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary in the future to modify the assumptions it made or to use different assumptions, or if the quantity and nature of the Company’s stock-based compensation awards changes, then the amount of expense may need to be adjusted and future stock compensation expense could be materially different from what has been recorded in the current period.

Contingencies and other loss reserves and accruals — We record accruals for severance costs, lease costs associated with excess facilities, contract terminations and asset impairments as a result of actions we undertake to streamline our organization, reposition certain businesses and reduce ongoing costs. Estimates of costs to be incurred to complete these actions, such as future lease payments, sublease income, the fair value of assets, and severance and related benefits, are based on assumptions at the time the actions are initiated. To the extent actual costs differ from those estimates, reserve levels may need to be adjusted. In addition, these actions may be revised due to changes in business conditions that we did not foresee at the time such plans were approved. During 2005 we revised our previous estimate for costs and losses associated with excess facilities and we recorded a charge of approximately $8.2 million, primarily due to a reduction of office space in San Jose, California, where we consolidated employees from two buildings into one. The charge is included in Other charges. Additionally, we record accruals for estimated incentive compensation costs during each year. Amounts accrued at the end of each reporting period are based on our estimates and may require adjustment as the ultimate amount paid for these incentives are sometimes not known until after year end.

RESULTS OF OPERATIONS

2006 VERSUS 2005

revenues increased 7% or $71.3 million, to $1,060.3 million in 2006 from $989.0 million in 2005.

•

Research revenues increased 9% in 2006 to $571.2 million, compared to $523.0 million in 2005, and comprised approximately 54% and 53% of total revenues in 2006 and 2005, respectively.

•

Consulting revenues in 2006 of $305.2 million were up 1% compared to the $301.1 in 2005, and comprised approximately 29% and 30% of total revenues in 2006 and 2005, respectively.

•

Events revenues were $169.4 million in 2006, an increase of 12% from the $151.3 million in 2005, and comprised approximately 16% and 15% of total revenues in 2006 and 2005, respectively.

•

Other revenues, consisting principally of reprint and software licensing fees, increased 6%, to $14.4 million in 2006 from $13.6 million in 2005.

Excluding the impact of foreign currency translation, total revenues for 2006 would have increased slightly less than 7%. See the Segment Results section below for a further discussion of segment revenues. Gartner acquired META on April 1, 2005, and as a result Gartner’s first quarter of 2005 operating results did not contain META. Because META has been completely integrated into Gartner, we cannot approximate the impact on our 2006 results from the acquisition.

Revenues increased in all regions. Revenues from sales to United States and Canadian clients increased 3% to $631.3 million in 2006 from $611.0 million in 2005. Revenues from sales to clients in Europe, the Middle East and Africa (“EMEA”) increased 14% to $337.7 million in 2006 from $296.7 million in 2005. Revenues from sales to clients in other international regions increased 12%, to $91.3 million in 2006 from $81.3 million in 2005.

Cost of services and product development expense increased $18.7 million, or 4%, to $505.3 million in 2006 from $486.6 million in 2005. Excluding the effects of foreign currency translation, Cost of services and product development expense would have increased 3% for the twelve months ended December 31, 2006.

The 4% year-over-year increase in Cost of services and product development expense was primarily due to charges of $8.0 million for stock-based compensation under SFAS No. 123(R), approximately $6.0 million of incremental delivery costs associated with continued growth in our Events business, the inclusion of a full year of salary and benefit expense for former META employees in 2006 compared to nine months in 2005, and higher compensation costs related to merit salary increases. The Company adopted SFAS No. 123(R) on January 1, 2006 under the modified prospective transition method, so the prior year excludes such charges. In addition to these expense increases, Cost of services and product development expense for 2005 benefited from the reversal of $2.1 million of prior year’s bonus accruals. For 2006 and 2005, Cost of services and product development expense as a percentage of sales was 48% and 49%, respectively.

Selling, general and administrative expenses (“SG&A”) increased 5%, or $18.8 million, to $416.1 million in 2006 from $397.3 million in 2005. Excluding the effects of foreign currency translation, SG&A expense would have increased by 4% year-over-year.

The 5% increase in SG&A expense on a year-to-date basis resulted primarily from increased investment in our sales organization. We now have 663 sales associates, a 21% increase over the prior year, which added approximately $18.0 million of costs. Also contributing to the increase were charges of $8.7 million for stock-based compensation under SFAS No. 123(R), and increased recruiting and relocation expenses. Offsetting these increases were reductions in a number of G&A expense categories, to include consulting, travel, facilities, and fulfillment. In addition, SG&A expense in 2005 benefited from the reversal of $0.8 million of prior year’s bonus accruals.

Depreciation expense for 2006 decreased 8%, to $23.4 million, compared to $25.5 million for 2005. The reduction is due to a decline in capital spending in both the current and prior periods, reflecting our focus on disciplined capital spending on projects that support our strategic initiatives.

Amortization of intangibles was $10.7 million for 2006 and $10.2 million in 2005. Of the $25.6 million of intangibles we recorded related to META, both the intellectual property and database intangibles are now fully amortized, with $5.0 million in customer relationship intangibles remaining to be amortized.

meta integration charges were $1.5 million and $15.0 million for 2006 and 2005, respectively. These expenses were primarily for severance, and for consulting, accounting, and tax services, related to our integration of META. The Company will not record any additional META integration charges in 2007 or later.

other charges were zero in 2006 and $29.1 million in 2005. The 2005 charges consisted of $10.6 million of employee severance costs, $8.2 million of charges mostly related to excess office space, $6.0 million related to an option buyback, and $4.3 million primarily for restructuring in our international operations.

loss on investments, net was zero and $5.8 million for 2006 and 2005, respectively. The 2005 loss was primarily due to the writedown of an investment in a venture capital fund to its net realizable value. The investment was sold in late 2005 at book value. As of December 31, 2006, we had approximately $0.3 million of investments.

interest expense, net was $16.6 million and $11.1 million for 2006 and 2005, respectively, a $5.5 million increase. The increase was primarily related to an increase in rates and an increase in the amount of debt outstanding, and to a lesser extent higher amortization and writeoff of debt issue costs. The weighted-average interest rate on our debt was 6.3% in 2006 compared to 4.9% in the prior year. In addition, the weighted-average debt outstanding was about $5.0 million higher in 2006 compared to 2005.

other expense, net for both 2006 and 2005 consists primarily of net foreign currency exchange gains and losses.

provision (benefit) for income taxes was $27.7 million for 2006 compared to $7.9 million for 2005. The effective tax rate was 32.2% and 144.8% for 2006 and 2005, respectively. The lower effective tax rate in 2006 as compared to 2005 is attributable to several items. The most significant of those items include the following: (a) the Company generated more income in low tax jurisdictions in 2006 as compared to 2005, and (b) 2006 included a significant decrease in valuation allowances for state and local net operating losses due to expected utilization as a result of legal entity restructuring while 2005 included a significant increase in valuation allowances for foreign tax credits. The impact of these items is partially offset by: (a) benefits taken to reduce overall tax expense in 2005 relating to repatriated earnings, no such items occurred in 2006, (b) larger benefits taken in 2005 as compared to 2006 for foreign tax credits generated, and (c) an overall increase in reserve needs in 2006 as compared to an overall decrease in 2005. Note that the impact of the various positive and negative adjustments is amplified by lower pretax book income in 2005 as compared to 2006.

In March 2005, we repatriated approximately $52.0 million in cash from our non-US subsidiaries. Also in 2005, we took into account technical corrections issued by the Treasury Department related to repatriating earnings under the American Jobs Creation Act (AJCA). As a result of favorable provisions in the technical corrections, we realized a tax benefit of $3.6 million in 2005 that reduced the cumulative charge on the repatriated earnings to $1.4 million. In addition, as a consequence of the application of the technical corrections, we re-evaluated our ability to use foreign tax credits in the future and took a charge of $2.5 million to re-establish valuation allowance for foreign tax credits that will more likely than not expire unused. Upon filing our 2005 income tax return in 2006, the Company determined that it would be more beneficial not to avail itself of the provision of the AJCA with respect to the taxation of the repatriation. Therefore, the repatriation was partially taxed as an ordinary dividend and partially as a tax-free return of capital under existing tax law.

