create table #test(
   a int,
   d1 datetime,
   d2 datetime)

insert into #test
select 1, '20070101', '20070301'
union all
select 1, '20070501', '20070901'
union all
select 2, '20070101', '20070601'
union all
select 2, '20070301', '20070801'

a   d1         d2
-------------------------------------
1   20070101   20070301
1   20070501   20070901
2   20070101   20070801

--Stage the data
;WITH yak (a, start, stop, grp)
as (
	select	t.a,
		t.d1,
		t.d2,
		0
	from	(
			SELECT	a,
				d1,
				d2,
				row_number() over (partition by a order by d1) as recid
			from	#test
		) as t
	where	recid = 1

	union all

	select	a,
		d1,
		case
			when stop < d1 and stop >= d2 then stop
			when stop < d1 and stop < d2 then d2
			else d2
		end,
		case
			when stop < d1 then grp +1
			else grp
		end
		from	(
				SELECT		y.stop,
						t.a,
						t.d1,
						t.d2,
						y.grp,
						row_number() over (partition by t.a order by t.d1) as recid
				from		#test as t
				inner join	yak as y on y.a = t.a and y.start < t.d1
			) as t where recid = 1
)

-- Show the expected output
select		a,
		min(start) as start,
		max(stop) as stop 
from		yak
group by	a,
		grp
order by	a,
		2

quote:

---

Specifies a temporary named result set, known as a common table expression (CTE). This is derived from a simple query and defined within the execution scope of a single SELECT, INSERT, UPDATE, or DELETE statement. This clause can also be used in a CREATE VIEW statement as part of its defining SELECT statement.

-BOL

---