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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K
                            ------------------------
(MARK ONE)

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       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 NO.: 0-30849

                           WEBEX COMMUNICATIONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                   DELAWARE                                      77-0548319
       (STATE OR OTHER JURISDICTION OF            (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
        INCORPORATION OR ORGANIZATION)

  307 WEST TASMAN DRIVE SAN JOSE, CALIFORNIA                       95134
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 435-7000

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                    COMMON STOCK, $0.001 PAR VALUE PER SHARE
                                (TITLE OF CLASS)

     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 [ ]

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

     The aggregate market value of Common Stock held by non-affiliates (based
upon the closing sale price on the Nasdaq National Market on March 15, 2001) was
approximately $166,957,784. Shares of Common Stock held by each executive
officer and based on Schedule 13G filings, have been excluded since such persons
may be deemed affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

     As of March 15, 2001, there were 36,869,936 shares of Common Stock, $0.001
per share par value, outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Certain sections of the Registrant's definitive Proxy Statement for the
2001 Annual Meeting of Stockholders to be held on MAY 15TH, 2001 are
incorporated by reference in Part III of this Form 10-K to the extent stated
herein.

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<PAGE>   2

                           WEBEX COMMUNICATIONS, INC.

                                   FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2000

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                        PAGE NO.
                                                                        --------
<S>       <C>                                                           <C>
                                     PART I
Item 1.   Business....................................................      1
Item 2.   Properties..................................................      6
Item 3.   Legal Proceedings...........................................      6
Item 4.   Submission of Matters to a Vote of Security Holders.........      6
          Executive Officers of the Registrant........................      7

                                    PART II
Item 5.   Market for the Registrant's Common Stock and Related              8
          Stockholder Matters.........................................
Item 6.   Selected Financial Data.....................................      9
Item 7.   Management's Discussion and Analysis of Financial Condition      10
          and Results of Operations...................................
Item 7A.  Quantitative and Qualitative Disclosures About Market            23
          Risk........................................................
Item 8.   Financial Statements and Supplementary Data.................     24
Item 9.   Changes in and Disagreements with Accountants on Accounting      45
          and Financial Disclosure....................................

                                    PART III
Item 10.  Directors and Executive Officers of the Registrant..........     45
Item 11.  Executive Compensation......................................     45
Item 12.  Security Ownership of Certain Beneficial Owners and              45
          Management..................................................
Item 13.  Certain Relationships and Related Transactions..............     45

                                    PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form      45
          8-K.........................................................
</TABLE>

                                        i
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     THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. WORDS SUCH AS
"ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES'
AND SIMILAR EXPRESSIONS IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED IN THE FORWARD-
LOOKING STATEMENTS. THESE ARE STATEMENTS THAT RELATE TO FUTURE PERIODS AND
INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS AS TO EXPECTED NET LOSSES AND
EXPECTED NET LOSSES AT LEAST THROUGH 2001, EXPECTED IMPROVEMENT OF CASH FLOWS
AND OUR ABILITY TO APPROACH POSITIVE CASH FLOW FROM OPERATIONS BY THE END OF
2001, ABILITY TO GENERATE REVENUE, ABILITY AND PROJECTIONS TO BECOME PROFITABLE,
EXPECTED EXPENSES INCLUDING THOSE RELATED SALES AND MARKETING, RESEARCH AND
DEVELOPMENT AND GENERAL AND ADMINISTRATIVE, ABILITY TO REDUCE OPERATING
EXPENSES, EXPECTED FUTURE REVENUE LEVELS AND SOURCES OF REVENUE, EXPECTED
IMPACT, IF ANY, OF LEGAL PROCEEDINGS, EXPECTED INCREASES IN HEADCOUNT, THE
ADEQUACY OF LIQUIDITY AND CAPITAL RESOURCES, THE SUFFICIENCY OF OUR CASH
RESERVES TO MEET OUR CAPITAL REQUIREMENTS, EXPECTED GROWTH IN BUSINESS AND
OPERATIONS AND THE EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS. FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PREDICTED, INCLUDE
BUT ARE NOT LIMITED TO, THE COMPANY'S DEPENDENCE ON KEY PRODUCTS AND/OR
SERVICES, THE COMPANY'S ABILITY TO ATTRACT AND RETAIN CUSTOMERS AND DISTRIBUTION
PARTNERS FOR EXISTING AND NEW SERVICES, TO EXPAND ITS OPERATIONS
INTERNATIONALLY, TO EXPAND ITS INFRASTRUCTURE TO MEET THE DEMAND FOR THE
COMPANY'S SERVICES, THE COMPANY'S ABILITY TO CONTROL ITS EXPENSES, THE COMPANY'S
ABILITY TO RECRUIT AND RETAIN EMPLOYEES PARTICULARLY IN THE AREAS OF SALES,
ENGINEERING, SUPPORT AND HOSTING SERVICES, THE ABILITY OF DISTRIBUTION PARTNERS
TO SUCCESSFULLY RESELL THE COMPANY'S SERVICES, THE ECONOMY AND THE STRENGTH OF
COMPETITIVE OFFERINGS AND THE PRICES BEING CHARGED BY THOSE COMPETITORS.
ADDITIONAL FACTORS, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY,
INCLUDE THOSE SET FORTH IN THE FOLLOWING DISCUSSION, AND, IN PARTICULAR, THE
RISKS DISCUSSED IN ITEM 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- FACTORS THAT MAY AFFECT RESULTS." THESE
FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE HEREOF. UNLESS REQUIRED BY
LAW, THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING
STATEMENTS.

     In the sections of this report entitled "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Factors That May Affect Results," all references to "WebEx," "we,"
"us," "our" or the "Company" mean WebEx Communications, Inc.

     ActiveTouch, WebEx, WebEx.com and Meeting-Enable Your Web Site are our
trademarks. We also refer to trademarks of other corporations and organizations
in this document.

                                     PART I

ITEM 1. BUSINESS

OVERVIEW

     We develop and market services that allow end-users to conduct meetings and
share software applications, documents, presentations and other content on the
Internet using a standard web browser. Integrated telephony and web-based audio
and video services are also available using standard devices such as telephones,
computer web-cameras and microphones.

     We commenced operations under the name Silver Computing, Inc. in February
1995. We changed our name to Stellar Computing Corporation in June 1997,
ActiveTouch Systems, Inc. in December 1997, ActiveTouch, Inc. in May 1998, and
WebEx, Inc. in December 1999. In July 2000, we reincorporated in Delaware under
the name WebEx Communications, Inc. We released an interactive communications
service built on our technology in early 1998. We began offering WebEx Meeting
Center, our first real-time, interactive multimedia communications service, in
February 1999 and began selling the service to customers and distribution
partners. We also made available a subset of our service for free at
www.webex.com. Since February 1999, our activities have been focused on
continuing to enhance and market our WebEx Interactive Platform and our WebEx
Meeting Center service, developing and deploying new services, expanding our
sales and marketing organizations and deploying our global WebEx Interactive
Network. We introduced WebEx

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<PAGE>   4

Business Exchange in the third quarter of 1999, WebEx OnCall service in the
fourth quarter of 1999, WebEx Shopping-Together (now WebEx OnTour) in the first
quarter of 2000, WebEx OnStage in the second quarter of 2000, and WebEx
Professional Services in the third quarter of 2000. In 2000, we generated over
90% of our revenue from our WebEx Meeting Center.

     We sell our services directly to our customers and indirectly through our
distribution partners. We offer our services on a monthly subscription basis to
our customers and on a revenue sharing, discounted or pay-per-use basis through
our distribution partners. Revenue from subscription services consists of
monthly usage fees, which are based upon a fixed number of concurrent users, and
initial set-up fees. Typically, our contracts are for an initial term of 90
days, and then renew monthly unless terminated by either party.

OUR SERVICES AND TECHNOLOGY ARCHITECTURE

     We have designed and developed our technology architecture to satisfy the
interactive communications requirements of a broad range of customers. Our
architecture consists of three tiers: WebEx Interactive Services, WebEx
Interactive Platform and WebEx Interactive Network.

WEBEX INTERACTIVE SERVICES

     WebEx Interactive Services provide a broad range of features that build on
the real-time functionality and capabilities of the WebEx Interactive Platform
and WebEx Interactive Network. We currently provide the following five services:
WebEx Meeting Center, WebEx Business Exchange, WebEx OnCall, WebEx OnTour and
WebEx OnStage. In addition, we offer WebEx Professional Services, which consists
of custom development work for special requirements of our customers and
distribution partners.

     - WebEx Meeting Center. The WebEx Meeting Center integrates data, audio and
       video to provide an on-line meeting environment where end-users can
       communicate, share applications, documents, presentations and other
       content in real-time as if they were physically in the same meeting. To
       attend a WebEx meeting and experience the full benefits of the WebEx
       Meeting Center, an end-user needs to have a personal computer with a
       standard web browser and an Internet connection, a telephone and a video
       camera, if video is desired. The WebEx Meeting Center is designed to
       allow end-users to participate in meetings anywhere, at any time, from
       any web browser and telephone. Telephone calls, and web-based audio and
       video services can also be controlled within a WebEx meeting using
       standard devices such as telephones, computer web-cameras and
       microphones. Personnel throughout an extended enterprise, including
       sales, marketing, training, customer service, engineering and business
       development personnel, can benefit from the WebEx Meeting Center.

     - WebEx Business Exchange. The WebEx Business Exchange incorporates WebEx
       meeting and office functionality in a seamless "virtual outer office"
       environment, thus enabling comprehensive, synchronous and asynchronous
       interaction between business professionals. The WebEx Business Exchange
       is a multi-tiered service that is available through our customers' and
       distribution partners' websites and can be offered with limited
       capabilities for free, or with full functionality on a pay-per-use or
       subscription basis, depending on the needs of the end-user. Our own
       website, www.webex.com, is a fully enabled example of the WebEx Business
       Exchange.

      The WebEx Business Exchange allows business professionals to establish
      their own office homepage and promote their meeting-enabled businesses to
      other members of their web community. WebEx Business Exchange also enables
      business professionals to more easily organize their real-time on-line
      meetings and to better manage off-line communications with their business
      associates. Office owners can create multi-category, multi-level
      directories to allow potential business associates to easily find the
      appropriate business professional to help them with their inquiry.

     - WebEx OnCall. This service is primarily used by customer service
       organizations and can be an extension of customer care websites. WebEx
       OnCall enables our customers to enhance the effectiveness of traditional
       telephone-based customer support by allowing their service agents to
       support end-users through the web browser, with no requirement for
       preinstalled software on either computer. The

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<PAGE>   5

       service incorporates a custom user interface to simplify support
       interactions for both the support agent and the end-user.

     - WebEx OnTour. This service is designed for retailing websites to enable
       on-line shoppers to co-browse and shop together. This service promotes a
       social shopping experience on-line, increasing the likelihood of on-line
       shoppers purchasing goods and services at the customer's website.

     - WebEx OnStage. WebEx OnStage offers business managers and executives a
       professionally managed web conferencing service for communications events
       such as press briefings, product announcements and marketing events. The
       service combines WebEx's interactive meeting capabilities with planning,
       training, logistics management and real-time support services to provide
       a comprehensive service that reduces the customer effort involved in
       hosting a web seminar.

     - WebEx Professional Services. Our WebEx Professional Services group
       provides custom development services to meet the special requirements of
       our customers and distribution partners when using the WebEx Interactive
       Services.

WEBEX INTERACTIVE PLATFORM

     The WebEx Interactive Platform is a software architecture that is designed
to provide high reliability, accommodate variable levels of traffic and activity
and offer comprehensive functionality. The WebEx Interactive Platform enables
the rapid development, by WebEx or third party developers, of interactive
services that can be easily integrated into any website or web application using
a set of standards-based application programming interfaces, or APIs. These
interactive services can be deployed over multiple servers and locations,
enabling each group of servers to quickly accommodate a large number of
meetings. The core functionality of the WebEx Interactive Platform is provided
by the following service managers:

     - Meeting Manager: provides reliable, real-time data delivery to all
       participants, and includes full data sharing functionality for documents,
       presentations, applications and web content, as well as live video. The
       meeting manager is compatible with existing firewalls.

     - Office Manager: provides personal offices for each registered user and
       tools for organizing WebEx meetings and promoting the office holder's
       business.

     - Session Manager: provides browser-based sessions without manual software
       installation, and manages meeting scheduling, security and encryption.

     - Telephony Manager: supports public switched telephone network or
       voice-over-IP communications within browser-based interactions.