Excluding the impact of SFAS No. 123(R), amortization of certain intangibles acquired as part of the META acquisition and various META integration charges, the effective tax rate was 32.4% for 2006. Excluding the impact of the amortization of certain intangibles acquired as part of the META acquisition, various META integration charges and certain one-time charges for facility closures and capital asset impairments, the effective tax rate was 36.6% for 2005, respectively. The lower effective tax rate in 2006 as compared to 2005 is attributable to several items. The most significant of those items include the following: (a) the Company generated more income in low tax jurisdictions in 2006 as compared to 2005, and (b) 2006 included a significant decrease in valuation allowances for state and local net operating losses while 2005 included a significant increase in valuation allowances for foreign tax credits. The impact of these items is partially offset by (a) benefits taken to reduce overall tax expense in 2005 relating to repatriated earnings, no such items occurred in 2006, (b) larger benefits taken in 2005 as compared to 2006 for foreign tax credits generated, and (c) an overall increase in reserve needs in 2006 as compared to an overall decrease in 2005. Note that the impact of the various positive and negative adjustments is amplified by lower pretax book income in 2005 as compared to 2006.

2005 VERSUS 2004

revenues increased 11%, or $95.2 million, to $989.0 million during 2005 from $893.8 million during 2004.

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Research revenues increased 9% in 2005 to $523.0 million, compared to $480.5 million in 2004, and comprised approximately 53% and 54% of total revenues in 2005 and 2004, respectively.

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Consulting revenues in 2005 of $301.1 million were up 16% compared to the $259.4 in 2004, and comprised approximately 30% and 29% of total revenues in 2005 and 2004, respectively.

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Events revenues were $151.3 million in 2005, an increase of 9% from the $138.4 million in 2004, and comprised approximately 15% of total revenues in both periods.

•

Other revenues, consisting principally of reprint and software licensing fees, decreased 13% to $13.6 million in 2005 from $15.5 million in 2004.

The effects of foreign currency translation had approximately a $1.1 million negative effect on total revenues for 2005 compared to 2004, while the META purchase added approximately $50.0 million of revenue. Excluding the effects of foreign currency translation and the META acquisition, revenues would have increased approximately 5% year-over-year. See the Segment Results section below for a further discussion of segment revenues.

Revenues increased in all regions. Revenues from sales to United States and Canadian clients increased 9% to $611.0 million in 2005 from $559.4 million in 2004. Revenues from sales to clients in Europe, the Middle East and Africa (“EMEA”) increased 13% to $296.7 million in 2005 from $263.0 million in 2004. Revenues from sales to clients in other international regions increased 14% to $81.3 million in 2005 from $71.4 million in 2004.

Cost of services and product development expense increased $52.1 million, or 12%, to $486.6 million in 2005 from $434.5 million in 2004, with foreign currency translation having a negligible impact. The increase in Cost of services and product development expense on a year-to-date basis resulted primarily from an increase in salary and benefits expense of approximately $33.5 million, primarily driven by the addition of 140 people related to the META purchase, and higher bonus expense and sales commissions of $14.2 million and $5.0 million, respectively. The increase in bonus expense reflects the Company’s decision to restore bonus payouts to a competitive level. In addition, we had $5.3 million of higher conference expenses related to an increase in the number of events and attendees.

Cost of services and product development expense in 2005 benefited by the reversal of $2.1 million of prior years’ bonus accruals. Additionally, Cost of services and product development expense during 2004 benefited by the reversal of $3.5 million of prior years’ incentive compensation program accruals. For 2005 and 2004, Cost of services and product development expense as a percentage of sales was 49% for both periods.

Selling, general and administrative expense increased $47.4 million, or 14%, to $397.3 million in 2005 from $349.8 million in 2004, with foreign currency translation having a negligible impact. The increase in SG&A expense on a year-to-date basis was primarily driven by our continued investment in our sales organization. We added over 110 new sales associates in 2005, which includes 80 from META. We added 111 people related to the META purchase, including the 80 sales associates, accounting for approximately $10.7 million of the increase. In addition to the $10.7 million increase attributable to META, other salary and benefit increases totaled $12.1 million, while bonus expense and sales commissions increased by $6.9 million and $7.0 million, respectively. Also, we had approximately $16.4 million of additional external consulting, facilities, outsourcing, and other charges. These charges were offset by the favorable impact of approximately $4.4 million of lower costs, primarily marketing, and production. SG&A expense in 2005 benefited by the reversal of $0.9 million of prior years’ incentive compensation program accruals. During 2004, SG&A expense benefited by the reversal of $3.3 million of prior year’s incentive compensation program accruals. During 2004 the Company reduced its allowance for doubtful accounts by $3.7 million as a result of increased collections and a decline in write-offs.

Depreciation expense for 2005 decreased 8% to $25.5 million, compared to $27.6 million for 2004. The reduction is due to a decline in capital spending, reflecting our disciplined capital spending on projects that support our strategic initiatives.

Amortization of intangibles increased to $10.2 million in 2005 from $0.7 million in the prior year due to the amortization of the $25.6 million of intangibles acquired in the META acquisition.

goodwill impairments were $2.7 million in 2004, reflecting the write-off of $0.7 million of goodwill related to the closing of certain operations in Latin America and $2.0 million related to the exit from certain non-core product lines.

meta integration charges was $15.0 million in 2005. These expenses were primarily for severance, and for consulting, accounting, and tax services, related to our integration of META.

other charges during 2005 were $29.2 million, which includes $10.7 million related to workforce reductions, $6.0 million for an option buyback, $8.2 million related to a reduction in office space, and $4.3 million of other charges. The Company severed a total of 150 employees in 2005 and estimates the annualized savings from the termination of these employees to be approximately $15.2 million. The Company has reinvested a significant portion of these savings into improving its products, processes, and infrastructure to help drive future growth.

Other charges during 2004 were $35.8 million. Included in this amount was $29.7 million related to severance and benefits for approximately 200 employees. During 2004, the Company also revised its estimate of previously recorded costs and losses associated with excess facilities and recorded $2.3 million of additional provisions. The revised estimate was due to a decline in market lease rates for expected subleases, as well as a reduction in estimated periods of subleases. The Company also recorded charges in 2004 of $1.9 million related to the restructuring of certain internal systems, and $1.8 million for charges related to the exit from certain international and other non-core operations.

loss on investments, net was $5.8 million and $3.0 million for 2005 and 2004, respectively. These losses were primarily for writedowns of the Company’s investments in venture capital funds.

other expense, net for 2005 of $2.9 million consists primarily of net foreign currency exchange gains and losses. Other (expense), net of $3.9 million in 2004 includes the non-cash write-off of $3.1 million of accumulated foreign currency translation adjustments associated with certain of our operations in South America that we closed. As a result of this decision we were required to reclassify these currency adjustments that have been accumulated within equity to earnings, in accordance with Statement of Financial Accounting Standards No. 52 “Foreign Currency Translation.”

provision for income taxes was 144.8% and 51.0% of income before income taxes for 2005 and 2004, respectively. The increase in the effective tax rate for 2005, as compared to that of 2004, is principally due to the fact that the Company generated less income in low tax jurisdictions as compared to the prior year and recorded valuation allowances against capital losses and foreign tax credit carryforwards. The impact of these items is offset, in part, by benefits taken to reduce the overall tax expense on repatriated earnings as well as reductions for interest costs related to tax contingencies. The impact of the various positive and negative adjustments is amplified by lower pretax book income in 2005 as compared to 2004.

