UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-Q

(Mark One)

[ X ]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended    March 31, 1998
                               -----------------
                                       OR

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

For the transition period from___________to______________

Commission File Number    0-132-58
                          --------

                              BOOLE & BABBAGE, INC.
            --------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


            Delaware                                    94- 1651571
   ------------------------------                    -------------------
   (State or other jurisdiction of                     (IRS Employer
   Incorporation or organization)                    Identification No.)


                3131 Zanker Road, San Jose, California 95134-1933
                -------------------------------------------------
                    (Address of principal executive offices)

Registrant's Telephone number, including area code:  408-526-3000
                                                     ------------

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

                                    Yes  X   No
                                       -----    -----

28,170,793 shares of common stock of the Registrant were outstanding as of April
30, 1998.



<PAGE>



                                  BOOLE & BABBAGE, INC.
<TABLE>
                                          INDEX


<CAPTION>
Part I        FINANCIAL INFORMATION                                              Page No.
<S>                                                                                   <C>
       Item 1.        FINANCIAL STATEMENTS
                      Consolidated Balance Sheets
                           March 31, 1998 and September 30, 1997                      1

                      Consolidated Statements of Income
                           Three and Six Months Ended March 31, 1998 and 1997         2

                      Consolidated Statements of Cash Flows
                           Six Months Ended March 31, 1998 and 1997                   3

                      Notes to Consolidated Financial Statements                      4-5


       Item 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS
                      OF FINANCIAL CONDITION AND RESULTS
                      OF OPERATIONS
                           Three and Six Months Ended March 31, 1998 and 1997         6-11


Part II       OTHER INFORMATION

       Item 4.        SUBMISSION OF MATTERS TO A VOTE
                      OF SECURITY HOLDERS                                             12
       Item 6.        EXHIBITS AND REPORTS ON FORM 8-K                                13


Signatures                                                                            14
</TABLE>


<PAGE>


<TABLE>
                                               Boole & Babbage, Inc.
                                            Consolidated Balance Sheets
                                        (Amounts in thousands except shares)
                                             (March 31, 1998 unaudited)
<CAPTION>
                                                                                      March 31,    September 30,
                                                                                        1998            1997
                                                                                    -----------     ------------
<S>                                                                                  <C>             <C>
Assets
Current assets:
    Cash and cash equivalents                                                        $  41,310       $  33,923
    Short-term investments                                                              53,065          23,050
    Accounts receivable, net                                                            22,163          26,412
    Installment and other receivables, net                                              56,726          65,469
    Deferred tax asset                                                                   5,961           6,154
    Prepaid expenses and other current assets                                            5,142           4,513
                                                                                     ---------       ---------
            Total current assets                                                       184,367         159,521

Purchased and internally developed software, net                                        12,178          12,152
Equipment, furniture and leasehold improvements, net                                    10,044           9,968
Long-term installment and other receivables                                             42,100          52,290
Long-term deferred tax asset                                                            10,516          10,571
Costs in excess of net assets of purchased businesses, net                                 621             634
Other assets                                                                            16,732          15,008
                                                                                     ---------       ---------
            Total assets                                                             $ 276,558       $ 260,144
                                                                                     =========       =========


Liabilities and Stockholders' Equity
Current liabilities:
     Accounts payable                                                                $   7,786       $   8,895
     Accrued payroll expense                                                             9,450           9,840
     Other accrued liabilities                                                          26,966          27,080
     Short-term borrowings                                                                 386           1,016
     Notes payable due within one year                                                     322             319
     Capital lease obligations due within one year                                         832             933
     Deferred maintenance revenue                                                       56,283          53,432
                                                                                     ---------       ---------
            Total current liabilities                                                  102,025         101,515

Notes payable due after one year                                                            17              50
Capital lease obligations due after one year                                             1,666           1,795
Deferred maintenance revenue due after one year                                         42,338          38,282

Stockholders' equity:
     Preferred stock, 2,000,000 shares authorized, $.001 par value, none issued           --              --
     Common stock, $.001 par value, authorized--45,000,000 shares; issued--
         30,492,473 (29,969,715 at September 30, 1997)                                      30              30
     Additional paid-in capital                                                         95,031          91,960
     Retained earnings                                                                  50,622          32,800
     Unrealized gain on marketable securities                                            7,579           5,691
     Foreign currency translation adjustment                                            (6,935)         (3,503)
     Less treasury stock, 2,197,930 shares (1,843,182 at
           September 30, 1997), at cost                                                (15,815)         (8,476)
                                                                                     ---------       ---------
            Total stockholders' equity                                                 130,512         118,502
                                                                                     ---------       ---------
            Total liabilities and stockholders' equity                               $ 276,558       $ 260,144
                                                                                     =========       =========
<FN>
See accompanying notes.
</FN>
</TABLE>