WEBEX INTERACTIVE NETWORK

     The WebEx Interactive Network is a globally distributed network that is
designed to deliver dependable, real-time communications services to our
customers' and distribution partners' websites by routing their end-users'
sessions through the nearest WebEx hub. The WebEx Interactive Network includes:

     - high capacity Internet connections for high speed connectivity and
       redundancy;

     - more than 250 WebEx servers in six data centers across the U.S., Europe
       and Asia, in our own domestic and international facilities and at
       third-party co-location facilities;

     - our network operations centers, located in California and Colorado, where
       we monitor the WebEx Interactive Network 24 hours a day, seven days a
       week;

     - the ability to dynamically add capacity at any facility, enabling each
       WebEx server cluster to scale to meet changes in user demand;

     - network management software to minimize technical issues; and

     - sophisticated diagnostic software for troubleshooting and rapid problem
       resolution.

                                        3
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CUSTOMERS AND DISTRIBUTION PARTNERS

     We sell our services directly to our customers and indirectly through our
distribution partners. We offer our services on a monthly subscription basis to
our customers and through a revenue share, discounted or pay-per-use basis to
our distribution partners. Our customers purchase and use our services
themselves while our distribution partners integrate and resell our services
with their offerings. Some of our distribution partners also use our services
themselves.

     As of December 31, 2000, we had subscription agreements with over 2,500
customers. In 2000, we derived more than 91% of our revenue from direct sales to
customers. As of December 31, 2000, we had entered into agreements with over 180
distribution partners, including portals, software and service vendors and
communications service providers. In 2000 we generated less than 9% of our
revenue from these relationships. Software and service vendors have agreements
to resell our services to end-users by marketing, and in some cases integrating,
our services into their product or service offerings. Communications service
providers have agreements to resell our services as part of their
teleconferencing and videoconferencing services. Our distribution agreements
typically have a term of one year and are automatically renewed unless either
party terminates the agreement with 30 days prior written notice. Under these
agreements, we often host and maintain a co-branded site offering the services
and the distribution partner provides a link to the co-branded site from its
website. In most of these agreements, the distribution partner purchases
subscription services from WebEx and resells such services to end user
customers. Under these agreements, the amount of revenue we receive depends on
the level of commitment and volume of business generated under the agreement.

     Under our distribution agreements, either WebEx or the distribution partner
bill the end user customers. When WebEx bills the end user, a percentage of the
proceeds generated from the distribution partner's sale of WebEx services are
paid to the distribution partner and the remainder is retained by WebEx. When
the distribution partner bills the end user, WebEx sells the services on a
discounted basis to the distribution partner, which in turn marks up the price,
and sells the service to the end user.

     No single customer accounted for 10% or more of our revenue in 2000.

TECHNOLOGY ALLIANCES

     We seek to develop technology alliances with leading technology and service
providers in areas complementary to our services, such as teleconferencing,
videoconferencing, voice-over-IP and communications infrastructure providers. We
believe these technology alliances allow us to integrate current and emerging
technology into our service offerings. Our technology alliances include
licensing agreements and in some instances co-branding and revenue-sharing
agreements. To date, we have technology alliances with Lipstream (voice over
IP), Net2Phone (enables audio transmissions between computers and telephones),
TIBCO Software (information distribution), Voyant (teleconferencing) and
Bitstream (font technology).

RESEARCH AND DEVELOPMENT

     The emerging market for interactive communications services for websites is
characterized by rapid technological change, new product introductions and
enhancements, evolving customer requirements and rapidly changing industry
standards. We devote a substantial portion of our resources to developing and
enhancing our network services and application platform, extending our global
network, and conducting quality assurance testing.

     As of December 31, 2000, we had 73 employees engaged in research and
development activities. Our research and development expenditures were
approximately $12.2 million, $3.4 million and $1.4 million in 2000, 1999 and
1998, respectively.

                                        4
<PAGE>   7

SALES AND MARKETING

     Our sales efforts target a broad range of businesses primarily through
direct sales channels and to a lesser extent through indirect sales channels.
Direct sales are generated through our internal sales force, while indirect
sales are generated through revenue-sharing agreements with our distribution
partners. Our internal sales force uses our own WebEx services to maximize the
effectiveness and efficiency of our direct sales channel.

     Our marketing programs include customer needs assessment and market
analysis, service and platform marketing, brand awareness, advertising, public
relations and lead generation, and educating organizations in our target
markets.

COMPETITION

     The market for interactive communication services is rapidly evolving and
intensely competitive. We expect competition to persist and intensify in the
future. Although we do not currently compete against any one entity with respect
to all aspects of our services, we do compete with various companies and
technologies in regards to specific elements of our services. For example, we
compete with providers of traditional communications technologies such as
teleconferencing and videoconferencing as well as applications software and
tools companies, such as Centra Software, Evoke Communications, Lotus
(SameTime), Microsoft (NetMeeting) and Placeware. Some of our current or
potential competitors have longer operating histories, significantly greater
financial, technical and other resources, or greater name recognition than we
do. Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements. Competition could seriously
harm our ability to sell services on terms favorable to us. Competitive
pressures could reduce our market share or require us to reduce the price of our
services, any of which could harm our business, financial condition and
operating results.

     We believe that the principal competitive factors in our market include:

     - service functionality, quality and performance;

     - ease of use, reliability, scalability and security of services;

     - establishing a significant base of customers and distribution partners;

     - ability to introduce new services to the market in a timely manner;

     - customer service and support;

     - attracting third-party web developers; and

     - pricing.

     Although we believe our services compete favorably with respect to each of
these factors, the market for our services is new and rapidly evolving. We may
not be able to maintain our competitive position against current and potential
competitors, especially those with greater resources.

INTELLECTUAL PROPERTY

     The status of United States patent protection in the Internet industry is
not well defined and will evolve as the U.S. Patent and Trademark Office grants
additional patents. We currently have three issued patents in the areas of
creating network connections for conferencing, document annotation and
optimizing data transfer and 16 patent applications pending in the United
States. We may seek additional patents in the future. We do not know if our
patent applications or any future patent application will result in a patent
being issued with the scope of the claims we seek, if at all, or whether any
patents we have or may receive will be challenged or invalidated. It is
difficult to monitor unauthorized use of technology, particularly in foreign
countries where the laws may not protect our proprietary rights as fully as in
the United States, and our competitors may independently develop technology
similar to ours. We will continue to assess appropriate occasions for seeking
patent and other intellectual property protections for those aspects of our
technology that we believe constitute

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innovations providing significant competitive advantages. The pending and any
future applications may not result in the issuance of valid patents.

     Our success depends in part upon our rights in proprietary technology. We
rely on a combination of copyright, trade secret, trademark and contractual
protection to establish and protect our proprietary rights, and we enter into
confidentiality agreements with those of our employees and consultants involved
in the development of our services. We routinely require our employees,
customers and potential business distribution partners to enter into
confidentiality and nondisclosure agreements before we will disclose any
sensitive aspects of our services, technology or business plans. In addition, we
require employees to agree to surrender to us any proprietary information,
inventions or other intellectual property they generate or come to possess while
employed by us. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use our
services or technology. These precautions may not prevent misappropriation or
infringement of our intellectual property.

     Third parties may infringe or misappropriate our copyrights, trademarks and
similar proprietary rights. In addition, other parties may assert infringement
claims against us. Although we have not received notice of any alleged
infringement of third party patents, our services may infringe issued patents
that relate to our services. In addition, because patent applications in the
United States are not publicly disclosed until the patent is issued, we may be
unaware of filed applications which relate to our services. We may be subject to
legal proceedings and claims in the ordinary course of our business, including
claims of alleged infringement of the trademarks and other intellectual property
rights of third parties. Intellectual property litigation is expensive and
time-consuming and could divert management's attention away from running our
business. This litigation could also require us to develop non-infringing
technology or enter into royalty or license agreements. These royalty or license
agreements, if required, may not be available on acceptable terms, if at all.
Our failure or inability to develop non-infringing technology or license the
proprietary rights on a timely basis would harm our business.

EMPLOYEES

     As of December 31, 2000, we had 427 full-time employees, including 73 in
research and development, 221 in sales and marketing, 97 in set-up, support and
training, and 36 in general and administrative. None of our employees are
covered by collective bargaining agreements. We believe our relations with our
employees are good.

ITEM 2. PROPERTIES

     We currently lease approximately 126,000 square feet in three buildings in
San Jose, California, which is used for sales, engineering, support, network
operations, and general corporate functions, including our corporate
headquarters. The lease terms for two of these buildings expire in September
2004 and for the third building in February 2008. We are also leasing
approximately 32,000 square feet in Sacramento, California which is used for
sales and support activities. We also have leased facilities in Denver,
Colorado, Amsterdam, the Netherlands, Melbourne, Australia, and Hong Kong. The
lease terms range from March 2001 to January 2008.

ITEM 3. LEGAL PROCEEDINGS

     We are not a party to any material pending legal proceeding, nor is our
property the subject of any material legal proceeding, except ordinary routine
legal proceedings arising in the ordinary course of our business and incidental
to our business, none of which are expected to have a material adverse impact
upon our business, financial position or results of operations.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 2000.

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EXECUTIVE OFFICERS OF THE REGISTRANT

     Our executive officers and their ages as of December 31, 2000, are:

<TABLE>
<CAPTION>
                   NAME                      AGE                    POSITION
                   ----                      ---                    --------
<S>                                          <C>   <C>
Subrah S. Iyar.............................  43    Chief Executive Officer
Min Zhu....................................  51    President and Chief Technical Officer
Craig Klosterman...........................  46    Chief Financial Officer
Glenn Reinus...............................  47    Vice President, Worldwide Sales and
                                                   Business Development
</TABLE>

     Subrah S. Iyar is a co-founder of WebEx and has served as its Chairman and
Chief Executive Officer since January 1997. Prior to founding WebEx, Mr. Iyar
served as the Vice President and General Manager of the Northern California
Internet Business division of Quarterdeck Corporation, a software company, from
October 1995 until November 1996. From February 1983 to 1995, Mr. Iyar held
several senior positions in Business Development, Marketing and Sales management
at Apple Computer, Inc., a computer hardware company, and Intel Corporation, a
semiconductor company. Mr. Iyar holds a B.S. in Electrical Engineering from the
Indian Institute of Technology and an M.S. in Computer Engineering from the
University of Southwestern Louisiana.

     Min Zhu is a co-founder of WebEx and has served as its President and Chief
Technical Officer since February 1997. Prior to founding WebEx, Mr. Zhu
co-founded Future Labs, a real-time collaboration software company, in 1991,
which was subsequently sold to Quarterdeck in 1996. Mr. Zhu holds an M.S. in
Engineering Economics Systems from Stanford University.

     Craig Klosterman has served as the Chief Financial Officer of WebEx since
February 2000. From August 1998 through November 1999, Mr. Klosterman served as
the Chief Financial Officer and Senior Vice President of Finance and
Administration for Informatica. From February 1993 to August 1998, Mr.
Klosterman worked at Lumisys, a medical imaging appliances company, and held a
variety of positions including Chief Operating Officer, Chief Financial Officer
and Executive Vice President. Mr. Klosterman holds a B.S. in mechanical
engineering from the University of Wisconsin and an M.B.A. in Finance from The
Wharton School at the University of Pennsylvania.

     Glenn Reinus, Vice President, Worldwide Sales, has been with WebEx since
October 1998. Prior to joining WebEx, Mr. Reinus served as Vice President of
Business Development of BackWeb Technologies, an automated knowledge
distribution solutions company, from December 1996 to October 1998. From
December 1995 to December 1996 Mr. Reinus served as Assistant General Manager
for the Internet Business Unit and Senior Director of Business Development at
Quarterdeck Corporation. Mr. Reinus holds a B.S. in Marketing and Business
Administration from California State University, Northridge.

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                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

MARKET FOR COMMON STOCK

     Our common stock has been traded publicly on the Nasdaq National Market
under the symbol "WEBX" since July 28, 2000. Before July 28, 2000, there was no
public market for the common stock. The following table sets forth for the
periods indicated the highest and lowest sale price of the common stock during
each quarter since July 28, 2000:

<TABLE>
<CAPTION>
                      FISCAL YEAR 2000                         HIGH       LOW
                      ----------------                        -------    ------
<S>                                                           <C>        <C>
Third Quarter...............................................  $58.00     $19.25
Fourth Quarter..............................................  $52.125    $12.50
</TABLE>

HOLDERS OF RECORD

     As of March 15, 2001, there were approximately 433 holders of record (not
including beneficial holders of stock held in street name) of the common stock.