Excluding the effect of certain one-time charges, the provision for income taxes for the years ended 2005 and 2004 would have been 36.6% and 36.0% respectively. In 2005, the most significant of these one-time charges included expenses related to the acquisition and integration of META, various capital losses and impairments, charges associated with the buy-back of under water stock options, and severance and facilities reduction charges. In 2004, the most significant of these one-time charges included nondeductible goodwill impairment, the write-off of accumulated foreign currency translation adjustments associated with certain South American operations, various capital losses and impairments, and severance and facilities reduction charges.

In 2004, we took a $5.0 million tax charge in anticipation of repatriating approximately $52.0 million in earnings from our non-US subsidiaries in 2005. The repatriation was expected to qualify for a one-time reduced tax rate pursuant to the American Jobs Creation Act (AJCA). The charge was partially offset by a benefit of $2.5 million to the release of a valuation allowance on foreign tax credits that was expected to be utilized before they expired.

In March 2005, we repatriated approximately $52.0 million in cash from our non-US subsidiaries. Also in 2005, we took into account technical corrections issued by the Treasury Department related to repatriating earnings under the AJCA. As a result of favorable provisions in the technical corrections, we realized a tax benefit of $3.6 million in 2005 that reduced the cumulative charge on the repatriated earnings to $1.4 million. In addition, as a consequence of the application of the technical corrections, we re-evaluated our ability to use foreign tax credits in the future and took a charge of $2.5 million to re-establish valuation allowances for foreign tax credits that will more likely than not expire unused.

2006 SEGMENT RESULTS

We evaluate reportable segment performance and allocate resources based on gross contribution margin. Gross contribution is defined as operating income excluding certain Cost of services and product development expense and SG & A expense, depreciation, META integration charges, amortization of intangibles and Other charges. Gross contribution margin is defined as gross contribution as a percentage of revenues.

Research

We had strong revenue performance in our Research segment in 2006, with revenue up 9%, to $571.2 million, from $523.0 in 2005. Foreign currency had an immaterial impact on revenue for the year. The revenue growth for the year was across all of our regions and client sectors, as well as across the entire client portfolio.

Both client and wallet retention rates remain strong. At December 31, 2006, our research client retention rate was 81%, the same rate as of December 31, 2005. Wallet retention was up 3 points from the prior year, to 96% at December 31, 2006, from 93% at December 31, 2005. Our Executive Program membership was 3,646 at December 31, 2006, compared to 3,522 at the prior year end.

Research gross contribution of $345.5 million for 2006 increased 11% from the $310.0 million in 2005, while gross contribution margin increased 1 point in 2006 to 60%, from 59% in the prior year. The improvement in the contribution margin was mainly due to operating leverage resulting from the strong revenue performance. For 2006, SFAS No. 123(R) decreased gross contribution margin in the Research segment by about 1 point.

Contract value at December 31, 2006 was the highest in the Company’s history, at $640.3 million, up 8% over the prior year value of $592.6 million. Excluding the impact of foreign currency, contract value increased by approximately 11%. Contract value has now increased for 12 consecutive quarters. The increase was driven by growth in both core research and Executive Programs.

Consulting

Consulting revenues increased 1%, to $305.2 million in 2006 as compared to the $301.1 million in 2005. With a strong emphasis on growing the Research and Events segments, coupled with a change in sales incentives for the success-fee portion of the Consulting segment, growth slowed from the first half of 2006. Excluding the impact of foreign currency translation, revenues were up slightly less than 1%.

The year-over-year revenue increase reflects increases in annualized revenue per billable headcount, billing rate, and consultant utilization. Billable headcount was 514 at December 31, 2006, compared to 525 for the prior year, a decline of 2%. Consultant utilization rates were 64% and 62% for 2006 and 2005, respectively. The billing rate remained at over $300 per hour in 2006, while the average annualized revenue per billable headcount was approximately $390,000.

Consulting gross contribution of $120.7 million for 2006 decreased 4% from the $125.7 million in 2005, while the contribution margin for 2006 decreased to 40%, from 42% in the prior year. The margin decline was primarily due to costs related to SFAS No. 123(R), costs related to exiting less profitable geographies, and investments made in senior level hires related to our growth strategy. The impact of SFAS No. 123(R), which we adopted on January 1, 2006, decreased gross contribution margin in the Consulting segment for 2006 by approximately half a point.

Consulting backlog, which represents future revenues to be recognized from in-process consulting, measurement and SAS, was $109.6 million at December 31, 2006, compared to $107.7 million at September 30, 2006 and $119.9 million at December 31, 2005.

Events

Events revenues in 2006 were up 12%, or $18.1 million, to $169.4 million from $151.3 million in the prior year. We held 74 events in 2006 with over 41,000 attendees compared to 70 events in 2005 with over 35,000 attendees. The increase in revenue was due to new events as well as strong performance from our on-going events. We had 11 new events in 2006 which had higher revenues than the events that were eliminated, while revenue from existing events was up 7%, reflecting underlying strength in our on-going Summit events. Excluding the impact of foreign currency translation, Events revenues were up approximately 11% in 2006.

Events gross contribution was $83.7 million, or 49% of revenues, for 2006, compared to $76.1 million, or 50% of revenues, for 2005. The decrease in gross contribution margin was primarily due to the mix of new events and existing events. SFAS No. 123(R) had an immaterial impact on the Events gross contribution margin for 2006.

2005 SEGMENT RESULTS

We evaluate reportable segment performance and allocate resources based on gross contribution margin. Gross contribution is defined as operating income excluding certain Cost of services and product development expense and SG & A expenses, depreciation, META integration charges, amortization of intangibles and Other charges. Gross contribution margin is defined as gross contribution as a percentage of revenues.

Research

Research revenues increased 9%, or $42.5 million, when comparing 2005 and 2004, with META contributing approximately $29.0 million, and growth in our Executive Programs accounting for the majority of the rest of the increase. The impact of foreign currency was immaterial. Excluding the impact of META and foreign currency, revenue was up 3%.

Research gross contribution of $310.0 million for 2005 increased from the $292.7 million for 2004, while the gross contribution margin for 2005 decreased to 59% from 61% in the prior year. The decrease in the gross contribution margin in 2005 was primarily due to increased revenues from our Executive Programs, which have lower margins than our core subscription products, an increase in compensation costs, mostly due to headcount related to the META acquisition, and the impact of converting META contract value to Gartner contract value. As of December 31, 2005, we had transacted on approximately 95% of the META contract value.

Research contract value, an indicator of future research revenue, was $592.6 million at December 31, 2005, an increase of 16%, or $83.4 million, from $509.2 million at December 31, 2004. Approximately half of the increase in contract value is attributable to the META acquisition. Excluding the impact of foreign currency, contract value increased by approximately 13%. The research contract value of $592.6 million at December 31, 2005 represented our highest reported contract value since September 30, 2000.

At December 31, 2005, our research client retention rate increased 1 percentage point to 81% from 80% at December 31, 2004, while our wallet retention rate was 93% compared to 95% at December 31, 2004. Our Executive Program membership was 3,522 at December 31, 2005, up 18% from 2,975 at December 31, 2004, which is attributed to new business growth in North America and EMEA, as well as improved renewal rates and clients obtained as a result of the META acquisition. As of December 31, 2005, our Executive Program membership remained the largest in our industry and had almost doubled in the last three years.

Consulting

Consulting revenues of $301.1 million for 2005 were up 16%, or $41.7 million, when compared to the $259.4 million in 2004, with META contributing approximately $18.0 million of the revenue growth. The revenue increase reflects strong organic growth in our core consulting services as well as in the performance-fee portion of our consulting business. The increase in the performance-fee business for 2005 includes revenues that the Company did not expect to close until the first quarter of 2006, and as a result our margin for that quarter will be impacted. The growth in our core consulting services reflects our continuing execution of our strategy of focusing on fewer accounts, attracting larger deals through integrated solutions, and enhancing engagement profitability through improved resource management. Revenue in 2005 increased despite our exit from certain less profitable consulting practices and geographies in 2004. The effect of foreign currency exchange rates reduced revenues by approximately 1%. Excluding the impact of META and foreign currency, revenue was up 11%.

