UNITED STATES


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended    March 31, 1997
                                  --------------

                                       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                  (I.R.S. 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___

18,815,440 shares of common stock of the Registrant were outstanding as of April
30, 1997.



<PAGE>


                              BOOLE & BABBAGE, INC.

                                      INDEX


Part I    FINANCIAL INFORMATION                                         Page No.

   Item 1.    FINANCIAL STATEMENTS
              Consolidated Balance Sheets
                   March 31, 1997 and September 30, 1996                       1

              Consolidated Statements of Operations
                   Three and Six Months Ended March 31, 1997 and 1996          2

              Consolidated Statements of Cash Flows
                   Six Months Ended March 31, 1997 and 1996                    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, 1997 and 1996       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


<PAGE>

<TABLE>
                                                        Boole & Babbage, Inc.
                                                     Consolidated Balance Sheets
                                                (Amounts in thousands except shares)
                                                     (March 31, 1997 unaudited)
<CAPTION>

                                                                                                        March 31,      September 30,
Assets                                                                                                    1997              1996
                                                                                                       ---------          ---------
<S>                                                                                                    <C>                <C>      
Current assets:
    Cash and cash equivalents                                                                          $  32,608          $  37,260
    Short-term investments                                                                                25,593             24,750
    Accounts receivable, net                                                                              26,824             27,955
    Installment and other receivables, net                                                                53,841             46,221
    Deferred tax asset                                                                                     5,603              5,649
    Prepaid expenses and other current assets                                                              5,348              4,383
                                                                                                       ---------          ---------
           Total current assets                                                                          149,817            146,218

Purchased and internally developed software, net                                                          11,273             11,614
Equipment, furniture and leasehold improvements, net                                                      10,427             12,763
Long-term installment and other receivables                                                               44,076             39,141
Long-term deferred tax asset                                                                               9,461              9,472
Costs in excess of net assets of purchased businesses, net                                                   647                660
Other assets                                                                                               7,014              4,672
                                                                                                       ---------          ---------
           Total assets                                                                                $ 232,715          $ 224,540
                                                                                                       =========          =========


Liabilities and Stockholders' Equity
Current liabilities:
     Accounts payable                                                                                  $   7,573          $   7,605
     Accrued payroll expense                                                                               8,991              7,890
     Other accrued liabilities                                                                            24,351             25,090
     Short-term borrowings                                                                                 3,266              3,150
     Notes payable due within one year                                                                       296                469
     Capital lease obligations due within one year                                                         1,395              1,813
     Deferred maintenance revenue                                                                         51,043             51,241
                                                                                                       ---------          ---------
           Total current liabilities                                                                      96,915             97,258

Notes payable due after one year                                                                             339                444
Capital lease obligations due after one year                                                               2,266              2,825
Deferred maintenance revenue due after one year                                                           33,957             28,949

Stockholders' equity:
     Preferred stock, 2,000,000 shares authorized, $.001 par value, none issued                             --                 --
     Common stock, $.001 par value, authorized--30,000,000 shares; issued--
         19,645,767 (19,110,385 at September 30, 1996)                                                        20                 19
     Additional paid-in capital                                                                           85,042             81,047
     Retained earnings                                                                                    18,943             19,328
     Unrealized gain on marketable securities                                                              2,808                370
     Foreign currency translation adjustment                                                                (570)               704
     Less treasury stock, 1,173,788 shares (1,143,788 at
         September 30, 1996), at cost                                                                     (7,005)            (6,404)
                                                                                                       ---------          ---------
           Total stockholders' equity                                                                     99,238             95,064
                                                                                                       ---------          ---------
           Total liabilities and stockholders' equity                                                  $ 232,715          $ 224,540
                                                                                                       =========          =========

<FN>
See accompanying notes.
</FN>
</TABLE>

                                                                 1

<PAGE>

<TABLE>
                                                        Boole & Babbage, Inc.
                                                Consolidated Statements of Operations
                                         (Amounts in thousands, except net income per share)
                                                             (Unaudited)
<CAPTION>