                                                          1
<PAGE>

<TABLE>
                                                Boole & Babbage, Inc.
                                          Consolidated Statements of Income
                                  (Amounts in thousands, except earnings per share)
                                                     (Unaudited)
<CAPTION>
                                                           Three Months Ended                 Six Months Ended
                                                               March 31,                           March 31,
                                                        -------------------------          -------------------------
                                                          1998             1997              1998             1997
<S>                                                     <C>              <C>               <C>              <C>
                                                       --------         --------          --------         --------
Revenue:
      Product licensing                                 $ 30,976         $ 25,057          $ 61,185         $ 52,335
      Maintenance fees and other                          22,611           21,394            45,335           43,877
                                                        --------         --------          --------         --------
           Total revenue                                  53,587           46,451           106,520           96,212
                                                        --------         --------          --------         --------

Costs and expenses:
      Cost of product licensing                            3,295            3,312             7,506            7,290
      Cost of maintenance fees and other                   5,519            4,200            10,654           10,216
      Product development                                  6,415            5,876            12,871           12,263
      Sales and marketing                                 24,766           22,132            49,157           47,258
      General and administrative                           4,933            4,348             9,433            9,673
      Acquisition and nonrecurring costs                    --             11,309              --             11,309
                                                        --------         --------          --------         --------
           Total costs and expenses                       44,928           51,177            89,621           98,009
                                                        --------         --------          --------         --------

Operating income (loss)                                    8,659           (4,726)           16,899           (1,797)

Interest and other income, net                             4,475            2,228             7,858            3,816
                                                        --------         --------          --------         --------
Income (loss) before provision for income taxes           13,134           (2,498)           24,757            2,019

Provision (benefit) for income taxes                       3,680             (195)            6,935            2,405
                                                        --------         --------          --------         --------

Net income  (loss)                                      $  9,454         ($ 2,303)         $ 17,822         ($   386)
                                                        ========         ========          ========         ========

Basic earnings (loss) per share                         $   0.34         ($  0.08)         $   0.63         ($  0.01)
                                                        ========         ========          ========         ========

Diluted earnings (loss) per share                       $   0.31         ($  0.08)         $   0.58         ($  0.01)
                                                        ========         ========          ========         ========

Common shares outstanding                                 28,120           27,615            28,165           27,430
                                                        ========         ========          ========         ========

Common shares assuming dilution                           30,710           27,615            30,740           27,430
                                                        ========         ========          ========         ========
<FN>
See accompanying notes.
</FN>
</TABLE>


                                                          2
<PAGE>
<TABLE>
                                               Boole & Babbage, Inc.
                                       Consolidated Statements of Cash Flows
                                               (Amounts in thousands)
                                                    (Unaudited)
<CAPTION>
                                                                                               Six Months Ended
                                                                                                   March 31,
                                                                                         -----------------------------
                                                                                           1998                 1997
                                                                                         --------             --------
<S>                                                                                      <C>                  <C>
Cash flows from operating activities:                                                 
  Net income (loss)                                                                      $ 17,822             ($   386)
  Adjustments to reconcile net income (loss) to net cash                              
      provided (used) by operating activities:                                        
      Depreciation, amortization and write-off of capitalized software                      4,584                4,862
      Loss on disposal of assets                                                             --                    570
      Gain on sale of equity securities                                                    (2,223)                --
      Stock issued under compensatory stock plans                                              92                   27
      Changes in operating assets and liabilities excluding the effect of acquisitions:
         Accounts receivable and installment and other receivables                        (17,373)             (14,807)
         Prepaid expenses and other assets                                                   (909)              (1,268)
         Accounts payable and accrued expenses                                               (120)               1,485
         Deferred maintenance revenue                                                      10,210                5,755
                                                                                         --------             --------
                                                                                      
Net cash provided by (used for) operating activities                                       12,083               (3,762)
                                                                                         --------             --------
                                                                                      