Consulting gross contribution of $125.7 million for 2005 increased significantly from the prior year, up 36% from the $92.7 million for 2004, primarily due to higher profitability per engagement, as well as the impact of the timing of performance-fees discussed above. Gross contribution margin for 2005 increased to 42% from 36% in the prior year. Consulting utilization rates were 62% during 2005 as compared to 63% during 2004, while our billable rate was over $300 per hour for both 2005 and 2004. Our billable headcount increased to 525 at December 31, 2005 as compared to 475 at December 31, 2004, an 11% increase, primarily related to consultants from the META acquisition. Our average annualized revenue per billable headcount was approximately $390,000 in 2005 compared to $342,000 in 2004.

Consulting backlog, which represents future revenues to be recognized from in-process consulting, measurement and SAS, increased 7%, or $8.1 million, to $119.9 million at December 31, 2005, compared to $111.8 million at December 31, 2004.

Events. Events revenues increased 9%, or $12.9 million, to $151.3 million for 2005, compared to $138.4 million for 2004, with approximately $2.4 million of the increase related to META. Changes in foreign currency exchange rates had a negligible effect on revenues when comparing 2005 to 2004. Excluding META and foreign currency, revenue was up 8%. The revenue increase was primarily due to an increase in the number of events, to 70 for 2005 compared to 56 in the prior year period, as we added 15 new events in new topic areas and geographies. Revenue increased to a lesser extent due to continued performance from our recurring events, for which revenue was up about 5% year over year. The number of attendees at our Events increased by about 14% in 2005 compared to 2004, rising to 35,502 from 31,223, respectively.

Gross contribution of $76.1 million for 2005 was 9.6% higher than the $69.5 million recorded in 2004. As a percentage of revenues, gross contribution was 50% during 2005 and 2004. Since new events typically run at lower margins in their first year of existence, the 15 new events we launched in 2005 had slightly lower margins than existing events. However, in addition to launching these new events, we continued to rationalize our existing portfolio by exiting from events that no longer met our profit targets. As a result of this active portfolio management, we were able to deliver a flat contribution margin year-over-year.

LIQUIDITY AND CAPITAL RESOURCES

2006

Cash provided by operating activities totaled $106.3 million for the twelve months ended December 31, 2006, compared to $27.1 million in the prior year period. The increase in cash flow from operating activities of $79.2 million was primarily due to an increase in cash from core operations of approximately $50.0 million. The improved cash flow also reflects lower cash payments for severance and other charges of about $21.0 million, as well as a decrease of $28.0 million of payments related to the integration of META. These improvements were somewhat offset by higher cash payments for bonus, and to a lesser extent, interest and other items.

Cash used in investing activities was $21.8 million for 2006, compared to $181.0 million in the prior year period. The decrease in cash used was primarily due to the net expenditure of $161.3 million for the acquisition of META in 2005. Capital expenditures of $21.1 million was down about $1.2 million from the prior year period, reflecting the Company’s continued focus on disciplined capital spending.

Cash used by financing activities totaled $91.5 million in 2006, compared to $70.0 million of cash provided in the twelve months ended December 31, 2005. The decline in cash provided was due to the repurchase of $270.7 million of our common shares in 2006, which includes $200.0 million repurchased directly from Silver Lake in December 2006, for which we borrowed an additional $190.0 million and utilized $10.0 million of existing cash. During 2005 we had $9.6 million of common share repurchases. We borrowed additional amounts in both 2006 and 2005, and our outstanding debt increased by about $123.0 million in 2006 compared to an increase of approximately $56.0 million in the prior year.

We realized about $15.7 million more in cash from stock issued under stock plans during 2006, with $46.7 million of proceeds in 2006 compared to $31.0 million during the prior year period. The increase was a result of our higher stock price during 2006 as compared to 2005, which resulted in more stock option exercises by employees in 2006. We also had $9.2 million in excess tax benefits from stock-based compensation awards under SFAS No. 123(R).

At December 31, 2006, cash and cash equivalents totaled $67.8 million. The effect of exchange rates increased cash and cash equivalents by about $4.6 million during 2006.

2005

Cash provided by operating activities totaled $27.1 million for 2005, compared to $48.2 million for the prior year, a $21.1 million decline. The net decrease in cash flow from operating activities was due primarily to the payment of $35.0 million of META integration payments, higher employee salary costs, primarily related to higher headcount due to the acquisition of META, and to a lesser extent, a shift in the mix of our products in the Research segment from higher margin core research to lower margin Executive Programs. Offsetting these decreases was a $12.0 million reduction in bonus payments and a decline of approximately $10.0 million in severance and related payments.

Cash used in investing activities increased to $181.0 million during 2005 as compared to $29.0 million in the prior year, primarily due to the acquisition of META, which was completed on April 1, 2005. The Company’s net cash investment in META was approximately $176.4 million of cash paid, including transaction costs, less the $15.1 million acquired from META. Offsetting the cash paid for META was a decline in capital expenditures, which decreased $2.7 million for 2005 as compared to 2004, and $2.1 million in cash received from the sale of the Company’s investment in SI II and other investments.

Cash provided by financing activities totaled $70.0 million for 2005, compared to $97.2 million of cash used for 2004. The increase was primarily driven by the borrowing of additional debt in 2005 and cash used in 2004 for stock repurchases.

We had an additional $56.7 million of debt at December 31, 2005 compared to the prior year end. During 2005, we borrowed $327.0 million and we repaid $271.3 million. We borrowed $250.0 million on June 29, 2005 related to the refinancing of our debt, $67.0 million in April under the revolver related to the META acquisition, and $10.0 million under the revolver. Of the $271.3 million repaid during 2005, we paid $247.0 million on June 29, 2005 related to the refinancing, we made $23.4 million in quarterly debt payments, and we paid

$0.9 million for a note payable we acquired in the META acquisition. We also paid $1.1 million in debt issue costs during the second quarter of 2005 related to the refinancing of our debt.

We received proceeds from stock issued for stock plans of $31.0 million during 2005 as compared to $67.9 million in the prior year as a result of our higher stock price during 2004 as compared to 2005, which resulted in more stock option exercises by employees in 2004. The Company used $6.0 million of cash, including expenses, to buy back employee stock options in the third and fourth quarters of 2005. In the fourth quarter of 2005 we used $9.6 million of cash to repurchase our stock, while in 2004 we used $346.1 million of cash for a stock tender offer and $6.1 million of cash for treasury stock purchases.

At December 31, 2005, cash and cash equivalents totaled $70.2 million. The effect of exchange rates decreased cash and cash equivalents by approximately $6.0 million during 2005.

OBLIGATIONS AND COMMITMENTS

On January 31, 2007, the Company entered into a new credit arrangement that provides for a five-year, $180.0 million term loan and a $300.0 million revolving credit facility, which may be increased, at Gartner’s option, by up to an additional $100.0 million, for a total revolving credit facility of $400.0 million. The Company also drew down $190.0 million from the revolving facility and $180.0 million from the term loan facility and repaid the $370.0 million outstanding under its existing facilities.

The term loan will be repaid in 18 consecutive quarterly installments commencing September 30, 2007, plus a final payment due on January 31, 2012, and may be prepaid at any time without penalty or premium at the option of Gartner. The revolving credit facility may be used for loans, and up to $15.0 million may be used for letters of credit. The revolving loans may be borrowed, repaid and reborrowed until January 31, 2012, at which time all amounts borrowed must be repaid. In conjunction with the new arrangement the existing facilities were terminated.