                                                                             Three Months Ended                Six Months Ended
                                                                                   March 31,                       March 31,
                                                                          -------------------------        -------------------------
                                                                            1997             1996            1997             1996
                                                                          --------         --------        --------         --------
<S>                                                                       <C>              <C>             <C>              <C>     
Revenue:
      Product licensing                                                   $ 25,057         $ 23,659        $ 52,335         $ 46,107
      Maintenance fees and other                                            21,394           20,179          43,877           40,595
                                                                          --------         --------        --------         --------
           Total revenue                                                    46,451           43,838          96,212           86,702
                                                                          --------         --------        --------         --------

Costs and expenses:
      Cost of product licensing                                              3,312            4,048           7,290            7,835
      Cost of maintenance fees and other                                     4,200            4,147          10,216            8,347
      Product development                                                    5,876            5,058          12,263           10,361
      Sales and marketing                                                   22,132           22,783          47,258           44,889
      General and administrative                                             4,348            4,424           9,673            8,902
      Acquisition and nonrecurring costs                                    11,309             --            11,309             --
                                                                          --------         --------        --------         --------
           Total costs and expenses                                         51,177           40,460          98,009           80,334
                                                                          --------         --------        --------         --------

Operating income (loss)                                                     (4,726)           3,378          (1,797)           6,368

Interest and other income, net                                               2,228            1,332           3,816            2,588
                                                                          --------         --------        --------         --------
Income (loss) before provision for income taxes                             (2,498)           4,710           2,019            8,956

Provision (benefit) for income taxes                                          (195)           1,530           2,405            3,355
                                                                          --------         --------        --------         --------

Net income  (loss)                                                        ($ 2,303)        $  3,180        ($   386)        $  5,601
                                                                          ========         ========        ========         ========

Net income (loss) per share                                               $  (0.13)        $   0.17        $  (0.02)        $   0.29
                                                                          ========         ========        ========         ========

Shares used in per share calculations                                       18,411           19,102          18,288           19,062
                                                                          ========         ========        ========         ========

<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,
                                                                                                           ------------------------
                                                                                                            1997             1996
                                                                                                           --------        --------
<S>                                                                                                        <C>             <C>     
Cash flows from operating activities:
  Net income (loss)                                                                                        ($   386)       $  5,601
  Adjustments to reconcile net income (loss) to net cash
      provided (used) by operating activities:
      Depreciation, amortization and write-off of capitalized software                                        4,862           5,326
      Loss on disposal of assets                                                                                570            --
      Stock issued under compensatory stock plans                                                                27             156
      Changes in operating assets and liabilities excluding the effect of acquisitions:
         Accounts receivable and installment and other receivables                                          (14,807)        (18,722)
         Prepaid expenses and other assets                                                                   (1,268)            (47)
         Accounts payable and accrued expenses                                                                1,485             626
         Deferred maintenance revenue                                                                         5,755           9,418
                                                                                                           --------        --------

Net cash provided by (used for) operating activities                                                         (3,762)          2,358
                                                                                                           --------        --------

Cash flows from investing activities:
     Purchases of equipment, furniture and leasehold improvements                                            (1,623)         (1,957)
     Payments for capitalized software                                                                       (1,904)         (1,980)
     Net (purchases) sales of short-term investments                                                           (550)            311
     Investment in equity securities                                                                            (26)           (855)
                                                                                                           --------        --------

Net cash used for investing activities                                                                       (4,103)         (4,481)
                                                                                                           --------        --------

Cash flows from financing activities:
      Proceeds from sale of lease contracts receivable                                                        2,154            --
      Proceeds from issuance of common stock                                                                  3,973           1,618
      Treasury stock purchases                                                                                 (601)           (570)
      Borrowing under line of credit, net                                                                       116           1,740
      Payments on notes payable                                                                                 (26)           (444)
      Payments on capital leases                                                                             (1,079)         (1,138)
                                                                                                           --------        --------

Net cash provided by financing activities                                                                     4,537           1,206
                                                                                                           --------        --------

Effect of exchange rate changes on cash                                                                      (1,028)           (407)
                                                                                                           --------        --------

Net decrease in cash and cash equivalents                                                                    (4,356)         (1,324)