DIVIDEND POLICY

     We have never declared nor paid any cash dividends on our capital stock and
do not expect to do so in the foreseeable future. Any future determination with
respect to the payment of dividends will be at the discretion of the Board of
Directors and will depend upon, among other things, our operating results,
financial condition and capital requirements, the terms of then-existing
indebtedness, general business conditions and such other factors as the Board of
Directors deems relevant.

SALES OF UNREGISTERED SECURITIES

     During the fiscal year ended December 31, 2000, we issued and sold the
following unregistered securities:

          1. We granted options to purchase 6,247,200 shares of common stock to
     employees, directors and consultants under our stock plans at exercise
     prices ranging from $0.50 to $11.50 per share.

          2. We issued 5,993,304 shares of common stock pursuant to the exercise
     of stock options at exercise prices ranging from $0.005 to $10.80 per
     share.

          3. We issued and sold 2,053,445 shares of Series D preferred stock to
     investors at a purchase price of $12.50 per share.

          4. We issued a warrant to purchase 339,915 shares of Series D
     preferred stock at an exercise price of $12.50

     The sales of the above securities were considered to be exempt from
registration under the Securities Act of 1933, as amended, in reliance on
Section 4(2) of the Securities Act, or Regulation D promulgated thereunder, or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving a public offering or transactions under compensatory
benefit plans and contracts relating to compensation provided under Rule 701.
The recipients of securities in each of these transactions represented their
intention to acquire the securities for investment only and not with a view to
or for sale with any distribution thereof, and appropriate legends were affixed
to the share certificates and instruments issued in these transactions. All
recipients had adequate access, through their relationship with the Registrant,
to information about the Registrant.

                                        8
<PAGE>   11

ITEM 6. SELECTED FINANCIAL DATA

     The following selected consolidated statement of operations data for the
years ended December 31, 2000, 1999 and 1998 and the selected consolidated
balance sheet data at December 31, 2000 and 1999 are derived from the audited
consolidated financial statements contained in Item 8 of Part II of this Form
10-K. The following selected consolidated statement of operations data for the
year ended December 31, 1997 and the selected consolidated balance sheet data at
December 31, 1998 and 1997 are derived from the audited consolidated financial
statements of the Company not contained in this Form 10-K. The following
selected consolidated statement of operations data for the year ended December
31, 1996 and the selected consolidated balance sheet data at December 31, 1996
is derived from the unaudited consolidated financial statements of the Company
not contained in this Form 10-K.

     The information set forth below is not necessarily indicative of results of
future operations and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes included in Items 7 and
8 of Part II of this Form 10-K.

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                   -----------------------------------------------
                                                     2000       1999      1998      1997     1996
                                                   --------   --------   -------   ------   ------
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>        <C>        <C>       <C>      <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenue......................................  $ 25,389   $  2,607   $ 1,987   $1,289   $  481
Cost of revenue..................................    10,081        688       484      192       38
                                                   --------   --------   -------   ------   ------
Gross profit.....................................    15,308      1,919     1,503    1,097      443
Operating expenses:
  Sales and marketing............................    50,807      9,319     2,244      421      103
  Research and development.......................    12,168      3,361     1,406      525      713
  General and administrative.....................     6,553      1,732       198      125       48
  *Equity-based compensation.....................    28,039      2,005        92       --       --
                                                   --------   --------   -------   ------   ------
          Total operating expenses...............    97,567     16,417     3,940    1,071      864
                                                   --------   --------   -------   ------   ------
Operating income (loss)..........................   (85,259)   (14,498)   (2,437)      26     (421)
Other income, net................................     1,833        127       102        2       --
                                                   --------   --------   -------   ------   ------
Net income (loss)................................  $(80,426)  $(14,371)  $(2,335)  $   28   $ (421)
                                                   ========   ========   =======   ======   ======
Net income (loss) per share, basic and diluted...  $  (3.81)  $  (1.34)  $ (0.23)  $ 0.00   $(0.08)
                                                   ========   ========   =======   ======   ======
Shares used to compute basic and diluted net
  income (loss) per share........................    21,111     10,700    10,103    7,192    5,000
                                                   ========   ========   =======   ======   ======
*Equity-based compensation:
Sales and marketing..............................  $  9,916   $    720   $    33   $   --   $   --
Research and development.........................     6,404        113        49       --       --
General and administrative.......................    11,719      1,172        10       --       --
                                                   --------   --------   -------   ------   ------
                                                   $ 28,039   $  2,005   $    92   $   --   $   --
                                                   ========   ========   =======   ======   ======
</TABLE>

                                        9
<PAGE>   12

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                       ------------------------------------------
                                                        2000      1999      1998    1997    1996
                                                       -------   -------   ------   -----   -----
                                                                     (IN THOUSANDS)
<S>                                                    <C>       <C>       <C>      <C>     <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................  $28,214   $13,621   $5,522   $  58   $  33
Working capital (deficit)............................   19,374    10,588    4,880    (405)    (72)
Total assets.........................................   68,543    21,649    5,991     283     158
Long-term obligations................................    1,269        --       --      10      55
Deferred equity-based compensation...................   17,181     2,078      134      --      --
Accumulated deficit..................................   97,488    17,062    2,691      15      18
Stockholders' equity (deficit).......................   45,506    14,799    5,112    (332)   (409)
</TABLE>

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

     The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates"
and similar expressions identify such forward-looking statements. These
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those indicated in the forward-
looking statements. These are statements that relate to future periods and
include statements as to expected net losses and expected net losses through
2001, expected improvement of cash flows and our ability to approach positive
cash flow from operations by the end of 2001, ability to generate revenue,
ability and projections to become profitable, expected expenses including those
related sales and marketing, research and development and general and
administrative, ability to reduce operating expenses, expected future revenue
levels and sources of revenue, expected impact, if any, of legal proceedings,
expected increases in headcount, the adequacy of liquidity and capital
resources, the sufficiency of our cash reserves to meet our capital
requirements, expected growth in business and operations and the effect of
recent accounting pronouncements. Factors that could cause actual results to
differ materially from those predicted, include, but are not limited to, the
Company's ability to attract and retain customers and distribution partners for
existing and new services, to expand its operations internationally, to expand
its infrastructure to meet the demand for the Company's services, the Company's
ability to control its expenses, the Company's ability to recruit and retain
employees particularly in the areas of sales, engineering, support and hosting
services, the ability of distribution partners to successfully resell the
Company's services, the economy and the strength of competitive offerings and
the prices being charged by those competitors. Additional factors, which could
cause actual results to differ materially, include those set forth in the
following discussion, and, in particular, the risks discussed in "Factors that
May Affect Results." These forward-looking statements speak only as of the date
hereof. Unless required by law, the Company undertakes no obligation to update
publicly any forward-looking statements.

OVERVIEW

     We develop and market services that allow end-users to conduct meetings and
share software applications, documents, presentations and other content on the
Internet using a standard web browser. Integrated telephony and web-based audio
and video services are also available using standard devices such as telephones,
computer web-cameras and microphones.

     We commenced operations in February 1995. We released an interactive
communications product built on our technology in early 1998. We began offering
WebEx Meeting Center, our first real-time, interactive multimedia communications
service, in February 1999 and began selling service to customers and
distribution partners. We also made available a subset of our service for free
at www.webex.com. Since February 1999, our activities have been focused on
continuing to enhance and market our WebEx Interactive Platform and our WebEx
Meeting Center service, developing and deploying new services, expanding our
sales and marketing organizations and deploying our global WebEx Interactive
Network. We introduced WebEx Business Exchange in the third quarter of 1999,
WebEx OnCall service in the fourth quarter of 1999, WebEx

                                        10
<PAGE>   13

Shopping-Together (now WebEx OnTour) in the first quarter of 2000, WebEx OnStage
in the second quarter of 2000 and WebEx Professional Services in the third
quarter of 2000.

     In 1998 and 1999, we provided contract development services.

     During 1998 and 1999, we sold a limited number of perpetual software
licenses for software delivered to customers. Under AICPA Statement of Position
("SOP") 97-2, Software Revenue Recognition, we recognize revenue from perpetual
software license agreements upon shipment of the software when all of the
following criteria have been met: persuasive evidence of an arrangement exists;
delivery has occurred; the fee is fixed or determinable; and collectibility is
probable.

     In February 1999, with the introduction of WebEx Meeting Center, we began
providing our customers and distribution partners access to our hosted services
under subscription and other service arrangements and discontinued selling
software licenses to end-users. Under these arrangements, end-users access our
services hosted on our servers via their website or web browser. Under the
consensus published by the Emerging Issues Task Force of the Financial
Accounting Standards Board for Issue No. 00-3, hosted services revenues are
recognized ratably over the service period and include software use fees, user
set-up fees, and hosting fees in limited cases of customer-dedicated hosted
software. In addition to the subscription services revenue, we derive revenue
from pay-per-use services and telephony charges which is recognized as the
related services are provided.

     We sell our services directly to our customers and indirectly through our
distribution partners. We offer our services on a monthly subscription basis to
our customers and on a revenue sharing, discounted or pay-per-use basis through
our distribution partners. In cases where WebEx contracts directly with the
end-user, revenues are recognized gross with payments made to distribution
partners recorded as a commission expense. In cases where the end-user contracts
directly with the distribution partner, revenues are recognized at the net
amount earned from the distribution partner.

     Cost of revenue consists primarily of expenses for delivering our services
to websites and supporting our customers and distribution partners. These
expenses include the cost of user set-up, hosting the service and technical
support and training, including Internet communication access costs, personnel,
licensed software and equipment costs and depreciation. Training costs are
recovered in the initial set-up fee charged to customers.

     Sales and marketing expense consists primarily of salaries, commissions and
other expenses related to the sale of our services to customers and establishing
partner relationships, as well as marketing campaigns to generate sales leads
and to build the WebEx brand. Research and development expense consists
primarily of personnel, equipment, consulting and other expenses associated with
designing, developing and testing our services and the software underlying our
services. In addition to our U.S. based engineering group, we have relationships
with related third-party companies in China under which contract engineers to
these companies provide a variety of quality assurance and software development
activities. We compensate these third parties based on the direct cost of their
services and not on development milestones. Expenses associated with these
relationships are included in research and development. General and
administrative expense includes personnel and associated expenses relating to
general management, finance, legal and human resources. Office space expense is
allocated by department.

     Equity-based compensation expense consists of the amortization of deferred
equity-based compensation resulting from the grant of stock options at exercise
prices less than the fair value of the underlying common stock on the grant date
for employees and the fair value of stock options and warrants granted to non-
employees. As of December 31, 2000 and December 31, 1999, we had recorded
cumulative equity-based compensation costs of approximately $47.3 million and
$4.2 million, respectively, in connection with the grant of stock options and
warrants to employees and non-employees. Cumulative amounts of deferred
equity-based compensation expensed through December 31, 2000 and through
December 31, 1999 were $30.1 million and $2.1 million, respectively. Based on
employees hired as of December 31, 2000, we expect to incur

                                        11
<PAGE>   14

equity-based compensation expense of at least $11.3 million in 2001, $4.6
million in 2002 and $1.6 million in 2003.

     As of December 31, 2000 and December 31, 1999, we had an accumulated
deficit of $97.5 million and $17.1 million, respectively. These losses have been
funded primarily through the private issuances of equity securities. We expect
our operating expenses to continue to increase as we continue to expand our
business. As a result, we expect to incur net losses at least through 2001 and
will need to generate significant revenue to achieve and maintain profitability.

     California is in the midst of an energy crisis that could disrupt our
operations and increase our expenses. We rely on the major Northern California
public utility, Pacific Gas & Electric Company, or PG&E, to supply electric
power to our headquarters in Northern California. Due to problems associated
with the de-regulation of the power industry in California and shortages in
wholesale electricity supplies, customers of PG&E have been faced with increased
electricity prices, power shortages and, in some cases, rolling blackouts. If
blackouts interrupt our power supply, we may be temporarily unable to continue
to operate our central computer and communications hardware and network systems.
Any such interruption in our ability to continue our operations could delay our
ability to develop or provide our network and services, which could damage our
reputation and result in lost revenue, either of which could substantially harm
our business and results of operations.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, the statement of
operations data as a percentage of revenue.