Cash flows from investing activities:                                                 
     Purchases of equipment, furniture and leasehold improvements                          (2,445)              (1,623)
     Payments for capitalized software                                                     (2,241)              (1,904)
     Net purchases of short-term investments                                              (30,015)                (846)
     Investment in equity securities                                                       (2,807)                 (26)
     Proceeds from sale of equity securities                                                5,030                 --
                                                                                         --------             --------
                                                                                      
Net cash used for investing activities                                                    (32,478)              (4,399)
                                                                                         --------             --------
                                                                                      
Cash flows from financing activities:                                                 
      Proceeds from sale of lease contracts receivable                                     35,732                2,154
      Proceeds from issuance of common stock                                                2,979                3,973
      Treasury stock purchases                                                             (7,339)                (601)
      Borrowing (payments) under line of credit, net                                         (631)                 116
      Payments on notes payable                                                               (24)                 (26)
      Payments on capital leases                                                             (543)              (1,079)
                                                                                         --------             --------
                                                                                      
Net cash provided by financing activities                                                  30,174                4,537
                                                                                         --------             --------
                                                                                      
Effect of exchange rate changes on cash                                                    (2,392)              (1,028)
                                                                                         --------             --------
                                                                                      
Net increase (decrease) in cash and cash equivalents                                        7,387               (4,652)
                                                                                      
Cash and cash equivalents at beginning of period                                           33,923               37,260
                                                                                         --------             --------
                                                                                      
Cash and cash equivalents at end of period                                               $ 41,310             $ 32,608
                                                                                         ========             ========
                                                                                      
Supplemental disclosures of cash flow information:                                    
      Cash paid during the period for:                                                
          Interest                                                                       $    688             $    899
          Income taxes, net                                                              $  5,650             $  3,240
                                                                                  
Supplemental disclosures of noncash investing and financing activities:
            A capital lease obligation of $313,000 was incurred in 1998 for the purchase of equipment.
<FN>
See accompanying notes
</FN>
</TABLE>



                                                          3
<PAGE>

                              BOOLE & BABBAGE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   Basis of Presentation

     The accompanying  consolidated financial statements include the accounts of
     all  subsidiaries  after the elimination of all  significant  inter-company
     items and transactions.

     A summary of the significant accounting policies of the Company is included
     in Note 1 of Notes to  Consolidated  Financial  Statements in the Company's
     annual  report on Form 10-K for the year ended  September  30, 1997.  These
     consolidated  financial statements should be read in conjunction with those
     notes.

     The consolidated financial information at March 31, 1998 and for the three-
     and six- month  periods  ended  March 31, 1998 and 1997 is  unaudited.  The
     statements in this report  include all  adjustments  of a normal  recurring
     nature. In the opinion of management, these adjustments are necessary for a
     fair  statement  of the  interim  results for the  periods  presented.  The
     interim results are not necessarily  indicative of the results for the full
     year.


2.   Earnings Per Share

     In 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
     Financial  Accounting  Standards  No.  128,  "Earnings  Per  Share",  which
     replaced the  previously  reported  primary and fully diluted  earnings per
     share with basic and diluted  earnings per share.  Unlike primary  earnings
     per share,  basic  earnings  per share  excludes  any  dilutive  effects of
     options,  warrants, and convertible securities.  Diluted earnings per share
     is very  similar to the  previously  reported  fully  diluted  earnings per
     share.  All earnings per share amounts for all periods have been  presented
     to conform to the Statement 128 requirements.
<TABLE>
<CAPTION>
       (Amounts in thousands, except     3 mos. ended Mar. 31,        6 mos. ended Mar. 31,
        earnings per share)             ----------------------       -----------------------
                                          1998          1997           1998          1997
                                        --------      --------       --------      --------
<S>                                     <C>           <C>            <C>            <C>
Diluted:
 Common shares outstanding                28,120        27,615         28,165        27,430
 Employee stock option plans               2,590          --            2,575          --
                                        --------      --------       --------      --------
                                          30,710        27,615         30,740        27,430
                                        ========      ========       ========      ========

 Net income (loss)                      $  9,454      ($ 2,303)      $ 17,822      ($   386)
                                        ========      ========       ========      ========
 Diluted earnings (loss) per share      $    .31      ($   .08)      $    .58      ($   .01)
                                        ========      ========       ========      ========
</TABLE>
     Diluted  earnings  per common  share is computed by adding to the  weighted
     average number of common shares outstanding during the period the number of
     dilutive  common  shares  that  would  be  issuable  upon the  exercise  of
     outstanding  options using the treasury  stock method of  computation.  Net
     loss per share is computed using only the weighted average number of common
     shares outstanding during the period.