We believe that our existing cash balances, together with cash from our operating activities and the additional borrowing capacity under our amended five-year revolving credit facility, will be sufficient for our expected short-term and foreseeable long-term needs.

The following table represents our contractual cash commitments (in thousands) due after December 31, 2006. The table excludes required interest payments under our credit facility:

						Less Than				1 - 3				4 - 5				More Than
		Total				1 Year				Years				Years				5 Years
Operating leases (1)		$	204,800			$	36,000			$	56,100			$	38,100			$	74,600
Debt (2)			370,000				20,000				80,000				80,000				190,000
Deferred compensation arrangement (3)			19,100				1,700				3,600				3,500				10,300
Other			700				700				—				—				—
Totals		$	594,600			$	58,400			$	139,700			$	121,600			$	274,900

QUARTERLY FINANCIAL DATA

(in thousands, except per share data)
2006		First				Second				Third				Fourth
Revenues		$	230,929			$	284,093			$	241,360			$	303,939
Operating income (1)			15,620				30,595				15,963				41,072
Net income			7,770				18,244				9,608				22,570
Net income per share (2)
Basic		$	0.07			$	0.16			$	0.08			$	0.20
Diluted			0.07				0.16				0.08				0.20

(in thousands, except per share data)
2005		First				Second				Third				Fourth
Revenues		$	199,824			$	274,569			$	225,311			$	289,300
Operating (loss) income (1), (3)			(10,786	)			5,138				1,186				29,742
Net (loss) income (4)			(14,707	)			(819	)			(1,721	)			14,810
Net (loss) income per share (2):
Basic		$	(0.13	)		$	(0.01	)		$	(0.02	)		$	0.13
Diluted			(0.13	)			(0.01	)			(0.02	)			0.13

RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB No. 108”). This SAB provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 establishes an approach that requires quantification of financial statement errors based on the effects on each of the Company’s financial statements and related financial statement disclosures. The SAB permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. The Company has recorded adjustments under SAB No. 108 effective the beginning of the 2006 fiscal year (see Note 2—Adoption of SEC Staff Accounting Bulletin No. 108 in the Notes to the Consolidated Financial Statements).

In June 2006, the FASB ratified the consensus reached on Emerging Issues Task Force (EITF) Issue No. 06-03, “How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, Gross Versus Net Presentation)” (“EITF 06-03”). The EITF reached a consensus that the presentation of taxes on either a gross or net basis is an accounting policy decision that requires disclosure. EITF 06-03 is effective for the first interim or annual reporting period beginning after December 15, 2006. The Company’s policy is to present taxes on a net basis and as a result the adoption of EITF 06-03 will not have any effect on the Company’s financial position or results of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which will become effective for the Company on January 1, 2007. The Interpretation prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For any benefit to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. If a position meets the more-likely-than-not threshold, the amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

The FASB is expected to give additional guidance regarding the meaning of ultimate settlement. This guidance could have an impact on whether certain reserves related to the ongoing IRS appeals case are released through retained earnings upon adoption of FIN 48 or through current earnings in a later period. While the Company’s analysis of the final impact of FIN 48 is not yet complete, its best estimate is that it will increase retained earnings at January 1, 2007, by less than $6.0 million.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007; therefore the Company will begin to apply the standard in its fiscal year commencing January 1, 2008. The Company is in the process of evaluating the impact, if any, SFAS No. 157 will have on the Company’s financial position or , results of operations.

In September 2006, the FASB issued SFAS Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132R” (“SFAS No. 158”). This new standard requires an employer to: (a) recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in comprehensive income of a business entity. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006 for

public entities. The Company adopted SFAS No. 158 on December 31, 2006 (see Note 13—Employee Benefits in the Notes to the Consolidated Financial Statements).

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

On January 31, 2007, the Company refinanced its existing borrowing arrangements by entering into a new Credit Agreement (the “2007 Credit Agreement”) with several lenders. The 2007 Credit Agreement provides for a five-year, $180.0 million term loan and a $300.0 million revolving credit facility. The term loan will be repaid in 18 consecutive quarterly installments commencing September 30, 2007, plus a final payment due on January 31, 2012, and may be prepaid at any time without penalty or premium at the option of Gartner. The revolving loans may be borrowed, repaid and reborrowed until January 31, 2012, at which time all amounts borrowed must be repaid.

Loans under the 2007 Credit Agreement bear interest at a rate equal to, at Gartner’s option, either (i) the greatest of the Administrative Agent’s prime rate, the Administrative Agent’s rate for three-month certificates of deposit (adjusted for statutory reserves) plus 1% and the average rate on overnight federal funds plus 1/2 of 1%, plus a margin equal to between 0.00% and 0.25% depending on Gartner’s leverage ratio as of the end of the four consecutive fiscal quarters most recently ended, or (ii) at the eurodollar rate (adjusted for statutory reserves) plus a margin equal to between .625% and 1.25%, depending on Gartner’s leverage ratio as of the end of the four consecutive fiscal quarters most recently ended.

As of mid-February 2007, we had $180.0 million outstanding under the term loan and $190.0 million under the revolver at an annualized interest rate of 6.3%. Assuming the revolver was fully utilized, a 25 basis point increase or decrease in interest rates would increase annual pre-tax interest expense by approximately $1.2 million.

Investment Risk

As of December 31, 2006, we had an investment in an equity security totaling $0.3 million. If there were a 100% adverse change in the value of this equity investment, this would result in a non-cash impairment charge of approximately $0.3 million.

Foreign Currency Exchange Risk

We face two risks related to foreign currency exchange: translation risk and transaction risk.

Amounts invested in our foreign operations are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in the stockholders’ equity section of the Consolidated Balance Sheets. Our foreign subsidiaries generally collect revenues and pay expenses in currencies other than the United States dollar. Since the functional currencies of our foreign operations are generally denominated in the local currency of our subsidiaries, the foreign currency translation adjustments are reflected as a component of stockholders’ equity and do not impact operating results. Revenues and expenses in foreign currencies translate into higher or lower revenues and expenses in U.S. dollars as the U.S. dollar weakens or strengthens against other currencies. Therefore, changes in exchange rates may negatively affect our consolidated revenues and expenses (as expressed in U.S. dollars) from foreign operations.

We are exposed to foreign currency transaction risk since we enter into foreign currency forward exchange contracts offset the effects of adverse fluctuations in foreign currency exchange rates. These instruments are typically short term and are reflected at fair value with unrealized and realized gains and losses recorded in earnings. At December 31, 2006, we had 15 foreign currency forward contracts outstanding with a total notional amount of $64.0 million with an immaterial net unrealized loss. All of these contracts matured in January 2007. Currency transaction gains or losses arising from transactions in currencies other than the functional currency are included within Other income (expense), net within the Consolidated Statements of Operations. Currency transaction gains (losses), net were $(0.5) million, $(2.8) million, and $(3.1) million during 2006, 2005 and 2004, respectively.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our consolidated financial statements for 2006, 2005, and 2004, together with the reports of KPMG LLP, independent registered public accounting firm, dated March 1, 2007, are included in this Annual Report on Form 10-K beginning on Page 32.

ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls

Management conducted an evaluation, as of December 31, 2006, of the effectiveness of the design and operation of our disclosure controls and procedures, (as such term is defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) under the supervision and with the participation of our chief executive officer and chief financial officer. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material Company information required to be disclosed by us in reports filed or submitted under the Act.

Management’s Annual Report on Internal Control Over Financial Reporting

Gartner management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Gartner’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment was reviewed with the Audit Committee of the Board of Directors.

Based on its assessment of internal control over financial reporting, management has concluded that, as of December 31, 2006, Gartner’s internal control over financial reporting was effective.