<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                              --------------------------
                                                               1998      1999      2000
                                                              ------    ------    ------
<S>                                                           <C>       <C>       <C>
Net revenue.................................................    100%      100%      100%
Cost of revenue.............................................     24        26        40
                                                               ----      ----      ----
Gross profit................................................     76        74        60
Operating expenses:
  Sales and marketing.......................................    113       358       200
  Research and development..................................     71       129        48
  General and administrative................................     10        66        26
  Equity-based compensation.................................      5        77       110
                                                               ----      ----      ----
          Total operating expenses..........................    198       630       384
                                                               ----      ----      ----
Operating loss..............................................   (123)     (556)     (324)
Other income, net...........................................      5         5         7
                                                               ----      ----      ----
Net loss....................................................   (118)%    (551)%    (317)%
                                                               ====      ====      ====
</TABLE>

     Revenue. Revenue increased from $2.0 million in 1998 to $2.6 million in
1999 and to $25.4 million in 2000, representing an increase of 31% from 1998 to
1999 and an increase of 874% from 1999 to 2000. This increase was primarily due
to growth in our direct subscribing customer base, and, to a lesser extent, an
increase in revenue from distribution partners.

     Cost of revenue. Cost of revenue increased from $484,000 in 1998 to
$688,000 in 1999 and to $10.1 million in 2000. As a percent of revenues, cost of
revenue increased from 24% in 1998 to 26% and 40% in 1999 and 2000,
respectively. The increase of cost of revenue as a percent of revenue was
primarily due to increases in the cost for delivering our services to more
customers, additional technical staff to support our growing installed base of
customers, and expanding and improving our worldwide network.

     Sales and marketing. Sales and marketing expense increased from $2.2
million in 1998 to $9.3 million in 1999 and to $50.8 million in 2000. The
increases were primarily due to the hiring of additional sales and marketing
personnel in connection with the building of our sales force, higher sales
commissions associated with increased sales volume and an extensive marketing
campaign to generate leads and build brand

                                        12
<PAGE>   15

awareness. We anticipate that sales and marketing expense will increase in
absolute dollars in 2001 relative to 2000, primarily due to anticipated
increases in our sales force.

     Research and development. Research and development expense increased from
$1.4 million in 1998 to $3.4 million in 1999 and to $12.2 million in 2000. The
increase was primarily related to consulting fees and personnel related expenses
resulting from an increase in headcount. We anticipate that research and
development expense will increase in absolute dollars in 2001 relative to 2000
as we continue to expand our service offerings and service functionalities.

     General and administrative. Our general and administrative expense consists
primarily of personnel costs for finance, human resources, legal and general
management, as well as professional expenses, such as legal and accounting.
General and administrative expense increased from $198,000 in 1998 to $1.7
million in 1999 and to $6.6 million in 2000. The increase was primarily due to
professional fees, personnel and payroll related expenses. We anticipate that
general and administrative expense will increase in absolute dollars in 2001
relative to 2000.

     Bad debt expense increased from $22,000 in 1998 to $288,000 in 1999 and to
$1.3 million in 2000. This increase was commensurate with the increase in
accounts receivable.

     Equity-based compensation. Our equity-based compensation expense represents
the amortization of deferred stock-based compensation over the vesting period of
options granted to employees and expenses related to issuance of common stock
warrants and options to non-employees. Deferred equity-based compensation
represents the difference between the exercise price of the stock options
granted to employees and the deemed fair value of common stock at the time of
those grants. Equity-based compensation expense increased from $92,000 in 1998
to $2.0 million in 1999 and to $28.0 million in 2000. Equity-based compensation
expense related to the unvested portion of non-employee options will be impacted
by future changes in our stock price and will fluctuate accordingly.

     Other income, net. Other income, net is comprised of net investment income
net of interest and other expenses. Other income, net increased from $102,000 in
1998 to $127,000 in 1999 and to $1.8 million in 2000. The increase was primarily
due to higher cash balances in 2000 compared to 1998 and 1999, as a result of
interest income earned on cash received from our Series C and D preferred stock
issuance and the initial public offering of common stock.

     Income taxes. Because we incurred net operating losses in 1998, 1999 and
2000, we paid no federal, state and foreign income taxes in those periods nor
have we recognized any tax benefits for the related tax operating loss
carryforwards. We have concluded it is more likely than not that such benefits
will not be utilized.

     As of December 31, 2000, we had federal and state net operating loss
carryforwards of approximately $65.1 million and $32.4, respectively. We also
had federal and state research and development tax credit carryforwards of
approximately $400,000 and $347,000, respectively. Our net operating loss
carryforwards will expire at various dates beginning in 2003 through 2020, if
not utilized.

     Net loss. As a result of the foregoing, net loss excluding equity-based
compensation expense was $2.2 million, $12.4 million and $52.4 million, and net
loss including such expense was $2.3 million, $14.4 million and $80.4 million in
1998, 1999 and 2000, respectively. We anticipate that net losses will continue
at least in 2001.

LIQUIDITY AND CAPITAL RESOURCES

     Prior to our initial public offering, we financed our operations primarily
from the private sales of preferred equity securities. Upon completion of our
initial public offering of common stock, a total of 4,025,000 shares were sold
to the public, which resulted in proceeds to WebEx, after offering expenses of
$50.7 million.

     As of December 31, 2000, cash and cash equivalents were $28.2 million, an
increase of $14.6 million compared with cash and cash equivalents of $13.6
million as of December 31, 1999.

                                        13
<PAGE>   16

     Net cash used in operating activities was $1.5 million in 1998, $10.9
million in 1999 and $44.8 million in 2000. Cash used in operating activities
were primarily due to net operating losses, increases in accounts receivable,
prepaid expenses and other non-current assets. The sources of cash were
primarily increases in accounts payable, accrued liabilities, accrued
commissions and deferred revenue.

     Net cash used in investing activities was $191,000 in 1998 and $2.9 million
in 1999 and $23.3 million in 2000. Net cash used by investing activities related
primarily to capital expenditures for equipment, hardware and software used in
our data operations center from which we operate our Internet communication
platform, and a loan to our Chief Executive Officer in 2000.

     Net cash provided by financing activities was $7.1 million in 1998, $21.9
million in 1999 and $82.7 million in 2000. Cash provided by financing activities
was primarily due to the sale of our Series C and D preferred stock and our
initial public offering. We also receive funds from time to time from the
exercise of options or similar rights to purchase shares of our common stock. We
have no other material external sources of liquidity.

     In March 2001 we entered into a loan and security agreement that allows us
to borrow up to $7.5 million or 80% of eligible accounts receivable as defined
in the agreement. As of March 29, 2001, available borrowings under the agreement
totaled $7.1 million. Under the terms of the agreement, we may borrow up to $2.0
million on a revolving credit line that bears interest at 1.5% above the prime
rate and matures on April 30, 2002, and up to $5.5 million on term advances that
bear interest at 1.75% above the prime rate and mature on September 30, 2003.

     The interest rates will be reduced by 0.5% after a profitability date,
defined in the agreement as the date we achieve a quarterly profit before
deduction of equity-based compensation charges. Term advances may be drawn
through June 30, 2001, and require only payments of interest through September
1, 2001, after which all outstanding principal and interest will be payable in
equal monthly installments until the maturity date. The loan and security
agreement is collateralized by all our tangible and intangible assets and is
subject to compliance with covenants, including a minimum liquidity ratio,
minimum cash balance, minimum tangible net worth, maximum quarterly operating
losses adjusted for equity-based compensation charges and minimum quarterly
revenue.

     As of December 31, 2000, our material purchase commitments, including
equipment purchases, construction of leasehold improvements at new leased
facilities, sales and marketing expenses, including advertising, totaled $8.4
million.

     We lease office facilities under various operating leases that expire
through 2008. Total future minimum lease payments, under all operating leases,
amount to approximately $26.2 million.

     We expect that existing cash resources will be sufficient to fund our
anticipated working capital and capital expenditure needs for at least the next
12 months. We expect our cash flow to improve and enable us to approach positive
cash flow from operations by the end of 2001, and that existing cash reserves
will therefore be sufficient to meet our capital requirements during this
period. We base our expense levels in part on our expectations of future revenue
levels. If our revenue for a particular period is lower than we expect, we may
take steps to reduce our operating expenses accordingly. If cash generated from
operations is insufficient to satisfy our liquidity requirements, we may seek to
sell additional public or private equity securities or obtain additional debt
financing. There can be no assurance that additional financing will be available
at all or, if available, will be obtainable on terms favorable to us. If we are
unable to obtain additional financing, we may be required to reduce the scope of
our planned technology and product development and sales and marketing efforts,
which could harm our business, financial condition and operating results.
Additional financing may also be dilutive to our existing stockholders.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement as amended by SFAS No. 137,
Deferral of the Effective Date of FASB Statement No. 133, establishes accounting
and reporting standards for derivative instruments and requires recognition of

                                        14
<PAGE>   17

all derivatives as assets or liabilities in the statement of financial position
and measurement of those instruments at fair value. The statement is effective
for fiscal quarters of all fiscal years beginning after June 15, 2000. WebEx
adopted SFAS No. 133 in the first quarter of fiscal year 2001 and such adoption
did not have a material effect on results of operations or financial position.

     In December 1999, the Securities and Exchange Commission published Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements. SAB 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements and provides interpretations regarding the application of generally
accepted accounting principles to revenue recognition where there is an absence
of authoritative literature addressing a specific arrangement or a specific
industry. SAB 101 was effective for WebEx in the fourth quarter of 2000. The
adoption of SAB 101 did not impact WebEx's financial statements or the
application of adopted revenue recognition policies.

FACTORS THAT MAY AFFECT RESULTS

     The risks and uncertainties described below are not the only ones we face.
If any of the following risks actually occur, our business, financial condition
or results of operations could be materially and adversely affected.

We incurred net losses in 1999 and 2000 and expect continuing losses at least
through 2001.

     As of December 31, 2000, we had an accumulated deficit of approximately
$97.5 million. We incurred net losses of approximately $80.4 million for the
year ended December 31, 2000 and $14.4 million for the year ended December 31,
1999. Our net losses were approximately 317% of revenue for the year ended
December 31, 2000.

     We expect to continue to incur net losses at least through 2001. If we do
not achieve our plans for profitability, we may not be able to increase the
number of our employees, our investment in expanding our network services and
application platform or our sales, marketing and research and development
programs in accordance with our present plans, each of which is critical to our
long-term success.

  Because our quarterly results vary and are difficult to predict, we may fail
to meet quarterly financial expectations, which may cause our stock price to
decline.

     We commenced operations in February 1995 and our business originally
consisted of consulting services. In early 1998, we licensed an interactive
communications product to a small number of customers. We began offering WebEx
Meeting Center in February 1999, our first real-time, interactive multimedia
communications service, and began selling this service to customers and
distribution partners. Because of our limited operating history providing
services and other factors, our quarterly revenue and operating results are
difficult to predict. In addition, because of the emerging nature of the market
for interactive communications services for websites, our quarterly revenue and
operating results may fluctuate from quarter to quarter. A number of other
factors could cause fluctuations in our operating results.

     Factors outside our control include:

     - our distribution partners' degree of success in distributing our services
       to end-users;

     - the announcement, introduction and market acceptance of new or enhanced
       services or products by our competitors;

     - changes in pricing policies of our competitors; and

     - the growth rate of the market for interactive communications services for
       websites.

     Factors within our control include:

     - our ability to develop, enhance and maintain our network services and
       application platform in a timely manner;

                                        15
<PAGE>   18

     - the mix of services we offer;

     - our ability to attract and retain customers;

     - the amount and timing of operating costs and capital expenditures
       relating to expansion of our business and network infrastructure;

     - the announcement, introduction and market acceptance of new or enhanced
       services or products by us; and

     - changes in our pricing policies.

     If any of these factors impact our business in a particular period, our
operating results may be below market expectations, in which case the market
price of our common stock would likely decline. Also, factors such as the growth
rate of the market for our services, our ability to maintain and enhance our
network services and platform and our competitors' success could impact our
longer-term financial growth by reducing demand for our services.

We expect that our operating expenses will continue to increase and if our
revenue does not correspondingly increase, our business and operating results
will suffer.

     We expect to continue to spend substantial financial and other resources on
developing and introducing new services, and expanding our sales and marketing
organization and network infrastructure. We base our expense levels in part on
our expectations of future revenue levels. If our revenue for a particular
quarter is lower than we expect, we may be unable to proportionately reduce our
operating expenses for that quarter, in which case our operating results for
that quarter would be adversely affected.

Our customers do not have long-term obligations to purchase our services;
therefore our revenue and operating results could decline if our customers do
not continue to use our services.