Cash and cash equivalents at beginning of period                                                             36,964          26,247
                                                                                                           --------        --------

Cash and cash equivalents at end of period                                                                 $ 32,608        $ 24,923
                                                                                                           ========        ========

Supplemental  disclosures  of cash flow  information:  Cash paid during the year
      for:
          Interest                                                                                         $    899        $    403
          Income taxes, net                                                                                $  3,240        $  3,030

Supplemental disclosures of noncash investing and financing activities:
            A capital lease  obligation of $265,000 was incurred in 1996 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, 1996.  These
     consolidated  financial statements should be read in conjunction with those
     notes.

     The consolidated financial information at March 31, 1997 and for the three-
     and six- month  periods  ended  March 31, 1997 and 1996 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.

<TABLE>
2.   Net Income (Loss) Per Share
     Net income 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.  Fully diluted net income (loss) per
     share is not disclosed because it is not materially  different from primary
     net income (loss) per share.
<CAPTION>

                                              3 mos. ended Mar. 31,                   6 mos. ended Mar 31,
       (Amounts in thousands, except       ----------------------------            --------------------------
        net income per share)                1997                1996               1997               1996
                                           --------             -------            ------             -------
<S>                                        <C>                  <C>                <C>                <C>   
Primary:
Common shares outstanding                    18,411              17,591            18,288              17,518
 Employee stock option plans                    n/a               1,511               n/a               1,544
                                           --------             -------            ------             -------
                                             18,411              19,102            18,288              19,062
                                           ========             =======            ======             =======

Net income (loss)                          ($ 2,303)            $ 3,180            ($ 386)            $ 5,601
                                           ========             =======            ======             =======
Net income (loss) per share                ($   .13)            $   .17            ($ .02)            $   .29
                                           ========             =======            ======             =======
</TABLE>

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

<PAGE>

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


4.   Acquisition
     On January 16, 1997, Boole & Babbage ("Boole") acquired, subject to certain
     conditions,   all  of  the  outstanding   capital  stock  of  MAXM  Systems
     Corporation  ("MAXM"),  a privately held company, in exchange for 1,137,115
     shares,  10% of which are held in escrow  with an  independent  third party
     escrow  agent,  of Boole & Babbage  common  stock.  The Company  incurred a
     charge in the  quarter  ending  March 31,  1997  (which is  included in the
     income statement line  "Acquisition and nonrecurring  costs") in connection
     with  activities  to complete  this  acquisition  and  eliminate  redundant
     facilities  and  personnel.  The  transaction  was  accounted for using the
     pooling method and the Company's  consolidated financial statements for all
     prior periods have been restated.

     The unaudited pro forma results of operations of the combined companies for
     the years  ended  September  30, 1995 and 1996 and the three  months  ended
     December 31, 1996 are as follows:

Three Mo. Ended Dec. 31, 1996               Boole           MAXM        Combined
                                            -----           ----        --------
Net revenues                                $47,696       $ 2,065        $49,761
Net income (loss)                             6,047        (4,129)         1,918
Net income (loss) per share                    0.33         (0.23)          0.10

Year Ended Sept. 30, 1996                   Boole           MAXM        Combined
                                            -----           ----        --------
Net revenues                               $165,077      $ 15,525       $180,602
Net income (loss)                            18,040        (6,583)        11,457
Net income (loss) per share                    0.99         (0.39)          0.60

Year Ended Sept. 30, 1995                   Boole           MAXM        Combined
                                            -----           ----        --------
Net revenues                               $152,244      $ 18,906       $171,150
Net income (loss)                            13,948          (826)        13,122
Net income (loss) per share                    0.81         (0.10)          0.71

5.   Earnings Per Share
     In  February  1997,  the  Financial   Accounting  Standards  Board  adopted
     Statement No. 128,  Earnings Per Share,  which is required to be adopted on
     December 31, 1997. At that time, the Company will be required to change the
     method  currently  used to compute  earnings  per share and to restate  all
     prior periods.  Under the new requirements for calculating primary earnings
     per share,  the dilutive  effect of stock  options  will be  excluded.  The
     impact is expected to result in an increase in primary  earnings per share.
     The impact of Statement 128 on the  calculation  of fully diluted  earnings
     per share is not expected to be material.