Gartner’s independent registered public accountants KPMG LLP, have issued an attest report on management’s assessment of Gartner’s internal control of financial reporting. This report appears on page 33.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2006 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required to be furnished pursuant to this item will be set forth under the captions “Proposal One: Election of Directors,” “Executive Officers,” “Corporate Governance,” “Other Information — Section 16(a) Beneficial Ownership Reporting Compliance” and “Miscellaneous – Available Information” in the Company’s Proxy Statement to be filed with the SEC no later than April 30, 2007. If the Proxy Statement is not filed with the SEC by April 30, 2007, such information will be included in an amendment to this Annual Report filed by April 30, 2007. See also Item 1. Business – Available Information.

NYSE Certification

The NYSE requires that the chief executive officers of its listed companies certify annually to the NYSE that they are not aware of violations by their companies of NYSE corporate governance listing standards. The Company submitted a non-qualified certification by its Chief Executive Officer to the NYSE last year in accordance with the NYSE’s rules.

ITEM 11. EXECUTIVE COMPENSATION.

The information required to be furnished pursuant to this item is incorporated by reference from the information set forth under the caption “Executive Compensation” in the Company’s Proxy Statement to be filed with the SEC no later than April 30, 2007. If the Proxy Statement is not filed with the SEC by April 30, 2007, such information will be included in an amendment to this Annual Report filed by April 30, 2007.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required to be furnished pursuant to this item will be set forth under the caption “Other Information — Security Ownership of Certain Beneficial Owners and Management” in the Company’s Proxy Statement to be filed with the SEC by April 30, 2007. If the Proxy Statement is not filed with the SEC by April 30, 2007, such information will be included in an amendment to this Annual Report filed by April 30, 2007.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

The information required to be furnished pursuant to this item will be set forth under the captions “Transactions With Related Persons” and “Corporate Governance – Director Independence” in the Company’s Proxy Statement to be filed with the SEC by April 30, 2007. If the Proxy Statement is not filed with the SEC by April 30, 2007, such information will be included in an amendment to this Annual Report filed by April 30, 2007.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required to be furnished pursuant to this item will be set forth under the caption “Principal Accountant Fees and Services” in the Company’s Proxy Statement to be filed with the SEC no later than April 30, 2007. If the Proxy Statement is not filed with the SEC by April 30, 2007, such information will be included in an amendment to this Annual Report filed by April 30, 2007.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) 1. and 2. Consolidated Financial Statements and Schedules

The reports of our independent registered public accounting firm and consolidated financial statements listed in the Index to Consolidated Financial Statements on page 31 hereof are filed as part of this report.

All financial statement schedules not listed in the Index have been omitted because the information required is not applicable or is shown in the consolidated financial statements or notes thereto.

3. Exhibits

EXHIBIT
NUMBER		DESCRIPTION OF DOCUMENT
3.1a(1)		Restated Certificate of Incorporation of the Company.
3.1b(2)		Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of the Company, dated November 27, 2006.
3.2(3)		Amended Bylaws, as amended through February 2, 2006.
4.1(1)		Form of Certificate for Common Stock as of June 2 2005.
4.2(2)		Second Amended and Restated Rights Agreement, dated as of November 6, 2006, between the Company and American Stock Transfer & Trust Company (as successor Rights Agent of Mellon Investor Services LLC).
4.3(1)		Amended and Restated Credit Agreement, dated as of June 29, 2005, to the Credit Agreement, dated as of August 12, 2004, among the Company, the several lenders from time to time parties, and JPMorgan Chase Bank, N.A. as administrative agent. (the “2005 Credit Agreement”).
4.4(16)		First Amendment dated as of August 12, 2004 to the 2005 Credit Agreement.
4.5(17)		Second Amendment dated as of December 12, 2006 to the 2005 Credit Agreement.
4.6(17)		Interim Credit Agreement, dated as of December 13, 2006, between the Company and JP Morgan Chase Bank, N.A.
4.7(5)		Credit Agreement, dated as of January 31, 2007, among the Company, the several lenders from time to time parties thereto, and JPMorgan Chase Bank, N.A. as administrative agent.
10.1(6)		Form of Indemnification Agreement.
10.2(4)		Amended and Restated Securityholders Agreement dated as of July 12, 2002 among the Company, Silver Lake Partners, L.P. and other parties thereto.
10.3(7)		Lease dated December 29, 1994 between Soundview Farms and the Company for premises at 56 Top Gallant Road, 70 Gatehouse Road, and 88 Gatehouse Road, Stamford, Connecticut.
10.4(8)		Lease dated May 16, 1997 between Soundview Farms and the Company for premises at 56 Top Gallant Road, 70 Gatehouse Road, 88 Gatehouse Road and 10 Signal Road, Stamford, Connecticut (amendment to lease dated December 29, 1994, see exhibit 10.3(7)).
10.5(7)+		1991 Stock Option Plan, as amended and restated on October 19, 1999.
10.6(9)ª		1993 Director Stock Option Plan, as amended and restated on April 14, 2000.
10.7(10) ª		2002 Employee Stock Purchase Plan, as amended and restated effective June 1, 2005.
10.8(1) ª		1994 Long Term Stock Option Plan, as amended and restated on October 12, 1999.
10.9(1)ª		1998 Long Term Stock Option Plan, as amended and restated on October 12, 1999.
10.10(1)ª		1996 Long Term Stock Option Plan, as amended and restated on October 12, 1999.
10.11(11)ª		1999 Stock Option Plan.
10.12(1)ª		2003 Long-Term Incentive Plan, as amended and restated on June 29, 2005.
10.13 (12)ª		Employment Agreement between Eugene A. Hall and the Company dated as of October 15, 2004.
10.14(13)ª		Restricted Stock Agreement by and between Eugene A. Hall and the Company dated November 9, 2005.

EXHIBIT
NUMBER		DESCRIPTION OF DOCUMENT
10.15(14) ª		Company Deferred Compensation Plan, Effective January 1, 2005.
10.16(15)+		Company Executive Benefits Program.
10.17(18)+		Employment Agreement between Eugene A. Hall and the Company dated as of February 15, 2007.
10.18(18)+		Form of 2007 Stock Appreciation Right Agreement for executive officers.
10.19(18)+		Form of 2007 Restricted Stock Unit Agreement for executive officers.
21.1*		Subsidiaries of Registrant.
23.1*		Consent of Independent Registered Public Accounting Firm
24.1		Power of Attorney (see Signature Page).
31.1*		Certification of chief executive officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of chief financial officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32*		Certification under Section 906 of the Sarbanes-Oxley Act of 2002.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

GARTNER, INC.
CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm			32
Report of Independent Registered Public Accounting Firm			33
Consolidated Balance Sheets as of December 31, 2006 and 2005			34
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004			35
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2006, 2005, and 2004			36
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005, and 2004			37
Notes to Consolidated Financial Statements			38

All financial statement schedules have been omitted because the information required is not applicable or is shown in the consolidated financial statements or notes thereto.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Gartner, Inc.:

We have audited the accompanying consolidated balance sheets of Gartner, Inc. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gartner, Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of quantifying errors in 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Gartner, Inc.’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 1, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

New York, New York
March 1, 2007

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Gartner, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting under Item 9A, that Gartner, Inc. (the “Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Gartner, Inc. maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Gartner, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Gartner, Inc. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2006. Our report dated March 1, 2007 expressed an unqualified opinion with an explanatory paragraph stating that the Company changed its method of quantifying errors in 2006 as discussed in Note 2 to the consolidated financial statements.

/s/ KPMG LLP

New York, New York
March 1, 2007

GARTNER, INC.