     Our customers do not have long-term obligations to purchase services from
us. In 1999, our subscription agreements generally had an initial term of 12
months. Beginning in 2000, most of our subscription agreements had an initial
term of three months. Our contracts can be terminated at any time after their
initial term. Over 95% of our customers have agreements with initial terms of
three to 12 months. Since we began selling our services, approximately 6% of our
customers have cancelled their agreements. In the fourth quarter of 2000, over
98% of the contracts entered into the previous quarter were renewed. Our
customers may choose not to continue to use our services, and we may not obtain
a sufficient number of additional customers to compensate for any customers we
may lose. The failure of existing customers to continue to use our services or
our failure to obtain additional customers would harm our business and operating
results.

Our business and operating results may suffer if we fail to establish
distribution relationships or if our distribution partners do not successfully
market and sell our services.

     To date, we have generated more than 90% of our revenue from direct sales
to customers to meeting-enable their websites. We have entered into distribution
agreements with over 180 distribution partners. For the year ended December 31,
2000, we have generated less than 10% of our revenue from our distribution
partners, which revenue consisted of initial set-up fees, commitment payments,
and service fees. The payments received from our distribution partners have
mostly been recorded as deferred revenue because we defer revenue related to
payments for initial set-up fees received at the beginning of the relationship
and record revenue from subscription services over the course of the service
period as the distribution partner resells our services. We also generally do
not record commitment fees as revenue until the commitment fee is fully earned
and paid. We cannot anticipate the amount of revenue we will derive from these
relationships in the future. Our distribution agreements are typically for
one-year terms and are automatically renewed unless either party terminates the
agreement by written notice. Under these agreements, we host and maintain a co-
branded site offering the services and the distribution partner provides a link
to the co-branded site from its website. Under these agreements, when WebEx
collects from the end user customers, WebEx pays a percentage of the proceeds
generated from the distribution partner's sale of WebEx services to the
distribution

                                        16
<PAGE>   19

partner and the remainder is retained by WebEx. When the distribution partner
purchases and resells the services, the distribution partner receives a discount
off of WebEx's standard end user prices. The revenue sharing and discount terms
of these agreements vary depending on the individual distribution partner's
business. The amount of revenue we receive depends on the minimum amount of
services they commit to resell and the volume of business generated under the
agreement. Under our standard distribution agreement, distribution partners are
required to make minimum resell commitments based on either a minimum number of
concurrent user subscriptions per month or a minimum dollar commitment. Under
these agreements, our distribution partners are obligated to offer our services
with WebEx branding during the term of the agreement. Some of our distribution
partners can add our pay-per-use meeting services to their existing websites.
The pay-per-use service provides unlimited access to our services to be paid on
a per use basis without the need for signing a subscription agreement. The
end-user generally pays for this service through use of a credit card. The
credit card information is entered as part of the on-line registration process
for using the service. If an end-user uses our services through a distribution
partner's website, we pay the partner a percentage of the revenue collected. For
pay per use services, we usually collect fees from the end-users and pay a
percentage of the fees collected to the distribution partner. We must continue
to establish and extend these distribution partnerships. Establishing these
distribution relationships can take as long as several months or more. It
typically takes several months before our distribution arrangements generate any
significant revenue.

     Our distribution partners are not prohibited from offering and reselling
the products and services of our competitors and may choose to devote
insufficient resources to marketing and supporting our services or to devote
greater resources to marketing and supporting the products and services of other
companies. If we fail to establish new distribution relationships in a timely
manner or if our distribution partners do not successfully distribute our
services, our ability to achieve market acceptance of our interactive
communications services for websites will suffer and our business and operating
results will be harmed.

We expect to depend on sales of our WebEx Meeting Center service for
substantially all of our revenue for the foreseeable future.

     Our WebEx Meeting Center service integrates data, audio and video to allow
end-users to participate in meetings online. Our WebEx Meeting Center service
accounted for more than 90% of our revenue in the year ended December 31, 2000.
We anticipate that revenue from our WebEx Meeting Center service will continue
to constitute substantially all of our revenue for the foreseeable future. Any
decline in the demand for our WebEx Meeting Center service, or its failure to
achieve broad market acceptance, would seriously harm our business.

If our services fail to function when used by large numbers of participants, we
may lose customers and our business and reputation may be harmed.

     Our strategy requires that our services be able to accommodate large
numbers of meetings at any one time. Our network monitoring measures the
capacity of our services by bandwidth use, and during the fourth quarter of 2000
our peak usage has been running at 50% or less of our capacity. However, if we
fail to increase our capacity consistent with our growth in usage, it could
impact system performance. In addition, we may encounter performance issues when
making upgrades and modifications to our network. If our services do not perform
adequately, we may lose customers, be unable to attract new customers and our
operating results could suffer.

Our sales cycle makes it difficult to predict our quarterly operating results.

     We have a long sales cycle because we generally need to educate potential
customers regarding the benefits of interactive communications services for
websites. Our sales cycle varies depending on the size and type of customer
contemplating a purchase. Potential customers frequently need to obtain
approvals from multiple decision makers within their organization and may
evaluate competing products and services prior to deciding to use our services.
Our sales cycle, which can range from several weeks to several months or more,
makes it difficult to predict the quarter in which use of our services may
begin.

                                        17
<PAGE>   20

The existence of significant equity-based compensation will negatively impact
earnings.

     As of December 31, 2000 we had approximately $17.2 million in deferred
equity-based compensation. This expense will generally be amortized over a four
year period and will result in a decrease in earnings. Cumulative amounts of
deferred equity-based compensation expensed through December 31, 1999 and
through December 31, 2000 were $2.1 million and $30.1 million, respectively. We
expect the amount of equity-based compensation expense to decrease over time as
a result of the vesting of options granted prior to our initial public offering.
However, the amount of future equity-based compensation expense related to the
unvested portion of option grants to non-employees will fluctuate with the stock
price and accordingly the amount of future equity-based compensation expense is
difficult to predict. In fiscal 1999 and fiscal 2000, we granted stock options
at exercise prices significantly lower than the anticipated offering price,
which has contributed to our equity-based compensation expenses.

If our branding and marketing efforts are not successful, our business may be
harmed.

     We believe that continued expansion of our marketing and brand recognition
efforts will be critical to achieve widespread acceptance of our interactive
communications services for websites. Although we have not yet determined the
specific amounts we plan to spend on marketing activities, we believe that sales
and marketing expense will increase in absolute dollars as we continue to expand
our sales force and build our brand. We intend to generally fund these expenses
from our existing cash balances, cash from operations and proceeds from our
initial public offering. Our marketing and advertising campaigns or branding
efforts may not be successful or consumers may not find our marketing efforts
compelling. In addition, our sales and marketing expenses may not be offset by
the expenses we incur in building our brand. If our marketing efforts are not
successful, our business and operating results will be harmed.

We rely on related companies in China which exposes us to risks of economic
instability in China, and risks related to political tension between China and
the United States.

     We currently rely on two related companies located in China, WebEx Haifei
and WebEx Hong Zhou, to conduct quality assurance testing and software
development activities. These companies are owned by the spouse of Min Zhu, one
of our executive officers. We have contracts with these companies under which
they perform development projects, assign ownership of the work performed to us,
and invoice us for services rendered based on a monthly fee per employee working
on WebEx projects. Most of the personnel who conduct these activities are
contract engineers to these third parties. Although our transactions with these
companies are approved by our disinterested directors, because these companies
are owned by the spouse of one of our executive officers, there may be a
perception that the terms of those arrangements are influenced by that
relationship. Our reliance on independent contractors located in China for
quality assurance and software development activities exposes us to a variety of
economic and political risks including but not limited to, trade restrictions,
tariffs and travel restrictions. The loss of these arrangements may cause our
costs to increase. In addition, current political and economic tensions between
the United States and China could harm our ability to conduct operations in
China, which could increase our operating costs and harm our business and
operations.

We could incur unexpected costs resulting from claims relating to use of our
services.

     Many of the business interactions supported by our services are critical to
our customers' businesses. Any failure in a customer's business interaction or
other communications activity caused or allegedly caused by our services could
result in a claim for damages against us, regardless of our responsibility for
the failure, and cause us to incur unexpected costs.

Our customers and end-users may use our services to share confidential and
sensitive information and if our system security is breached, our reputation
could be harmed and we may lose customers.

     Our customers and end-users may use our services to share confidential and
sensitive information, the security of which is critical to their business.
Third parties may attempt to breach our security or that of our

                                        18
<PAGE>   21

customers. We may be liable to our customers for any breach in security and any
breach could harm our reputation and cause us to lose customers. In addition,
computers are vulnerable to computer viruses, physical or electronic break-ins
and similar disruptions, which could lead to interruptions, delays or loss of
data. We may be required to expend significant capital and other resources to
further protect against security breaches or to resolve problems caused by any
breach.

The software underlying our services is complex and our business and reputation
could suffer if our services fail to perform properly due to undetected errors
or similar problems with our underlying software.

     Complex software, such as the software underlying our services, often
contains undetected errors. We may be forced to delay commercial release of our
services until problems are corrected and, in some cases, may need to implement
enhancements to correct errors that we do not detect until after deployment of
our services. If we do detect an error in our software before we introduce new
versions of our services, we might have to limit our services for an extended
period of time while we address the problem. In addition, problems with the
software underlying our services could result in:

     - damage to our reputation;

     - damage to our efforts to build brand awareness;

     - loss of or delay in revenue;

     - delays in or loss of market acceptance of our services; and

     - unexpected expenses and diversion of resources to remedy errors.

If our services do not work with the many hardware and software platforms used
by our customers and end-users, our business may be harmed.

     We currently serve customers and end-users who use a wide variety of
constantly changing hardware and software applications and networking platforms.
If our services are unable to support these platforms, they may fail to gain
broad market acceptance, which would cause our operating results to suffer. Our
success depends on our ability to deliver our services to multiple platforms and
existing, or legacy, systems and to modify our services and underlying
technology as new versions of applications are introduced. In addition, the
success of our services depends on our ability to anticipate and support new
standards, especially web standards.

We license third-party technologies, and if we cannot continue to license these
or alternate technologies in a timely manner and on commercially reasonable
terms, our business could suffer.

     We intend to continue to license technologies from third parties, including
applications used in our research and development activities and technology
which is integrated into our services. For example, we license real-time
database replication software, voice-over IP technology which provides web-based
voice communication capability in our services, and font rendering technology.
These third-party technologies and any that we may utilize in the future may not
continue to be available to us on commercially reasonable terms. In addition, we
may fail to successfully integrate any licensed technology into our services.
This in turn could harm our business and operating results.

Our recent growth has placed a strain on our infrastructure and resources, and
if we fail to manage our future growth to meet customer and distribution partner
requirements, our business could suffer.

     We are currently experiencing a period of rapid expansion in our personnel,
facilities, and infrastructure that has been placing a significant strain on our
resources. For example, our headcount increased from 105 employees at December
31, 1999 to 427 at December 31, 2000, and, although we may not experience in the
near future a hiring rate as high as that experienced during 2000, we expect
some increase in our headcount over the next several months. Our expansion has
placed, and we expect that it will continue to place, a significant strain on
our management, operational and financial resources. Any failure by us to

                                        19
<PAGE>   22

effectively manage our growth could disrupt our operations or delay execution of
our business plan and could consequently harm our business.

If we lose the services of Subrah S. Iyar, our Chief Executive Officer, or Min
Zhu, our Chief Technical Officer, our business may be harmed.

     Our success will depend on our senior executives. In particular, the loss
of the services of our Chief Executive Officer and co-founder, Subrah S. Iyar,
or our President, Chief Technical Officer and co-founder, Min Zhu, would harm
our business. We do not have long-term employment agreements with or life
insurance policies on any of our senior management.

We must attract, integrate and retain qualified personnel, which is particularly
difficult for us because we are headquartered in the San Francisco Bay Area
where competition for personnel is intense.

     Our future success will depend on our ability to attract, train, retain and
motivate highly skilled engineering, technical, managerial, sales and marketing
and customer support personnel. Competition for these personnel is intense,
especially in the San Francisco Bay Area. We hired over 322 people during 2000
and, although we may not experience in the near future a hiring rate as high as
that experienced during 2000, we expect to increase our headcount over the next
several months. We have had difficulty hiring qualified personnel as quickly as
we have desired. In particular, we have had difficulty hiring a sufficient
number of qualified technical, development and support personnel. Our inability
to hire, integrate and retain qualified personnel in sufficient numbers could
reduce the quality of our services. If we fail to retain and recruit necessary
sales, marketing or other personnel, our ability to develop new services and to
provide a high level of customer service, and consequently our business, could
suffer. In addition, if we hire employees from our competitors, these
competitors may claim that we have engaged in unfair hiring practices. We could
incur substantial costs in defending ourselves against any of these claims,
regardless of their merits.

Interruptions in either our internal or outsourced computer and communications
systems could reduce our ability to provide our services and could harm our
business and reputation.