                                       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,
1996, 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.


<TABLE>
REVENUES:

The Company  derives  its  revenues  primarily  from the  licensing  of computer
software programs,  consulting and education services, and the sales of software
maintenance services.  Total revenue for the 3 and 6 months ended March 31, 1997
and 1996  increased  over the same  period in the prior  year by 6.0% and 11.0%,
respectively.  Without  the effect of the MAXM  acquisition  and  currency  rate
changes, total revenue increased 21.3% and 23.3%, respectively.
<CAPTION>

                                         % of Revenue                            % of Revenue
                                         ------------                            ------------
                                       3 Mo. ended Mar. 31,                    6 Mo. ended Mar. 31,
                                      -----------------------                -----------------------
                                        1997        1996        Y/Y chg        1997        1996        Y/Y chg
                                      ----------- ----------- -----------    ----------- ----------- -----------
<S>                                     <C>         <C>         <C>            <C>         <C>        <C>  
Product licensing                       53.9%       54.0%       5.9%           54.4%       53.2%      13.5%
Maintenance fees and other              46.1%       46.0%       6.0%           45.6%       46.8%       8.1%
                                      ----------- ----------- -----------    ----------- ----------- -----------
    Total                              100.0%      100.0%       6.0%          100.0%      100.0%      11.0%
                                      ----------- ----------- -----------    ----------- ----------- -----------
</TABLE>


Product Licensing:

The  Company  licenses  its  products  to  customers  for use on their  computer
systems.  Product  licensing  accounted for 53.9% and 54.4% of total revenue for
the 3 and 6 months  ended March 31,  1997,  respectively,  compared to 54.0% and
53.2% in 1996,  and  increased  by 5.9% and 13.5%  for the 3 and 6 months  ended
March 31, 1997,  respectively,  compared to 1996. Without the effect of the MAXM
acquisition  and currency rate changes,  product  licensing  increased 26.8% and
30.3% for the 3 and 6 months ended March 31, 1997, respectively. 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.  And, 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.

                                       6

<PAGE>


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

<TABLE>
Products:

Client/Server  products  decreased 24.1% and 16.2% for the 3 and 6 month period,
respectively, and accounted for 22.4% and 20.3% of licensing. Without the effect
of MAXM and currency rate changes,  client/server  licensing increased 22.8% and
25.6%. The Company anticipates that this group will continue to show high growth
rates for the  remainder  of fiscal 1997.  However,  the Company  competes  with
certain  companies who have greater resources along with products already in the
marketplace.  In addition,  the Company is dependent on the client/server market
developing  at  a  rapid  rate  despite   reports  by  industry   analysts  that
implementation  of  client/server  networks  may  be  more  expensive  and  time
consuming than users had anticipated, which could potentially slow the growth of
the market.  Due to these factors,  there can be no assurances that new products
will achieve  significant  market  acceptance  or  competitive  success and thus
contribute  to revenue  growth.  Mainframe  products  increased  19.5% and 24.8%
(28.0% and 31.5%  without the effect of currency  rate  changes) for the 3 and 6
months  ended  March 31,  1997,  respectively,  primarily  as a result of strong
growth in North America and non-European  international which had shown negative
growth in 1996.  The Company does not expect  mainframe  growth to be as high in
future  quarters.   Mainframe  products  include  Plex  products,  which  enable
customers  to handle  large  groups of  computer  processors,  particularly  the
parallel  processing  machines by IBM. The Company's  product  licensing  growth
rates could be materially and adversely  impacted if the parallel  processors do
not gain significant  market  acceptance and customer  spending shifts away from
traditional  mainframes to technology  platforms where the Company does not have
significant product acceptance.