                                       4
<PAGE>



                              BOOLE & BABBAGE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)



3.   Contingencies

     The Company is involved in certain legal actions and claims  arising in the
     ordinary course of business.  Management  believes that such litigation and
     claims will be resolved  without  material  adverse effect on the Company's
     financial position or results of operations.


4.   Recent Accounting Pronouncements

     The  company  intends  to adopt  SFAS  No.  130,  "Reporting  Comprehensive
     Income," and SFAS No. 131 "Disclosures  about Segments of an Enterprise and
     Related   Information,"   in  fiscal  1999.  Both  standards  will  require
     additional disclosure, but will not have a material effect on the Company's
     financial  position  or  results  of  operations.  SFAS  No.  130  contains
     requirements for the reporting and display of comprehensive income and will
     first be reflected in the Company's first quarter of 1999 interim financial
     statements.  Components  of  comprehensive  income for the Company  include
     items  such as net income  and  changes in the value of  available-for-sale
     securities.   SFAS  No.  131  changes  the  way  companies  report  segment
     information and requires  segments to be determined based on how management
     measures performance and makes decisions about allocating  resources.  SFAS
     No. 131 will first be reflected in the Company's 1999 Annual Report.


                                       5
<PAGE>


                              BOOLE & BABBAGE, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS:

When used in this discussion,  the words "anticipate," "estimate," "project" and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are  subject to certain  risks and  uncertainties,  including  those
discussed  below and in the Company's Form 10-K for the year ended September 30,
1997, that could cause actual results to differ materially from those projected.
Readers are  cautioned  not to place undue  reliance  on these  forward  looking
statements,  which speak only as of the date hereof.  The Company  undertakes no
obligation   to  publicly   release  the  result  of  any   revisions  to  these
forward-looking  statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.

Statement of Position (SOP) 97-2,  "Software Revenue Recognition" and (SOP) 98-4
"Deferral  of the  Effective  Date of a Provision of (SOP)  97-2"were  issued in
October  1997  and  March  1998,  respectively,  and  address  software  revenue
recognition  matters  primarily  from a  conceptual  level and does not  include
specific  implementation  guidance. The SOP supersedes SOP 91-1 and is effective
for transactions entered into for fiscal years beginning after December 15, 1997
and will  therefore  be adopted for the  Company's  fiscal year 1999,  beginning
October  1, 1998.  Based on its  reading  and  interpretation  of SOP 97-2,  the
Company believes it is currently in compliance with the final standard. However,
detailed  implementation  guidelines for this standard have not yet been issued.
Once issued, such detailed  implementation  guidance could lead to unanticipated
changes in the Company's current revenue accounting practices,  and such changes
could be material to the Company's revenues and earnings.

As  detailed  on its web site  (boole.com),  many Boole & Babbage  products  are
already Year 2000 compliant. Most of the remaining products will be compliant by
the end of fiscal 1998 and the Company  will  ensure that all  products  will be
fully Year 2000 compliant before December 31, 1999.

For its internal  systems,  the Company has implemented  conversion  projects to
properly process transactions  relating to the year 2000 and beyond. The Company
plans to have  programming and other changes to critical  systems such as Oracle
Accounting Financial Applications completed by early 1999 in order to allow time
for  testing.  However,  there can be no  assurance  that the  systems  of other
companies on which the Company's  systems rely will be year 2000 capable or that
any failure to ensure year 2000 year  capability  by another  company  would not
have an adverse effect on the Company's systems. The Company does not expect the
cost of these  projects  to have a material  effect on the  Company's  financial
position or results of operations.

REVENUES:

The Company  derives  its  revenues  primarily  from the  licensing  of computer
software  programs,  the  sales  of  software  maintenance  services,  and  from
consulting and education  services.  The following  table shows percent of total
revenue and year-to-year  percentage  changes as reported and without the effect
of currency  rate  changes for the three and six months ended March 31, 1998 and
1997, respectively.