     The success of our interactive communications services for websites depends
on the efficient and uninterrupted operation of our internal and outsourced
computer and communications hardware and software systems. Any system failure
that causes an interruption in our interactive communications services for
websites or a decrease in their performance could harm our relationships with
our customers and distribution partners. In this regard, some of our
communications hardware and software are hosted at third-party co-location
facilities. These systems and operations are vulnerable to damage or
interruption from human error, telecommunications failures, break-ins, sabotage,
computer viruses and intentional acts of vandalism. Because our central computer
and communications hardware and network operations are located in the San
Francisco Bay Area, an earthquake or other natural disaster could impair the
performance of our entire network. We have no formal disaster recovery plan in
the event of damage to or interruption of our internal or outsourced systems,
and business interruption insurance may not adequately compensate us for losses
that may occur.

We might have liability for content or information transmitted through our
communications services.

     We face potential liability for defamation, negligence, copyright, patent
or trademark infringement and other claims based on the nature and content of
the materials transmitted through our web-based communications services. Any
imposition of liability could harm our reputation and our business and operating
results, or could result in the imposition of criminal penalties.

                                        20
<PAGE>   23

Our success depends upon the patent protection of our software and technology.

     Our success and ability to compete depend to a significant degree upon the
protection of our underlying software and our proprietary technology through
patents. We regard the protection of patentable inventions as important to our
future opportunities. We currently have three issued patents in the areas of
peer-to-peer connections to facilitate conferencing, document annotation and
optimizing data transfer and 17 patent applications pending in the United States
and we may seek additional patents in the future. These patent applications
cover different aspects of the technology used to deliver our services and are
important to our ability to compete. However, it is possible that:

     - any patents acquired by or issued to us may not be broad enough to
       protect us;

     - any issued patent could be successfully challenged by one or more third
       parties, which could result in our loss of the right to prevent others
       from exploiting the inventions claimed in those patents;

     - current and future competitors may independently develop similar
       technology, duplicate our services or design around any of our patents;

     - our pending patent applications may not result in the issuance of
       patents; and

     - effective patent protection may not be available in every country in
       which we do business.

We also rely upon trademarks, copyrights and trade secrets to protect our
technology, which may not be sufficient to protect our intellectual property.

     We also rely on a combination of laws, such as copyright, trademark and
trade secret laws, and contractual restrictions, such as confidentiality
agreements and licenses, to establish and protect our technology. Our trademarks
include: ActiveTouch, WebEx (word and design), WebEx bifurcated ball design,
Meeting Center, WebEx Meeting Center, WebEx.com and Meeting-Enable Your Web
Site, and We've Got To Start Meeting Like This. Also, our software is
automatically protected by copyright law. These forms of intellectual property
protection are critically important to our ability to establish and maintain our
competitive position. However,

     - third parties may infringe or misappropriate our copyrights, trademarks
       and similar proprietary rights;

     - laws and contractual restrictions may not be sufficient to prevent
       misappropriation of our technology or to deter others from developing
       similar technologies;

     - effective trademark, copyright and trade secret protection may be
       unavailable or limited in foreign countries;

     - other companies may claim common law trademark rights based upon state or
       foreign laws that precede the federal registration of our marks; and

     - policing unauthorized use of our services and trademarks is difficult,
       expensive and time-consuming, and we may be unable to determine the
       extent of any unauthorized use.

     Reverse engineering, unauthorized copying or other misappropriation of our
proprietary technology could enable third parties to benefit from our technology
without paying us for it, which would significantly harm our business.

We may face intellectual property infringement claims that could be costly to
defend and result in our loss of significant rights.

     We may be subject to legal proceedings and claims in the general areas of
distributed networks, Internet-based communication and real-time collaboration,
including claims of alleged infringement of the copyrights, trademarks and
patents of third parties. Although we have not received notice of any alleged
patent infringement, our services may infringe issued patents that may relate to
our services. In addition, because the contents of patent applications in the
United States are not publicly disclosed until the patent is issued, we may be
unaware of filed patent applications relating to our services. We have received
notices alleging that we

                                        21
<PAGE>   24

have infringed trademarks or related rights of third parties. Intellectual
property litigation is expensive and time-consuming and could divert
management's attention away from running our business. This litigation could
also require us to develop non-infringing technology or enter into royalty or
license agreements. These royalty or license agreements, if required, may not be
available on acceptable terms, if at all, in the event of a successful claim of
infringement. Our failure or inability to develop non-infringing technology or
license proprietary rights on a timely basis would harm our business.

We may engage in future acquisitions or investments that could dilute the
ownership of our existing stockholders, cause us to incur significant expenses
or harm our operating results.

     We may acquire or invest in complementary businesses, technologies or
services, although as of December 31, 2000, we had no specific agreements or
commitments with respect to any of these transactions. Integrating any newly
acquired businesses, technologies or services may be expensive and
time-consuming. To finance any acquisitions, it may be necessary for us to raise
additional funds through public or private financings. Additional funds may not
be available on terms that are favorable to us and, in the case of equity
financings, may result in dilution to our stockholders. We may be unable to
complete any acquisitions or investments on commercially reasonable terms, if at
all. Even if completed, we may be unable to operate any acquired businesses
profitably or otherwise implement our growth strategy successfully. If we are
unable to integrate any newly acquired entities or technologies effectively, our
operating results could suffer. Future acquisitions by us could also result in
large and immediate write-offs, incurrence of debt and contingent liabilities,
or amortization of expenses related to goodwill and other intangibles, any of
which could harm our operating results.

We must compete successfully in the interactive communications services market.

     The market for interactive communications services is intensely
competitive, subject to rapid change and is significantly affected by new
product and service introductions and other market activities of industry
participants. Although we do not currently compete against any one entity with
respect to all aspects of our services, we do compete with various companies in
regards to specific elements of our interactive communications services. For
example, we compete with providers of traditional communications technologies
such as teleconferencing and videoconferencing as well as applications software
and tools companies, such as Centra Software, Evoke, Lotus (SameTime), Microsoft
(NetMeeting) and Placeware. We also face potential competition from a variety of
enterprise software vendors, such as Microsoft, and from a variety of providers
of infrastructure services for websites, such as Akamai, Inktomi, Infospace and
Critical Path, any of which could choose to extend their products and services
to include interactive communications.

     Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical and other resources and
greater name recognition than we do. Our current and future competitors may be
able to respond more quickly to new or emerging technologies and changes in
customer requirements. In addition, current and potential competitors have
established, and may in the future establish, cooperative relationships with
third parties and with each other to increase the availability of their products
and services to the marketplace. Competitive pressures could reduce our market
share or require us to reduce the price of our services, either of which could
harm our business and operating results.

Our future success depends on the broad market adoption and acceptance of
interactive communications services for Websites.

     The market for interactive communications services for websites is
relatively new and rapidly evolving. Market demand for communications services
over the Web is uncertain. If the market for interactive communications services
does not grow, our business and operating results will be harmed. Factors that
might influence market acceptance of our services include the following, all of
which are beyond our control:

     - willingness of businesses and end-users to use interactive communications
       services for websites;

     - the growth of the Web and commercial on-line services;

                                        22
<PAGE>   25

     - the willingness of our distribution partners to integrate interactive
       communications services for websites in their service offerings; and

     - the ongoing level of security and reliability for conducting business
       over the Web.

Our success depends on the continued growth of Web usage and the continued
reliability of the Internet.

     Because our services are designed to work over the Web, our revenue growth
depends on the continued development and maintenance of the Internet
infrastructure. This continued development of the Web would include maintenance
of a reliable network with the necessary speed, data capacity and security, as
well as timely development of complementary products and services, including
high speed modems, for providing reliable Internet access and services. Because
global commerce on the Web and the on-line exchange of information is new and
evolving, we cannot predict whether the Web will continue to be a viable
commercial marketplace over the long term. The success of our business will rely
on the continued improvement of the Web as a convenient means of customer
interaction and commerce, as well as an efficient medium for the delivery and
distribution of information by businesses to their employees.

Many of our customers are high technology companies or in the Internet industry
which may face financial problems in a slowing or down economy.

     Some of the companies that buy or that are likely to buy our products and
services are high technology companies or are in the Internet industry which may
face financial problems in a slowing or down economy. If they face financial
difficulties or are not successful, these companies may not be able to pay for
products or services that we have provided to them, and they may not be able to
buy further products and services from us.

We may experience power blackouts and higher electricity prices as a result of
California's current energy crisis, which could disrupt our operations and
increase our expenses

     California is in the midst of an energy crisis that could disrupt our
operations and increase our expenses. We rely on the major Northern California
public utility, Pacific Gas & Electric Company, or PG&E, to supply electric
power to our headquarters in Northern California. Due to problems associated
with the de-regulation of the power industry in California and shortages in
wholesale electricity supplies, customers of PG&E have been faced with increased
electricity prices, power shortages and, in some cases, rolling blackouts. If
blackouts interrupt our power supply, we may be temporarily unable to continue
to operate our central computer and communications hardware and network systems.
Any such interruption in our ability to continue our operations could delay our
ability to develop or provide our network and services, which could damage our
reputation and result in lost revenue, either of which could substantially harm
our business and results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Foreign Currency Risk. We have recently begun selling our services outside
the United States. These services are generally priced in the local currency. As
a result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
When the amount of revenue obtained from sources outside the United States
becomes significant, we may engage in hedging activities or other actions to
decrease fluctuations in operating results due to changes in foreign currency
exchange rates. To date, we have not used derivative instruments to hedge
foreign currency risks.

     Interest Rate Risk. We do not use derivative financial instruments or
market risk sensitive instruments. Instead, we invest in highly liquid
investments such as money market funds with maturities of less than three months
at date of purchase. Accordingly, we do not expect any material loss from these
investments and believe that our potential interest rate exposure is not
material.

                                        23
<PAGE>   26

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Financial Statements:
  Independent Auditors' Report..............................   25
  Consolidated Balance Sheets as of December 31, 2000 and
     1999...................................................   26
  Consolidated Statements of Operations for the years ended
     December 31, 2000, 1999 and 1998.......................   27
  Consolidated Statements of Stockholders' Equity (Deficit)
     and Comprehensive Loss for the years ended December 31,
     2000, 1999 and 1998....................................   28
  Consolidated Statements of Cash Flows for the years ended
     December 31, 2000, 1999 and 1998.......................   30
  Notes to Consolidated Financial Statements................   31
Financial Statement Schedule:
  Schedule II -- Valuation and Qualifying Accounts..........   44
</TABLE>

                                        24
<PAGE>   27

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
WebEx Communications, Inc.:

     We have audited the consolidated financial statements of WebEx
Communications, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of WebEx
Communications, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

                                                     /s/ KPMG LLP

Mountain View, California
February 2, 2001, except as to
note 8 which is as of March 29, 2001

                                        25
<PAGE>   28

                           WEBEX COMMUNICATIONS, INC.