<CAPTION>
Markets:
                                      % of Product Licensing                   % of Product Licensing
                                      -----------------------                 -----------------------
                                        3 Mo. ended Mar. 31,                   6 Mo. ended Mar. 31,
                                      -----------------------                 ----------------------
                                        1997        1996        Y/Y chg         1997        1996       Y/Y chg
                                      ----------- ----------- ------------    ----------- ---------- -----------
<S>                                     <C>         <C>         <C>             <C>         <C>         <C>  
Domestic                                31.9%       26.2%       28.6%           34.8%       28.6%       38.5%
International                           68.1%       73.8%       (2.2%)          65.2%       71.4%        3.5%
                                      ----------- ----------- ------------    ----------- ---------- -----------
    Total                              100.0%      100.0%        5.9%          100.0%      100.0%       13.5%
                                      ----------- ----------- ------------    ----------- ---------- -----------
</TABLE>

Domestic:
Field  sales grew 25.6% and 41.1%  (54.7% and 57.7%  without the effect of MAXM)
for 3 and 6 months,  respectively  while  telesales  grew 47.3% and  22.6%.  For
growth to continue  in this  geographic  market,  the  Company is  dependent  on
continued increases from the telesales group and from the field sales force.

                                       7

<PAGE>


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


International:
The 2.2%  decrease  (3.5%  increase  for six  months) in the  Company's  product
licensing from its international  operations,  comprised of foreign subsidiaries
and marketing  agents,  is primarily a result of unfavorable  currency  exchange
rates and the  effect of the MAXM  acquisition.  Without  the effect of MAXM and
currency  exchange  rates,  growth  was  18.1%  and  21.9% for the 3 and 6 month
periods,  respectively.  Since the  majority  of new  revenue  is  derived  from
international  markets,  the Company's operations and financial results could be
significantly and adversely affected by international factors such as changes in
currency  exchange  rates  and  specific   countries'   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 (net
of costs) and royalties from IBM for the jointly developed CICS product

Maintenance fees and other grew 6.0% and 8.1% for the quarter and  year-to-date,
respectively.  Without the effect of currency rate changes, maintenance fees and
other grew  12.7% and 13.6%.  This  increase  is mainly the result of  increased
product  licensing in the previous  year  combined  with high renewal  rates but
reduced  by higher  discounts  granted  on  multiple-year  maintenance  packages
purchased by customers.

The Company  anticipates that maintenance  revenues in fiscal 1997 will continue
to increase due to the higher license  revenue growth in 1996,  although it will
be negatively  impacted by reduced revenue associated with site  consolidations,
non-CPU specific pricing and multiple-year  maintenance  package  discounts.  In
addition, to produce maintenance revenue increases, the Company must continue to
generate  new product  licensing  revenues  and continue to provide high quality
maintenance support and upgrades.

                                       8

<PAGE>


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


<TABLE>
COSTS AND EXPENSES (excluding acquisition and nonrecurring costs):
<CAPTION>

                                                 % of Revenue                          % of Revenue
                                              --------------------                 --------------------
                                               3 Mo. ended Mar. 31,                6 Mo. ended Mar. 31,
                                              --------------------                 --------------------
                                                 1997       1996      Y/Y chg        1997       1996      Y/Y chg
                                              ---------- --------- ------------    ---------- --------- ------------
<S>                                              <C>        <C>       <C>            <C>        <C>        <C>   
Cost of product licensing                         7.1%       9.2%     (18.2%)         7.6%       9.0%      (7.0%)
Cost of maintenance fees and other                9.0%       9.5%       1.3%         10.6%       9.6%      22.4%
Product development                              12.7%      11.5%      16.2%         12.8%      12.0%      18.4%
Sales and marketing                              47.7%      52.0%      (2.9%)        49.1%      51.8%       5.3%
General and administrative                        9.4%      10.1%      (1.7%)        10.1%      10.3%       8.7%
                                              ---------- --------- ------------    ---------- --------- ------------
    Total                                        85.9%      92.3%      (1.5%)        90.2%      92.7%       7.9%
                                              ---------- --------- ------------    ---------- --------- ------------
</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.  Cost of product  licensing  decreased  18.2% and 7.0% for the 3 and 6
months  ended  March 31,  1997,  respectively.  Without  the  impact of MAXM and
currency  exchange  rates,  the  decrease  for the  quarter was 3.7% with a 2.5%
increase  for the six month  period.  The  decrease  in the  second  quarter  is
primarily  attributable  to less  software  amortization.  The first quarter had
higher third party vendor sales which increased royalty expense. In general, the
relationship  of cost of product  licensing to licensing  revenue will fluctuate
due primarily to changes in revenue mix, royalty  agreements and amortization of
capitalized software.