                                      6
<PAGE>

<TABLE>
                                                BOOLE & BABBAGE, INC.
                                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<CAPTION>
                                                      As      Without                                As     Without
                                 % of Revenue      Reported   Currency         % of Revenue       Reported  Currency
                            --------------------- ---------- ---------    ---------------------- --------- ----------
                                3 mos. ended                                  6 mos. ended
                                  Mar. 31                                        Mar. 31          
                            ---------------------   Y/Y       Y/Y         ----------------------   Y/Y        Y/Y
                              1998       1997       chg.       chg.         1998        1997       chg.       chg.
                            -----------------------------------------------------------------------------------------
<S>                          <C>        <C>        <C>        <C>           <C>        <C>         <C>       <C>
Product licensing             57.8%      53.9%     23.6%      30.2%          57.4%      54.4%      16.9%     24.7%
Maint.fees and other          42.2%      46.1%      5.7%      10.7%          42.6%      45.6%       3.3%      9.5%
                            -----------------------------------------------------------------------------------------
    Total                    100.0%     100.0%     15.4%      21.2%         100.0%     100.0%      10.7%     17.8%
                            =========================================================================================
</TABLE>


<TABLE>
Product Licensing:
<CAPTION>
                                       As                Without               As              Without
                                    Reported            Currency            Reported           Currency
                                    --------            --------            --------           --------
                                  Y/Y chg 3Mo         Y/Y chg 3Mo         Y/Y chg 6Mo         Y/Y chg 6Mo
                                 ---------------    ----------------     ---------------    ----------------
<S>                                  <C>                 <C>                 <C>                 <C>
Product Group:
Client/Server                        65.0%               75.5%               68.3%               80.9%
Mainframe                            11.7%               17.2%                3.8%               10.4%
                                 ---------------    ----------------     ---------------    ----------------
                                     23.6%               30.2%               16.9%               24.7%
                                 ===============    ================     ===============    ================
Sales Channel:
Domestic                             54.6%               54.6%               31.4%               31.4%
International                         9.1%               18.8%                9.2%               21.1%
                                 ---------------    ----------------     ---------------    ----------------
                                     23.6%               30.2%               16.9%               24.7%
                                 ===============    ================     ===============    ================
</TABLE>

The  Company  licenses  its  products  to  customers  for use on their  computer
systems.  As is common in the industry,  more than 50% of the Company's  license
revenue is derived from  transactions that close in the last month of a quarter,
which  can make  quarterly  revenues  difficult  to  forecast.  Since  operating
expenses are  relatively  fixed,  failure to achieve  projected  revenues  could
materially and adversely affect the Company's operating results.  This, in turn,
could  result in an  immediate  and  adverse  effect on the market  price of the
Company's stock.

Products:

The Company  anticipates that the Client/Server group will continue to show high
growth  rates for fiscal  1998.  However,  the  Company  competes  with  certain
companies who have greater financial and operational resources along with larger
customer bases.  This could allow those companies to bundle  competing  products
with  more  established  non-competing  products  in order  to gain a  marketing
advantage.  In  addition,  the  Company is  dependent  on the success of its new
Explorer  family  of  Windows  NT and  Web-based  products  relating  to its new
Desired-State  Management  initiative.  This initiative represents a significant
expansion of the SpaceView,  COMMAND/POST and Command MQ product lines. There is
also a potential  diversion of customers' business attention and project funding
to Year 2000 projects. Due to these factors, there can be no assurances that new
or  even  existing  products  will  achieve  significant  market  acceptance  or
competitive success and thus contribute to revenue growth.

Mainframe products include Plex products, which enable customers to handle large
groups of computer processors,  particularly the parallel processing machines by
IBM. In the mainframe  market,  industry  analysts have  projected  that systems
management  spending  will only grow at 5% per year through the year 2000.  They
also  project  that while the  majority  of large data  centers  have  adopted a
sysplex


                                       7
<PAGE>

                              BOOLE & BABBAGE, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
strategy, mid-size data centers will not broadly adopt these parallel processors
until  1998 or later.  Thus,  despite a  somewhat  flat  mainframe  market,  the
Company's  product  licensing growth has benefited by data centers adopting this
new  technology.  This has also  helped to  increase  the number of  competitive
replacements  which in fiscal 1998 accounted for  approximately 14% of licensing
revenue  and occur  primarily  through  multi-year  licensing  agreements  which
comprised  approximately  59% of licensing  revenue.  Thus,  future growth rates
could be  materially  and adversely  impacted if the parallel  processors do not
gain significant market acceptance among the mid-size data centers,  if the rate
of successful  competitive  replacements  slows, or if customer  spending shifts
away from traditional  mainframes to technology platforms where the Company does
not have significant product acceptance.
    