(IN THOUSANDS, EXCEPT SHARE DATA)

		December 31,
		2006				2005
ASSETS
Current assets:
Cash and cash equivalents		$	67,801			$	70,282
Fees receivable, net of allowances of $8,700 and $7,900, respectively			328,383				313,195
Deferred commissions			46,822				42,804
Prepaid expenses and other current assets			41,027				35,838
Total current assets			484,033				462,119
Property, equipment and leasehold improvements, net			59,715				61,770
Goodwill			408,545				404,034
Intangible assets, net			5,978				15,793
Other assets			81,522				82,901
Total assets		$	1,039,793			$	1,026,617
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	208,002			$	243,036
Deferred revenues			375,881				333,065
Current portion of long-term debt			220,000				66,667
Total current liabilities			803,883				642,768
Long-term debt			150,000				180,000
Other liabilities			59,592				57,261
Total liabilities			1,013,475				880,029
Commitments and contingencies (note 8)
Stockholders’ equity:
Preferred stock:
$.01 par value, authorized 5,000,000 shares; none issued or outstanding			—				—
Common stock:
$.0005 par value, authorized 250,000,000 shares for both periods; 156,234,416 and 153,549,434 shares issued, respectively			78				77
Additional paid-in capital			544,686				511,062
Unearned compensation, net			(2,208	)			(6,652	)
Accumulated other comprehensive income, net			13,097				6,320
Accumulated earnings			249,004				187,652
Treasury stock, at cost, 52,169,591 and 39,214,747 common shares, respectively,			(778,339	)			(551,871	)
Total stockholders’ equity			26,318				146,588
Total liabilities and stockholders’ equity		$	1,039,793			$	1,026,617

See Notes to Consolidated Financial Statements.

GARTNER, INC.

(IN THOUSANDS, EXCEPT PER SHARE DATA)

		Year Ended December 31,
		2006				2005				2004
Revenues:
Research		$	571,217			$	523,033			$	480,486
Consulting			305,231				301,074				259,419
Events			169,434				151,339				138,393
Other			14,439				13,558				15,523
Total revenues			1,060,321				989,004				893,821
Costs and expenses:
Cost of services and product development			505,330				486,611				434,499
Selling, general and administrative			416,094				397,252				349,834
Depreciation			23,444				25,502				27,650
Amortization of intangibles			10,753				10,226				687
Goodwill impairments			—				—				2,711
META integration charges			1,450				14,956				—
Other charges			—				29,177				35,781
Total costs and expenses			957,071				963,724				851,162
Operating income			103,250				25,280				42,659
Loss on investments, net			—				(5,841	)			(2,958	)
Interest income			2,517				2,142				3,063
Interest expense			(19,098	)			(13,214	)			(4,380	)
Other expense, net			(797	)			(2,929	)			(3,922	)
Income before income taxes			85,872				5,438				34,462
Provision for income taxes			27,680				7,875				17,573
Net income (loss)		$	58,192			$	(2,437	)		$	16,889
Net income (loss) per share:
Basic:		$	0.51			$	(0.02	)		$	0.14
Diluted		$	0.50			$	(0.02	)		$	0.13
Weighted average shares outstanding:
Basic			113,071				112,253				123,603
Diluted			116,203				112,253				126,326

See Notes to Consolidated Financial Statements.

GARTNER, INC.

(IN THOUSANDS)

														Accumulated
														Other
						Additional				Unearned				Comprehensive												Total
		Common				Paid-In				Compensation,				Income (Loss),				Accumulated				Treasury				Stockholders’
		Stock				Capital				Net				Net				Earnings				Stock				Equity
Balance at December 31, 2003		$	72			$	408,504			$	(1,846	)		$	1,310			$	173,200			$	(206,450	)		$	374,790
Comprehensive income:
Net income			—				—				—				—				16,889				—				16,889
Other comprehensive income:
Foreign currency translation adjustments			—				—				—				11,284				—				—				11,284
Net unrealized gain on investments, net of tax			—				—				—				128				—				—				128
Other comprehensive income															11,412												11,412
Comprehensive income																											28,301
Issuances under stock plans			3				60,199				—				—				—				7,714				67,916
Tax benefits of employee stock transactions			—				10,004				—				—				—				—				10,004
Purchase of shares for treasury stock			—				—				—				—				—				(352,262	)			(352,262	)
Stock compensation (net of forfeitures)			—				7,006				(5,707	)			—				—				—				1,299
Balance at December 31, 2004		$	75			$	485,713			$	(7,553	)		$	12,722			$	190,089			$	(550,998	)		$	130,048
Comprehensive (loss):
Net loss			—				—				—				—				(2,437	)			—				(2,437	)
Other comprehensive (loss):
Foreign currency translation adjustments			—				—				—				(5,970	)			—				—				(5,970	)
Unrealized loss on investment and swap, net of tax			—				—				—				(432	)			—				—				(432	)
Other comprehensive (loss)															(6,402	)											(6,402	)
Comprehensive (loss)																											(8,839	)
Issuances under stock plans			2				20,748				—				—				—				10,210				30,960
Tax benefits of employee stock transactions			—				4,472				—				—				—				—				4,472
Purchase of shares for treasury stock			—				—				—				—				—				(11,083	)			(11,083	)
Stock compensation (net of forfeitures)			—				129				901				—				—				—				1,030
Balance at December 31, 2005		$	77			$	511,062			$	(6,652	)		$	6,320			$	187,652			$	(551,871	)		$	146,588
Cumulative effect of adoption of SAB No. 108, net of tax							7,167												3,160								10,327
Adjusted balance at January 1, 2006			77				518,229				(6,652	)			6,320				190,812				(551,871	)			156,915
Comprehensive income:
Net income			—				—				—				—				58,192				—				58,192
Other comprehensive income:
Foreign currency translation adjustments			—				—				—				7,340				—				—				7,340
Unrealized gain on investment and swap, net of tax			—				—				—				775				—				—				775
Pension unrealized loss, net of tax			—				—				—				(1,338	)			—				—				(1,338	)
Other comprehensive income															6,777												6,777
Comprehensive income																											64,969
Issuances under stock plans			1				1,634				2,361				—				—				42,736				46,732
Excess tax benefits from stock compensation			—				9,159				—				—				—				—				9,159
Purchase of shares for treasury stock			—				—				—				—				—				(269,204	)			(269,204	)
Stock compensation (net of forfeitures)			—				15,664				2,083				—				—				—				17,747
Balance at December 31, 2006		$	78			$	544,686			$	(2,208	)		$	13,097			$	249,004			$	(778,339	)		$	26,318

See Notes to Consolidated Financial Statements.

GARTNER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

		Year Ended December 31,
		2006				2005				2004
Operating activities:
Net income (loss)		$	58,192			$	(2,437	)		$	16,889
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of intangibles			34,197				35,728				28,337
Stock-based compensation expense			16,660				1,030				1,299
Excess tax benefits from stock-based compensation expense			(9,159	)			—				—
Tax benefit associated with employee exercise of stock options			—				4,472				10,004
Deferred taxes			6,830				(5,644	)			(8,613	)
Loss from investments and sales of assets, net			225				5,841				2,958
Amortization of debt issue costs			1,627				1,424				954
Charge for stock option buy back			—				5,980				—
Goodwill impairments			—				—				2,711
Non-cash charges associated with impairment of long-lived assets			—				—				5,157
Changes in assets and liabilities:
Fees receivable, net			(3,876	)			(35,746	)			13,711
Deferred commissions			(2,774	)			(9,850	)			(5,197	)
Prepaid expenses and other current assets			(4,562	)			(2,436	)			(788	)
Other assets			(1,787	)			113				(5,850	)
Deferred revenues			33,574				3,899				(14,764	)
Accounts payable and accrued liabilities			(22,883	)			24,748				1,393
Cash provided by operating activities			106,264				27,122				48,201
Investing activities:
Acquisition of META (net of cash acquired)			—				(161,323	)			—
Prepaid acquisition costs for META			—				—				(3,870	)
Additions to property, equipment and leasehold improvements			(21,113	)			(22,356	)			(25,104	)
Other investing activities, net			(688	)			2,699				—
Cash used in investing activities			(21,801	)			(180,980	)			(28,974	)
Financing activities:
Proceeds from stock issued for stock plans			46,732				30,960				67,916
Proceeds from debt issuance			190,000				327,000				200,000
Payments for debt issuance costs			(45	)			(1,082	)			(2,823	)
Payments on debt			(66,667	)			(271,291	)			(10,000	)
Purchases of stock via tender offer			—				—				(346,150	)
Purchases of treasury stock			(270,704	)			(9,585	)			(6,112	)
Purchases of options via stock option buy back			—				(5,980	)			—
Excess tax benefits from stock-based compensation expense			9,159				—				—
Cash (used) provided by financing activities			(91,525	)			70,022				(97,169	)
Net decrease in cash and cash equivalents			(7,062	)			(83,836	)			(77,942	)
Effects of exchange rates on cash and cash equivalents			4,581				(6,008	)			8,106
Cash and cash equivalents, beginning of period			70,282				160,126				229,962
Cash and cash equivalents, end of period		$	67,801			$	70,282			$	160,126
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	14,901			$	12,333			$	2,591
Income taxes, net of refunds received		$	11,160			$	12,033			$	12,474
Supplemental schedule of non-cash investing and financing activities:
Transfer of investment to SI II			—				—			$	(2,186	)

See Notes to Consolidated Financial Statements.