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 operating the computer
services  division.  Cost of  maintenance  fees and other  increased by 1.3% and
22.4% for the 3 and 6 months  ended March 31,  1997,  respectively.  Without the
impact of MAXM and currency exchange rates, the increases were 20.8% and 30.4%%.
In 1997,  the increase  was  primarily  due to higher  third party  royalties in
Europe as a result of the expiration of a reduced rate from a third-party vendor
which ran from the second quarter of fiscal 1995 to the fourth quarter of fiscal
1996. In general,  fluctuations in the  relationship of cost of maintenance fees
and other to revenue are caused primarily by changes in revenue mix, maintenance
support, royalty agreements, and amortization of capitalized software.

                                       9

<PAGE>


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

Product development:

Product development costs increased by 16.2% for the quarter and 18.4% for the 6
month period in 1997. Without the effect of MAXM and currency rate changes,  the
increases were 19.5% and 24.2%, respectively.  The increase in 1997 is primarily
attributable  to higher  R&D  personnel  costs due to  increased  headcount.  In
addition,  reimbursement  of expenses by IBM  relating to the jointly  developed
CICS  product  was  terminated  as a result of the new  royalty  contract in the
fourth  quarter of fiscal  1996.  R&D  expenditures  were 15% and 16% of revenue
(excluding  third party) in 1997 and 1996,  respectively,  and the amount of R&D
capitalized  was 16% and 15% of gross R&D costs in 1997 and 1996,  respectively.
The Company  capitalizes  certain development costs in accordance with Statement
of Financial  Accounting  Standard No. 86 ("FAS 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 and support expenses may fluctuate  annually  depending in part upon
the number and status of internal software development projects.

Sales and marketing:

Sales and  marketing  expenses  decreased by 2.9% for the quarter and  increased
5.3% for the 6 month  period in 1997.  Without  the effect of MAXM and  currency
rate changes, the increases were 14.4% and 17.2%, respectively.  The increase in
1997 is  primarily  attributable  to higher agent and  employee  commissions  on
increased  sales,  higher  sales  personnel  costs in  Europe  and  Japan due to
increased headcount.

General and Administrative:

General  and  administrative  expenses  decreased  by 1.7% for the  quarter  and
increased  8.7% for the 6 month period.  Without the effect of MAXM and currency
rate changes,  there was a 14.3%  increase for the quarter and a 15.4%  increase
for the six month period.  The increase is primarily  attributable  to increased
costs relating to European facility costs, performance based accruals and higher
personnel costs.

Acquisition and Nonrecurring Costs:

During the second quarter of 1997, the Company had  approximately  $11.3 million
of  nonrecurring  costs which  included  $1 million of  purchased  research  and
development costs and $10.3 million of acquisition costs related to the purchase
of MAXM Systems  Corporation  on January 16, 1997 (see Note 4). The  acquisition
costs  consisted  primarily  of $4.0  million of  termination  costs  related to
reseller  agreements,  $2.8  million of employee  costs,  $1.6  million of costs
related to closing  redundant  facilities and $1.6 million of legal,  accounting
and broker fees.

                                       10

<PAGE>


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

Interest and other income, net:

Interest and other income  consists  principally  of interest  income,  interest
expense,  currency  gain or loss,  and gain or loss on disposal  of assets.  The
67.3% increase over 1996 is mainly due to higher  interest income as installment
receivables increased  approximately 23% over a year ago and a $250,000 currency
gain in 1997 versus a loss of $125,000 in the prior year.

Income Taxes:

Income taxes have been provided based upon the estimated  effective tax rate for
the year. The effective tax rate for the six months ended March 31, 1997 was 30%
exclusive  of the tax  effect of  expenses  related to the  acquisition  of MAXM
Systems  Corporation  and  operating  losses of MAXM for which no tax benefit is
recognized. Acquisition costs and operating losses of MAXM increased tax expense
$555,000  and  $1,800,000  for the three and six months  ended  March 31,  1997,
respectively.