Sales Channels

Domestic:
   
Domestic licensing  comprised 39.9% and 31.9% of total product licensing for the
three  months and 39.1% and 34.8% for the six months  ended  March 31,  1998 and
1997,  respectively.  For growth to continue in the domestic market, the company
is  dependent  on  continued  productivity  increases  as well as the ability to
generate larger size transactions,  primarily through  multi-year  contracts and
competitive replacements.
    

International:
   
The Company's licensing from its international operations,  comprised of foreign
subsidiaries  and  marketing  agents,  increased  as a result of solid growth in
Europe,  Japan and South America despite unfavorable currency exchange rates. In
the Asia-Pacific area, the Company continued its conservative  position and only
booked new  revenues on a cash basis other than from its  subsidiaries  in Japan
and Australia to avoid potential  impact from the current  economic  turmoil and
uncertainties  regarding  payment on product orders from the distributors in the
other markets of this region.  In addition to the risks described  above,  since
the majority of product  licensing is derived from  international  markets,  the
Company's  overall  operations and financial  results could be significantly and
adversely affected by such international factors as changes in currency exchange
rates and specific regional or country political and economic circumstances.
    


Maintenance fees and other:

Maintenance  revenue is generated from services the Company  provides  including
technical support, product enhancements,  system updates and user documentation.
Maintenance  revenue also includes  maintenance  services for an initial  period
ranging from six months to one year which is included in the initial charge when
the  Company  licenses  its  software  products  under  a  long-term  agreement.
Thereafter on each  anniversary  date of the license,  the customer may elect to
renew its  maintenance  contract  with the Company.  Customers may also elect to
purchase  advance  maintenance at the time of product  licensing for maintenance
periods beyond the first year. Included in maintenance fees and other is revenue
from consulting and educational services,  computer services, hardware sales and
royalties  from IBM for a jointly  developed  CICS  product.  In July 1996,  the
Company  entered  into a long-term  licensing  agreement  requiring  IBM to make
royalty payments,  based upon their sales of the product,  of up to a maximum of
approximately $10 million for the period from the fourth quarter of 1996 through
the second quarter of fiscal 1999.  The Company has  recognized  $7.5 million of
revenue of which $6.5 million has been paid through March 31, 1998.  Since there
are no minimum  generated  amounts,  actual  royalties due to the Company may be
significantly below the maximum amount. This increase in


                                       8
<PAGE>


                              BOOLE & BABBAGE, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

maintenance fees and other is mainly the result of increased  product  licensing
in the previous year combined with  relatively  high renewal rates and increased
royalties from IBM under the July 1996 agreement. The maintenance revenue growth
rate is lower than the  licensing  growth  rate  primarily  as a result of fewer
customer  sites due to the  consolidation  of  customer  data  centers;  reduced
revenue  associated  with  customers'  conversion  to non-CPU  specific  pricing
systems such as MIPS-based  pricing;  and higher  discount levels offered by the
Company on multiple-year maintenance packages.

The Company  anticipates that maintenance  revenues in fiscal 1998 will increase
due to the higher license revenue growth in 1997, although it will be negatively
impacted  by  reduced  revenue  associated  with  site  consolidations,  non-CPU
specific pricing and multiple-year  maintenance  package discounts.  The Company
must  continue to generate new product  licensing  revenues and also continue to
provide  high  quality   maintenance  support  and  upgrades  to  ensure  future
maintenance revenue increases.


COSTS AND EXPENSES :
<TABLE>
The following table shows percent of total revenue and  year-to-year  percentage
changes of costs and expenses (excluding acquisition and non recurring costs) as
reported  and without the effect of currency  rate changes for the three and six
months ended March 31, 1998 and 1997,  respectively.  The Company  acquired MAXM
Systems Corporation  ("MAXM") on January 16, 1997. The transaction was accounted
for  using  the  pooling  of  interest  method  and the  Company's  consolidated
financial  statements  for all prior  periods have been  restated to include the
results of MAXM. In general,  operating costs increased more in the three months
ending March 31, 1998 than the six month period as  redundant  costs  related to
MAXM were eliminated in the second quarter of 1997.
<CAPTION>
                                                               