GARTNER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation. The fiscal year of Gartner, Inc. (the “Company”) represents the period from January 1 through December 31. Certain prior year amounts have been reclassified to conform to the current year presentation. When used in these notes, the terms “Company,” “we,” “us,” or “our” mean Gartner, Inc. and its subsidiaries. During 2005, the Company combined its Class A and Class B common stock into a single class of common stock. Accordingly, certain share amounts disclosed herein have been restated to reflect the stock combination.

On April 1, 2005, the Company acquired META Group, Inc. (“META”), which was a technology and research firm, for a purchase price of approximately $168.3 million, excluding transaction costs of approximately $8.1 million. The acquisition was accounted for as a purchase business combination. The consolidated financial statements include the results of META from the date of acquisition. The purchase price was allocated to the net assets and liabilities acquired based on their estimated fair values. Any excess of the purchase price over the estimated fair value of the net assets acquired, including identifiable intangible assets, was allocated to goodwill.

Principles of consolidation. The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Investments in companies in which the Company owns less than 50% but have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. All other investments for which the Company does not have the ability to exercise significant influence are accounted for under the cost method of accounting. The results of operations for acquisitions of companies accounted for using the purchase method have been included in the Consolidated Statements of Operations beginning on the closing date of acquisition.

Use of estimates. The Company makes estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures, if any, of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates are required by generally accepted accounting principles in the United States of America in the Company’s preparation of its Consolidated Financial Statements. Actual results could differ from those estimates. Estimates are used when accounting for such items as allowance for doubtful accounts, investments, depreciation, amortization, income taxes and certain accrued liabilities.

Revenues and commission expense recognition. The Company typically enters into annually renewable subscription contracts for research products. Revenues from research products are deferred and recognized ratably over the applicable contract term. The majority of research contracts are billable upon signing, absent special terms granted on a limited basis from time to time. All research contracts are non-cancelable and non-refundable, except for government contracts that have a 30-day cancellation clause but have not produced material cancellations to date. With the exception of certain government contracts which permit termination and contracts with special billing terms, it is Company policy to record the entire amount of the contract that is billable as a fee receivable at the time the contract is signed, which represents a legally enforceable claim, and a corresponding amount as deferred revenue. For those government contracts that permit termination, the Company bills the client the full amount billable under the contract but only records a receivable equal to the earned portion of the contract. In addition, the Company only records deferred revenue on these government contracts when cash is received. Deferred revenue attributable to government contracts was $47.9 million and $41.7 million at December 31, 2006 and 2005, respectively. In addition, at December 31, 2006 and 2005, the Company had not recognized receivables or deferred revenues relating to government contracts that permit termination of $9.6 million and $7.1 million, respectively, which had been billed but not yet collected. The Company records the commission obligation related to research contracts upon the signing of the contract and amortizes the corresponding deferred commission expense over the contract period in which the related revenues are earned.

Consulting revenues, primarily derived from consulting, measurement and strategic advisory services (paid one-day analyst engagements), are generated from fixed fee or time and materials for discrete projects. Revenues for such projects are recognized as work is delivered and/or services are provided. Unbilled fees receivables associated with consulting engagements were $29.5 million at December 31, 2006, and $31.9 million at December 31, 2005.

Events revenues are deferred and recognized upon the completion of the related symposium, conference or exhibition. In addition, the Company defers certain costs directly related to events and expenses these costs in the period during which the related symposium, conference or exhibition occurs. The Company policy is to defer only those costs, primarily prepaid site and production services costs, which are incremental and are directly attributable to a specific event. Other costs of organizing and producing our events, primarily Company personnel and non-event specific expenses, are expensed in the period incurred.

Other revenues consist primarily of fees from research reprints and software licensing. Reprint fees are recognized when the reprint is shipped. Fees from software licensing are recognized when a signed non-cancelable software license exists, delivery has occurred and collection is probable, and our fees are fixed or determinable.

Cash and cash equivalents. All highly liquid investments with original maturities of three months or less are classified as cash equivalents. The carrying value of these investments approximates fair value based upon their short-term maturity. Investments with maturities of more than three months are classified as marketable securities.

Investments in equity securities. The Company accounts for its investments in publicly traded equity securities under Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” These investments meet the criteria for classification as available for sale, given the Company’s ability and intent to sell such investments, and are recorded at fair value and included in Other assets on the Consolidated Balance Sheets. Unrealized gains and losses on these marketable investments are recorded, net of tax, as a component of Accumulated other comprehensive income (loss) within the Stockholders’ equity section of the Consolidated Balance Sheets. Realized gains and losses are recorded in (Loss) gain on investments, net within the Consolidated Statements of Operations. The cost of equity securities sold is based on specific identification. The Company assesses the need to record impairment losses on investments and records such losses when the impairment of an investment is determined to be other than temporary in nature.

Property, equipment and leasehold improvements. Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the remaining term of the related leases. Property, equipment and leasehold improvements, less accumulated depreciation and amortization consist of the following (in thousands):

						December 31,
		Useful Life (Years)				2006				2005
Computer equipment and software			2 - 7			$	138,493			$	138,121
Furniture and equipment			3 - 8				39,044				39,892
Leasehold improvements			2 - 15				47,257				46,123
							224,794				224,136
Less – accumulated depreciation and amortization							(165,079	)			(162,366	)
						$	59,715			$	61,770

Total depreciation expense was $23.4 million, $25.5 million, and $27.7 million in 2006, 2005, and 2004, respectively.

At December 31, 2006 and 2005, capitalized development costs for internal use software were $15.9 million and $13.2 million, respectively, net of accumulated amortization of $10.1 million and $14.0 million, respectively. Amortization of capitalized internal software development costs totaled $4.6 million, $6.7 million, and $7.7 million during 2006, 2005, and 2004, respectively, which is included in Depreciation in the Consolidated Statements of Operations.

Intangible assets. Intangible assets are amortized using the straight-line method over their expected useful lives. Intellectual property and databases are amortized over 18 months, while customer relationships are amortized over five years. Noncompete agreements are generally amortized over two to five years while trademarks are amortized over nine to twelve years. The acquisition of META resulted in the recording of $25.6 million of intangibles assets, which was composed of $14.4 million of intellectual property, $7.7 million of customer relationships, and $3.5 million of databases. During 2006, both the intellectual property and the databases that the Company had acquired from META were fully amortized.

Intangible assets subject to amortization include the following (in thousands):

		Intellectual				Customer
December 31, 2006		Property				Relationships				Databases				Other				Total
Gross cost		$	14,741			$	7,700			$	3,585			$	1,265			$	27,291
Accumulated amortization			(14,741	)			(2,695	)			(3,585	)			(292	)			(21,313	)
Net		$	—			$	5,005			$	—			$	973			$	5,978