                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                2000        1999
                                                              --------    --------
<S>                                                           <C>         <C>
Current Assets:
  Cash and cash equivalents.................................  $ 28,214    $ 13,621
  Accounts receivable, net of allowances of $1,848 and $310
     at December 31, 2000 and 1999, respectively............     9,596       2,449
  Prepaid expenses..........................................     3,179       1,299
  Other current assets......................................       153          69
                                                              --------    --------
          Total current assets..............................    41,142      17,438
Property and equipment, net.................................    20,502       2,167
Due from related party......................................     3,600          --
Other non-current assets....................................     3,299       2,044
                                                              --------    --------
          Total assets......................................  $ 68,543    $ 21,649
                                                              ========    ========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 10,052    $  3,435
  Accrued liabilities.......................................     4,095         713
  Due to related party......................................        --         200
  Current portion of capital lease obligation...............       888          --
  Deferred revenue..........................................     6,733       2,502
                                                              --------    --------
          Total current liabilities.........................    21,768       6,850
Capital lease obligation less current portion...............     1,269          --
                                                              --------    --------
          Total liabilities.................................    23,037       6,850
                                                              --------    --------
Commitments (note 5)
Stockholders' equity:
  Preferred stock, $0.001 par value, 5,000,000 shares
     authorized; no shares issued or outstanding............        --          --
  Convertible preferred stock, no par value; no shares
     authorized, issued or outstanding at December 31, 2000;
     14,599,119 shares authorized, 13,077,051 issued and
     outstanding at December 31, 1999; aggregate liquidation
     preference of $0 and $29,108 as of December 31, 2000
     and 1999, respectively.................................        --      29,108
  Common stock, $0.001 par value; 250,000,000 and 40,000,000
     shares authorized at December 31, 2000 and 1999,
     respectively; 36,817,162 and 11,047,166 shares issued
     and outstanding at December 31, 2000 and 1999,
     respectively...........................................        37          11
  Additional paid-in capital................................   160,191       4,820
  Notes receivable from stockholder.........................       (45)         --
  Deferred equity-based compensation........................   (17,181)     (2,078)
  Accumulated deficit.......................................   (97,488)    (17,062)
  Accumulated other comprehensive loss......................        (8)         --
                                                              --------    --------
          Total stockholders' equity........................    45,506      14,799
                                                              --------    --------
          Total liabilities and stockholders' equity........  $ 68,543    $ 21,649
                                                              ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements
                                        26
<PAGE>   29

                           WEBEX COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000        1999       1998
                                                              --------    --------    -------
<S>                                                           <C>         <C>         <C>
Revenue.....................................................  $ 25,389    $  2,607    $ 1,987
Cost of revenue.............................................    10,081         688        484
                                                              --------    --------    -------
  Gross profit..............................................    15,308       1,919      1,503
Operating expenses:
  Sales and marketing.......................................    50,807       9,319      2,244
  Research and development..................................    12,168       3,361      1,406
  General and administrative................................     6,553       1,732        198
  Stock-based compensation*.................................    28,039       2,005         92
                                                              --------    --------    -------
          Total operating expenses..........................    97,567      16,417      3,940
                                                              --------    --------    -------
  Operating loss............................................   (82,259)    (14,498)    (2,437)
  Other income, net.........................................     1,833         127        102
                                                              --------    --------    -------
          Net loss..........................................  $(80,426)   $(14,371)   $(2,335)
                                                              ========    ========    =======
Net loss per share, basic and diluted.......................  $  (3.81)   $  (1.34)   $ (0.23)
                                                              ========    ========    =======
Shares used in computing net loss per share basic and
  diluted...................................................    21,111      10,700     10,103
                                                              ========    ========    =======
  *Stock-based compensation:
     Sales and marketing....................................  $  9,916    $    720    $    33
     Research and development...............................     6,404         113         49
     General and administrative.............................    11,719       1,172         10
                                                              --------    --------    -------
                                                              $ 28,039    $  2,005    $    92
                                                              ========    ========    =======
</TABLE>

          See accompanying notes to consolidated financial statements
                                        27
<PAGE>   30

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
                 YEARS ENDED DECEMBER 31, 1998, 1999, AND 2000
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                   CONVERTIBLE PREFERRED                                              NOTE
                                           STOCK              COMMON STOCK                         RECEIVABLE      DEFERRED
                                   ---------------------   -------------------     ADDITIONAL         FROM       EQUITY-BASED
                                     SHARES      AMOUNT      SHARES     AMOUNT   PAID-IN CAPITAL   STOCKHOLDER   COMPENSATION
                                   ----------   --------   ----------   ------   ---------------   -----------   ------------
<S>                                <C>          <C>        <C>          <C>      <C>               <C>           <C>
BALANCES AT DECEMBER 31, 1997....          --   $     --   10,000,000    $10        $     14          $ --         $     --
  Net loss.......................          --         --           --     --              --            --               --
  Comprehensive loss.............          --         --           --     --              --            --               --
  Issuance of common stock in
    connection with the exercise
    of stock options.............          --         --      479,373     --              18            --               --
  Issuance of series A
    convertible preferred
    stock........................   1,144,474      1,288           --     --              --            --               --
  Issuance of series B
    warrants.....................          --         --           --     --             564            --               --
  Issuance of series B
    convertible preferred stock
    upon exercise of warrants....   4,598,383      5,817           --     --              --            --               --
  Deferred equity-based
    compensation.................          --         --           --     --             219            --             (219)
  Amortization of equity-based
    compensation to employees....          --         --           --     --              --            --               85
  Equity-based compensation to
    non-employees................          --         --           --     --               7            --               --
                                   ----------   --------   ----------    ---        --------          ----         --------
BALANCES AT DECEMBER 31, 1998....   5,742,857      7,105   10,479,373     10             822            --             (134)
  Net loss.......................          --         --           --     --              --            --               --
  Comprehensive loss.............          --         --           --     --              --            --               --
  Issuance of common stock in
    connection with the exercise
    of stock options.............          --         --      567,793      1              49            --               --
  Issuance of series C
    convertible preferred
    stock........................   7,334,194     22,003           --     --              --            --               --
  Deferred equity-based
    compensation.................          --         --           --     --           2,838            --           (2,838)
  Amortization of equity-based
    compensation to employees....          --         --           --     --              --            --              894
  Equity-based compensation to
    non-employees................          --         --           --     --           1,111            --               --
                                   ----------   --------   ----------    ---        --------          ----         --------

<CAPTION>
                                                    ACCUMULATED                      TOTAL
                                                       OTHER                     STOCKHOLDERS'
                                   COMPREHENSIVE   COMPREHENSIVE   ACCUMULATED      EQUITY
                                       LOSS            LOSS          DEFICIT       (DEFICIT)
                                   -------------   -------------   -----------   -------------
<S>                                <C>             <C>             <C>           <C>
BALANCES AT DECEMBER 31, 1997....                       $--         $   (356)      $   (332)
  Net loss.......................    $ (2,335)           --           (2,335)        (2,335)
                                     --------
  Comprehensive loss.............    $ (2,335)           --               --             --
                                     ========
  Issuance of common stock in
    connection with the exercise
    of stock options.............                        --               --             18
  Issuance of series A
    convertible preferred
    stock........................                        --               --          1,288
  Issuance of series B
    warrants.....................                        --               --            564
  Issuance of series B
    convertible preferred stock
    upon exercise of warrants....                        --               --          5,817
  Deferred equity-based
    compensation.................                        --               --             --
  Amortization of equity-based
    compensation to employees....                        --               --             85
  Equity-based compensation to
    non-employees................                        --               --              7
                                                        ---         --------       --------
BALANCES AT DECEMBER 31, 1998....                        --           (2,691)         5,112
  Net loss.......................    $(14,371)           --          (14,371)       (14,371)
                                     --------
  Comprehensive loss.............    $(14,371)           --               --             --
                                     ========
  Issuance of common stock in
    connection with the exercise
    of stock options.............                        --               --             50
  Issuance of series C
    convertible preferred
    stock........................                        --               --         22,003
  Deferred equity-based
    compensation.................                        --               --             --
  Amortization of equity-based
    compensation to employees....                        --               --            894
  Equity-based compensation to
    non-employees................                        --               --          1,111
                                                        ---         --------       --------
</TABLE>

                                        28
<PAGE>   31

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
                                  (CONTINUED)
                 YEARS ENDED DECEMBER 31, 1998, 1999, AND 2000
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                  CONVERTIBLE PREFERRED                                               NOTE
                                          STOCK               COMMON STOCK                         RECEIVABLE      DEFERRED
                                  ----------------------   -------------------     ADDITIONAL         FROM       EQUITY-BASED
                                    SHARES       AMOUNT      SHARES     AMOUNT   PAID-IN CAPITAL   STOCKHOLDER   COMPENSATION
                                  -----------   --------   ----------   ------   ---------------   -----------   ------------
<S>                               <C>           <C>        <C>          <C>      <C>               <C>           <C>
BALANCES AT DECEMBER 31, 1999...   13,077,051     29,108   11,047,166     11           4,820            --           (2,078)
  Net loss......................           --         --           --     --              --            --               --
  Foreign currency translation
    adjustment..................           --         --           --     --              --            --               --
  Comprehensive loss............           --         --           --     --              --            --               --
  Issuance of series C
    convertible preferred
    stock.......................      787,131      2,361           --     --              --            --               --
  Issuance of series D
    convertible preferred stock,
    net of issuance costs of
    $59.........................    2,053,445     25,609           --     --              --            --               --
  Issuance of common stock in
    connection with the exercise
    of stock options............           --         --    5,994,054      6           3,922           (45)              --
  Issuance of common stock in
    connection with Employee
    Stock Purchase Plan.........           --         --       79,025     --             940            --               --
  Repurchase of common shares...           --         --     (245,710)    --            (174)           --               --
  Issuance of series D
    warrants....................           --         --           --     --           1,737            --           (1,737)
  Amortization of series D
    warrants....................           --         --           --     --              --            --              709
  Deferred equity-based
    compensation................           --         --           --     --          38,604            --          (38,604)
  Issuance of common stock in
    connection with IPO, net of
    issuance costs of $5,610....           --         --    4,025,000      4          50,478            --               --
  Conversion of convertible
    preferred stock into common
    stock.......................  (15,917,627)   (57,078)  15,917,627     16          57,062            --               --
  Amortization of equity-based
    compensation to employees...           --         --           --     --              --            --           24,529
  Equity-based compensation to
    non-employees...............           --         --           --     --           2,802            --
                                  -----------   --------   ----------    ---        --------          ----         --------
BALANCES AT DECEMBER 31,
  2000..........................           --   $     --   36,817,162    $37        $160,191          $(45)        $(17,181)
                                  ===========   ========   ==========    ===        ========          ====         ========

<CAPTION>
                                                   ACCUMULATED                      TOTAL
                                                      OTHER                     STOCKHOLDERS'
                                  COMPREHENSIVE   COMPREHENSIVE   ACCUMULATED      EQUITY
                                      LOSS            LOSS          DEFICIT       (DEFICIT)
                                  -------------   -------------   -----------   -------------
<S>                               <C>             <C>             <C>           <C>
BALANCES AT DECEMBER 31, 1999...                        --          (17,062)        14,799
  Net loss......................    $(80,426)           --          (80,426)       (80,426)
  Foreign currency translation
    adjustment..................          (8)           (8)              --             (8)
                                    --------
  Comprehensive loss............    $(80,434)           --               --             --
                                    ========
  Issuance of series C
    convertible preferred
    stock.......................                        --               --          2,361
  Issuance of series D
    convertible preferred stock,
    net of issuance costs of
    $59.........................                        --               --         25,609
  Issuance of common stock in
    connection with the exercise
    of stock options............                        --               --          3,883
  Issuance of common stock in
    connection with Employee
    Stock Purchase Plan.........                        --               --            940
  Repurchase of common shares...                        --               --           (174)
  Issuance of series D
    warrants....................                        --               --             --
  Amortization of series D
    warrants....................                        --               --            709
  Deferred equity-based
    compensation................                        --               --             --
  Issuance of common stock in
    connection with IPO, net of
    issuance costs of $5,610....                        --               --         50,482
  Conversion of convertible
    preferred stock into common
    stock.......................                        --               --             --
  Amortization of equity-based
    compensation to employees...                        --               --         24,529
  Equity-based compensation to
    non-employees...............                        --               --          2,802
                                                       ---         --------       --------
BALANCES AT DECEMBER 31,
  2000..........................                       $(8)        $(97,488)      $ 45,506
                                                       ===         ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        29
<PAGE>   32

                           WEBEX COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000        1999       1998
                                                              --------    --------    -------
<S>                                                           <C>         <C>         <C>
Cash flows from operating activities:
  Net loss..................................................  $(80,426)   $(14,371)   $(2,335)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Provision for doubtful accounts and sales allowances...     1,832         288         22
     Depreciation and amortization..........................     3,651         392         57
     Equity-based compensation..............................    28,039       2,005        656
     Changes in operating assets and liabilities:
       Accounts receivable..................................    (8,979)     (2,536)      (105)
       Prepaid expenses and other current assets............    (1,964)     (1,332)       (31)
       Other non-current assets.............................      (185)        (15)         4
       Accounts payable.....................................     6,617       1,788         28
       Accrued liabilities..................................     3,382         461        205
       Deferred revenue.....................................     3,231       2,422         51
       Other................................................       (10)         --        (20)
                                                              --------    --------    -------
          Net cash used by operating activities.............   (44,812)    (10,898)    (1,468)
                                                              --------    --------    -------
Cash flows from investing activities:
  Loan made to related party................................    (3,600)         --         --
  Payments of security deposits.............................      (581)       (500)        --
  Purchases of property and equipment.......................   (19,075)     (2,198)      (191)
  Purchases of intangibles..................................        --        (158)        --
                                                              --------    --------    -------
          Net cash used in investing activities.............   (23,256)     (2,856)      (191)
                                                              --------    --------    -------
Cash flows from financing activities:
  Net proceeds from initial public offering.................    50,482          --         --
  Net proceeds from other issuances of common stock.........     4,823          50         18
  Repurchase of restricted common stock.....................      (174)         --         --
  Net proceeds from issuance of preferred stock.............    27,969      22,003      7,105
  Principal payments on capital leases......................      (239)         --         --
  Repayment of amounts due to related party.................      (200)       (200)        --
                                                              --------    --------    -------
          Net cash provided by financing activities.........    82,661      21,853      7,123
                                                              --------    --------    -------
Increase in cash and cash equivalents.......................    14,593       8,099      5,464
Cash and cash equivalents at beginning of the year..........    13,621       5,522         58
                                                              --------    --------    -------
Cash and cash equivalents at end of the year................  $ 28,214    $ 13,621    $ 5,522
                                                              ========    ========    =======
Supplemental disclosures of noncash investing and financing
  activities:
  Deferred equity-based compensation........................  $ 43,142    $  4,302    $   226
                                                              ========    ========    =======
  Accounts payable for acquisition of intellectual property
     rights and patents.....................................  $     --    $  1,500    $    --
                                                              ========    ========    =======
  Shareholder note received for issuance of common stock....  $     45    $     --    $    --
                                                              ========    ========    =======
  Acquisition of property and equipment under capital
     leases.................................................  $  2,396    $     --    $    --
                                                              ========    ========    =======
  Investment in distribution partner........................  $  1,000    $     --    $    --
                                                              ========    ========    =======
Cash paid for:
  Interest..................................................  $     61    $     12    $    --
                                                              ========    ========    =======
</TABLE>