                                                    As       Without                              As       Without       
                                 % of Revenue    Reported   Currency          % of Revenue     Reported   Currency
                                 ------------    --------   --------          ------------     --------   --------
                                3 mos. ended                                  6 mos. ended
                                   Mar. 31                                       Mar. 31                             
                            ---------------------   Y/Y        Y/Y        ---------------------   Y/Y        Y/Y
                              1998       1997       chg.       chg.         1998       1997       chg.       Chg.
                            ------------------------------------------    -------------------------------------------
<S>                          <C>        <C>        <C>        <C>          <C>        <C>         <C>        <C> 
Cost of product
    licensing                  6.1%      7.1%      (0.5%)      6.5%         7.0%       7.6%        3.0%      11.3%
Cost of maintenance
    fees and other           10.3%       9.0%      31.4%      38.6%        10.0%      10.6%        4.3%      11.3%
Product development          12.0%      12.6%       9.2%      10.5%        12.1%      12.7%        5.0%       6.5%
Sales and marketing          46.2%      47.6%      11.9%      17.9%        46.1%      49.1%        4.0%      10.6%
General and
    administrative            9.2%       9.4%      13.5%      17.3%         8.9%      10.1%       (2.5%)      2.5%
                            ------------------------------------------    -------------------------------------------
    Total                    83.8%      85.7%      12.7%      18.0%        84.1%      90.1%        3.4%       9.3%
                            ------------------------------------------    -------------------------------------------
</TABLE>

Cost of product licensing:

Cost of product  licensing  consists  primarily of royalties paid to independent
software  authors  and  amortization  of  purchased  and  internally   developed
software.  The increase in 1998 relates primarily to higher royalty costs due to
increased  third party sales. In general,  fluctuations  in the  relationship of
cost of product  licensing to licensing  revenue are caused primarily by changes
in licensing  revenue mix,  royalty  agreements and  amortization of capitalized
software.


                                       9
<PAGE>

                              BOOLE & BABBAGE, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cost of maintenance fees and other:

Cost of  maintenance  fees  and  other  consists  primarily  of cost of  product
maintenance   support,   royalties   paid  to  independent   software   authors,
amortization of purchased and internally developed software, the cost to provide
educational  and  consulting  services  and costs  related to  certain  computer
services. In 1998, the increase for the three and six months is primarily due to
higher costs to provide consulting and education and higher royalty costs.

In general,  fluctuations in the  relationship  of cost of maintenance  fees and
other to revenue are caused  primarily  by changes in  maintenance  revenue mix,
maintenance  support,  royalty  agreements,   and  amortization  of  capitalized
software

Product development:

The  increase  in  product  development  in 1998 for the three and six months is
primarily  attributable  to higher research and  development  ("R&D")  personnel
costs due to  increased  headcount  offset by  decreased  expenses  relating  to
supporting the IBM jointly developed CICS product.  R&D expenditures were 16% of
revenue  (excluding  third  party) in 1998 and in 1997  while the  amount of R&D
capitalized  was 15% of gross R&D costs in both years.  The Company  capitalizes
certain  development costs in accordance with Statement of Financial  Accounting
Standard No. 86. To the extent the Company  capitalizes its product  development
costs, the effect is to defer such costs to future periods and match them to the
revenue generated by the products.  Product  development  expenses may fluctuate
annually  depending  in part upon the  number and  status of  internal  software
development projects.


Sales and marketing:

The  increase  in sales and  marketing  in 1998 for the three and six  months is
primarily  a result  of  higher  commissions  on  increased  product  licensing,
increased headcount, and more product marketing costs.


General and administrative:

General and  administrative  expenses  increased for the three and six months in
1998 primarily due to increased personnel costs.


Interest and other income, net:

Interest and other income consists  principally of net interest income and gains
or losses from sales of investments, and currency hedging. Increases of 101% and
106% for the three and six  months  of fiscal  1998 over 1997 are  approximately
one-third due to higher interest  income on more lease contracts  receivable and
two-thirds due to currency gains in Europe in the current year (versus a loss in
the prior year) and gains on sales of equity investments.


                                       10
<PAGE>

                              BOOLE & BABBAGE, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Income Taxes:

Income taxes have been provided based upon the estimated  effective tax rate for
the year of 28%. In 1997,  the  effective  tax rate was 30% exclusive of the tax
effect of non-deductible  acquisition costs and pre-acquisition operating losses
of MAXM for which no tax benefit was  recognized.  These  acquisition  costs and
operating  losses of Maxm  increased tax expense by $555,000 and  $1,800,000 for
the three and six months ended March 31, 1997, respectively.