The   effective   tax  rate  before  the   valuation   allowance  for  MAXM  and
non-deductible  acquisition  costs  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.  Management  believes  future
taxable income will be sufficient to realize the tax benefit of the net deferred
tax asset of approximately $15 million.

LIQUIDITY AND CAPITAL RESOURCES:

The significant  sources of cash during 1997 include  proceeds from the exercise
of employee stock options of $3,145,000;  proceeds from sale of lease  contracts
receivable of $2,154,000;  stock  purchases  through the Employee Stock Purchase
Plan of $828,000  and net  borrowings  under a line of credit of  $116,000.  The
significant  uses of cash  during  1997  include  $3,761,000  used by  operating
activities; $1,904,000 for internally developed capitalized software; $1,623,000
for purchases of furniture, equipment and leasehold improvements; $1,105,000 for
payments  on capital  leases and notes  payable;  $601,000  for the  purchase of
treasury  stock;  $550,000 for the net purchase of  short-term  investments  and
$26,000 for investment in long-term equity securities.  Management believes cash
flows from  operations  and existing cash resources will be adequate to meet its
working capital 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
20,  1997,  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 2000
annual  meeting  of  stockholders,  to  approve an  amendment  to the  Company's
Restated  Certificate  of  Incorporation  to increase the  authorized  number of
shares of Common Stock,  to amend the Company's  employee stock purchase plan to
increase the aggregate number of shares available for issuance 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.

Franklin P. Johnson,  Jr. was elected to the board of directors for a three-year
term with 15,036,976 votes "FOR" and 84,736 votes "WITHHELD".

Johannes S.  Bruggeling  was elected to the board of directors  for a three-year
term with 15,037,559 votes "FOR" and 84,153 votes "WITHHELD".

The amendment to the Company's Restated Certificate of Incorporation to increase
the number of  authorized  number of shares of Common Stock from  30,000,000  to
45,000,000 was approved by the following vote:
                                                           
             "FOR"            "AGAINST"          "ABSTAIN"       Broker Nonvotes
             -----            ---------          ---------       ---------------
          14,609,965           292,081            18,024             201,642

The  amendment to the  Company's  employee  stock  purchase plan to increase the
aggregate number of shares available for issuance under the plan was approved by
the following vote:

             "FOR"            "AGAINST"          "ABSTAIN"       Broker Nonvotes
             -----            ---------          ---------       ---------------
           12,833,722         2,035,684           50,664             201,642

The selection of Ernst & Young LLP as the Company's independent auditors for the
fiscal year ending September 30, 1997 was ratified by the following vote:

             "FOR"            "AGAINST"          "ABSTAIN"       Broker Nonvotes
             -----            ---------          ---------       ---------------
           15,100,903           12,269             8,540              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.

                        During  the  three  months  ended  March 31,  1997,  the
                        Company filed a Current Report on Form 8-K dated January
                        16, 1997 under Item 2,  Acquisition  or  Disposition  of
                        Assets,  relating  to the  acquisition  of MAXM  Systems
                        Corporation.  Subsequent to March 31, 1997,  the Company
                        filed Form 8-K/A under Item 7, Financial  Statements and
                        Pro Forma Financial Information,  which amended Form 8-K
                        dated January 16, 1997.

                                       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.
                                                  ---------------------


May 12, 1997                                      \Paul E. Newton\
                                                  ----------------------------
                                                  Paul E. Newton
                                                  President and Director
                                                  (Principal Executive Officer)



May 12, 1997                                      \Arthur F. Knapp, Jr.\
                                                  ----------------------------
                                                  Arthur F. Knapp, Jr.
                                                  Senior Vice President
                                                  Chief Financial Officer
                                                  (Principal Financial Officer)



May 12, 1997                                      \Carla J. Dorow\
                                                  ----------------------------
                                                  Carla J. Dorow
                                                  Controller
                                                  (Principal Accounting Officer)

                                       14