The effective  tax rate differs from the federal  statuary rate due primarily to
permanently invested earnings of foreign subsidiaries being taxed at rates lower
than the  federal  statutory  rate and tax credits for  increased  research  and
development.  Management  believes  future  taxable income will be sufficient to
realize the tax benefit of the net  deferred  tax asset of  approximately  $16.5
million.

LIQUIDITY AND CAPITAL RESOURCES:

At  March  31,  1998,  the  Company's  cash,  cash  equivalents  and  short-term
investments were $94,375,000.  The Company continues to use installment  payment
plans  to  gain a  competitive  advantage  during  the  sales  process  and  had
outstanding  installment  receivables  of  $102,510,000  at March 31, 1998.  The
Company  periodically  sells  portions of  installments  receivables  subject to
limited  recourse  provisions.  During the first six months of 1998, the Company
sold $35,732,000 of installment receivables.

The  Company  continues  to finance  its growth  through  funds  generated  from
operations.  For the six  months  ended  March  31,  1998 net cash  provided  by
operating  activities was $12,083,000.  Net cash used in investing activities in
1998  was  $32,478,000,   primarily  for  internally   developed  and  purchased
capitalized  software,  acquisition  of  computers  and related  equipment,  the
purchase of equity securities,  and the net purchases of short-term  investments
offset by cash provided from to the sale of equity securities. Net cash provided
by financing  activities  in 1998 was  $30,174,000,  primarily  from the sale of
lease  contracts  receivable,  the exercise of employee  stock options and stock
purchases  through the Employee  Stock Purchase Plan offset by cash used for the
Company's stock repurchase program and debt payment.

The  Company  continues  to evaluate  business  acquisition  opportunities  that
complement  its  strategic  plans and believes  existing cash balances and funds
generated from operations will be sufficient to meet its liquidity  requirements
for the foreseeable future.


                                       11
<PAGE>



BOOLE & BABBAGE, INC.

                           PART II. OTHER INFORMATION

ITEM 4.  Submission of Matters to a Vote of Security Holders

The Annual Meeting of  Stockholders  of Boole & Babbage,  Inc. was held February
18,  1998,  for the purpose of  electing  two people to the  Company's  Board of
Directors to serve a three-year  term expiring on the date of the Company's 2001
annual meeting of stockholders, and to ratify the selection of Ernst & Young LLP
as the Company'  independent  auditors  for the next fiscal  year.  Proxies were
solicited  pursuant to Section 14(a) of the Securities  Exchange Act of 1934 and
there was no solicitation in opposition to management's solicitations.

Terry R. McGowan.  was elected to the board of directors  for a three-year  term
with 16,091,368 votes "FOR" and 84,272 votes "WITHHELD".

David B. Wright was elected to the board of directors for a three-year term with
16,092,147 votes "FOR" and 83,493 votes "WITHHELD".


The selection of Ernst & Young LLP as the Company's independent auditors for the
fiscal year ending September 30, 1998 was ratified by the following vote:


                                                                  Broker 
          "FOR"            "AGAINST"          "ABSTAIN"          Nonvotes
          -----            ---------          ---------          --------
       16,152,043           12,699             10,898              NONE


                                       12
<PAGE>



BOOLE & BABBAGE, INC.

                           PART II. OTHER INFORMATION

ITEM 6.  Exhibits and Reports on Form 8-K

             (a) Exhibits

                        The following exhibit is filed herewith.

                        Exhibit
                        Number              Description of Document
                        ------              -----------------------

                           27               Financial Data Schedule

             (b) Reports on Form 8-K - None.


                                       13
<PAGE>


                        BOOLE & BABBAGE, INC. SIGNATURES


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



                                           BOOLE & BABBAGE, INC.



April 11, 1998                             \Paul E. Newton\
--------------                             --------------------------
                                           Paul E. Newton
                                           President and Director
                                           (Principal Executive Officer)



April 11, 1998                             \Arthur F. Knapp, Jr.\
--------------                             --------------------------
                                           Arthur F. Knapp, Jr.
                                           Senior Vice President
                                           Chief Financial Officer
                                           (Principal Financial Officer)



April 11, 1998                             \Carla J. Dorow\
--------------                             --------------------------
                                           Carla J. Dorow
                                           Controller
                                           (Principal Accounting Officer)


                                       14