          See accompanying notes to consolidated financial statements
                                        30
<PAGE>   33

                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

(a) COMPANY BACKGROUND

     WebEx was incorporated in February 1995 under the name of Silver Computing,
Inc., and subsequently changed its name to Stellar Computing Corporation in June
1997, to ActiveTouch Systems, Inc. in December 1997, to ActiveTouch, Inc. in May
1998, to WebEx, Inc. in December 1999 and in July 2000 reincorporated under the
name WebEx Communications, Inc. WebEx is a provider of web communications
services. WebEx provides a globally distributed network and application platform
for powering real-time, interactive multimedia communications through websites.
WebEx provides its services, based on its platform, to companies seeking to
meeting-enable their websites and to distribution partners who can integrate
WebEx's services into their offerings.

(b) BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the accounts of
WebEx and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.

(c) FOREIGN CURRENCY TRANSLATION

     Foreign assets and liabilities are translated using the exchange rate in
effect at the balance sheet date, and results of operations are translated using
an average rate for the period. Translation adjustments are accumulated and
reported as a component of stockholders' equity and comprehensive income.

(d) REVENUE RECOGNITION

     Revenue is derived from web communication services. Web communication
services revenue is generated through a variety of contractual arrangements that
involve hosted services and revenue sharing activities. The Company sells web
communication services direct to customers through service subscriptions and
pay-per-use arrangements. Under these arrangements, customers access the
application hosted on WebEx servers via their websites or web browser.
Subscription arrangements include monthly subscriber user fees, user set-up
fees, and hosting fees in limited cases of customer-dedicated hosted software.
The subscription arrangements are considered service arrangements in accordance
with EITF Issue No. 00-3, Application of AICPA Statement of Position 97-2,
Software Revenue Recognition, to Arrangements That Include the Right to Use
Software Stored on Another Entity's Hardware, and, accordingly revenue is
recognized ratably over the service period provided that evidence of the
arrangement exists, the fee is fixed or determinable and collectibility is
reasonably assured. In addition to the subscription services revenue, WebEx
derives revenue from pay-per-use services and telephony charges which are
recognized as the related services are provided.

     The Company also enters into revenue sharing arrangements with distribution
partners. Revenue under these arrangements are derived from hosted services
provided to end users and are recognized over the service period provided that
evidence of the arrangement exists, the fee is fixed or determinable and
collectibility is reasonably assured. Initial set up fees received in connection
with these arrangements are recognized ratably over the initial term of the
contract. Service fees are recognized as the services are provided for
pay-per-use service arrangements and ratably over the service period for
services provided on a subscription basis through the reseller. Advance payments
received from distribution partners are deferred until the related services are
provided or until otherwise earned by WebEx. In cases where WebEx contracts
directly with the end-user, revenue is recognized at the gross amount received
from end users with payments made to distribution

                                        31
<PAGE>   34
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

partners recorded as a commission expense. In cases where the end-user contracts
directly with the distribution partner, revenue is recognized at the net amount
earned from the distribution partner.

     WebEx sold a limited number of perpetual software licenses for software
delivered to customers in 1998 and 1999 before discontinuing the practice in
early 1999. WebEx recognized revenue on software products delivered to customers
in accordance with the provisions of Statement of Position (SOP) 97-2, Software
Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software
Revenue Recognition, with Respect to Certain Transactions. Revenue from
perpetual software license agreements was recognized upon shipment of the
software when all of the following criteria have been met: persuasive evidence
of an arrangement exists; delivery has occurred; the fee is fixed or
determinable; and collectibility is probable.

     In 1998 and 1999, WebEx provided contract development services which were
recognized as the services were provided.

     Accounts receivable represents all unpaid amounts billed to customers.
WebEx records an allowance for doubtful accounts to reduce accounts receivable
to amounts expected to be received from customers. WebEx records estimates for
sales allowances at the time of the sale.

     Deferred revenue includes amounts billed to customers for which revenue has
not been recognized, which generally result from the following: (1) unearned
portion of monthly billed subscription service fees; (2) deferred subscription
and distribution partner set-up fees; (3) advances received from distribution
partners under revenue sharing arrangements; and (4) amounts billed in advance
under customer-dedicated application hosting arrangements.

(e) CASH EQUIVALENTS

     Cash equivalents consist of highly liquid investments such as money market
funds with maturities of less than three months at date of purchase.

(f) RESTRICTED CASH

     Included in the other non-current assets on the consolidated balance sheets
at December 31, 2000 and December 31, 1999 is $500 of restricted cash to support
a letter of credit provided as a security deposit on WebEx's leased facility.
The deposit is required for the full 5-year term of the lease, but the amount
can be reduced if WebEx meets conditions specified in the lease agreement.

(g) FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK

     The carrying value of WebEx's financial instruments, including cash and
cash equivalents, accounts receivable, accounts payable, accrued commissions,
accrued liabilities and due to related party, approximates fair market value due
to the short-term nature of these instruments. The carrying value of due from
related party, approximates fair value based on its term and interest rate in
relation to market rates for similar instruments.

     Financial instruments that subject WebEx to concentration of credit risk
consist primarily of cash and cash equivalents and trade accounts receivable.
WebEx is exposed to credit risk related to cash and cash equivalents in the
event of default by the financial institutions or the issuers of these
investments. WebEx performs ongoing credit evaluations of its customers'
financial condition, and generally, requires no collateral from its customers.
Allowances provide for credit risk on amounts due from customers, which is
concentrated in the United States.

                                        32
<PAGE>   35
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

(h) PROPERTY AND EQUIPMENT

     Property and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method over
the estimated useful lives of the respective assets, generally three years.
Leasehold improvements are amortized over the shorter of the estimated useful
lives of the improvements or the remaining lease term.

(i) INTANGIBLES

     Intangible assets consist of purchased intellectual property rights,
trademarks, and domain name. Amortization is calculated using the straight-line
method over the estimated useful lives of the assets. The trademarks and domain
name are amortized over ten years, and the purchased intellectual property
rights are amortized over three years.

     Intangible assets (included in other non-current assets) as of December 31,
2000 and 1999 consisted of the following:

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                             ----------------
                                                              2000      1999
                                                             ------    ------
<S>                                                          <C>       <C>
Intellectual property rights...............................  $1,500    $1,500
Trademarks and domain name.................................     158       158
                                                             ------    ------
                                                              1,658     1,658
Less accumulated amortization..............................    (653)     (138)
                                                             ------    ------
                                                             $1,005    $1,520
                                                             ======    ======
</TABLE>

     Amortization expense for the years ended December 31, 2000, 1999 and 1998
was $515, $138 and $0, respectively.

(j) RESEARCH AND DEVELOPMENT COSTS

     Software development costs are expensed as incurred until technological
feasibility has been established. To date, WebEx's software has been available
for general release concurrent with the establishment of technological
feasibility and, accordingly, costs qualifying for capitalization have been
insignificant. Software applications purchased from third parties that are for
internal use in delivering our services or have alternative future uses to
enhancing our services are capitalized and amortized over their estimated useful
lives of 3 years.

(k) IMPAIRMENT OF LONG-LIVED ASSETS

     WebEx evaluates its long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future undiscounted net cash flows expected to be generated by the asset. If
the carrying value exceeds the cash flows, such assets are considered to be
impaired and the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount of the assets
or fair value less costs to sell.

(l) INCOME TAXES

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement

                                        33
<PAGE>   36
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is recorded against deferred tax assets if
it is more likely than not that all or a portion of the deferred tax assets will
not be realized.

(m) EQUITY-BASED COMPENSATION

     WebEx generally grants stock options to its employees for a fixed number of
shares with an exercise price equal to the fair value of the shares on the date
of grant. As allowed under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), WebEx has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) and related interpretations in accounting for stock awards to
employees. Deferred compensation for options granted to employees is determined
as the excess of the deemed fair market value of WebEx's common stock over the
exercise price on the date the options were granted. Expense associated with
equity-based compensation is amortized on an accelerated basis over the vesting
period of the individual award consistent with the method described in Financial
Accounting Standards Board Interpretation No. 28 (FIN 28).

     Equity-based compensation expense for options granted to non-employees has
been determined in accordance with SFAS 123 as the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measured. Equity-based compensation expense for
options granted to non-employees is remeasured for changes in their fair value
in accordance with the provisions of EITF Issue No. 96-18 until the underlying
options vest.

(n) USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.

(o) NET LOSS PER SHARE

     Basic net loss per share is computed using the weighted-average number of
common shares outstanding for the period excluding restricted common shares
subject to repurchase. Diluted net loss per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. Potential common shares are
comprised of restricted common stock subject to repurchase and incremental
shares of common stock issuable upon the exercise of warrants and stock options
computed using the treasury stock method and upon the conversion of convertible
preferred stock.

                                        34
<PAGE>   37
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

     The following potential common shares have been excluded from the
computation of diluted net loss per share for the years ended December 31, 2000,
1999 and 1998 because their effect would have been antidilutive:

<TABLE>
<CAPTION>
                                                            AS OF DECEMBER 31,
                                                   ------------------------------------
                                                     2000          1999         1998
                                                   ---------    ----------    ---------
<S>                                                <C>          <C>           <C>
Shares issuable under stock options..............  4,685,724     4,675,775    2,676,207
Shares of restricted common stock subject to
  repurchase.....................................  3,243,109            --           --
Shares issuable pursuant to warrants.............    339,915       450,000           --
Shares of convertible preferred stock on an
  "as-if" converted basis........................         --    13,077,051    5,472,857
</TABLE>

     The weighted-average exercise price of stock options outstanding as of
December 31, 2000, 1999 and 1998 was $9.84, $0.30 and $0.14, respectively. The
weighted-average repurchase price of restricted common shares outstanding as of
December 31, 2000 was $.92. The exercise price of warrants outstanding as of
December 31, 2000 and 1999 was $12.50 and $0.01, respectively.

(p) RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement as amended by SFAS No. 137
and No. 138, establishes accounting and reporting standards for derivative
instruments and requires recognition of all derivatives as assets or liabilities
on the balance sheet and measurement of those instruments at fair value. The
statement is effective for fiscal years beginning after June 15, 2000. WebEx
adopted SFAS No. 133 in the first quarter of fiscal year 2001 and such adoption
did not have a material effect on results of operations or financial position.

     In December 1999, the Securities and Exchange Commission published Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements. SAB 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements and provides interpretations regarding the application of generally
accepted accounting principles to revenue recognition where there is an absence
of authoritative literature addressing a specific arrangement or a specific
industry. SAB 101 was effective for WebEx in the fourth quarter of 2000. The
adoption of SAB 101 did not impact WebEx's financial statements.

(q) ADVERTISING COSTS

     WebEx's policy is to expense advertising costs as incurred. WebEx's
advertising and promotion expense was $23,852, $2,912 and $368 for the years
ended December 31, 2000, 1999 and 1998, respectively. At December 31, 1999,
included in prepaid expenses is $1,299 relating to prepaid media costs for a
January 2000 television advertising campaign. At December 31, 2000, included in
prepaid expense is $1,557 of prepaid advertising expense paid to a distribution
partner in connection with a revenue sharing arrangement.

(r) RECLASSIFICATIONS

     Certain reclassifications have been made to the prior years' financial
statements to conform with the current year presentation.

                                        35
<PAGE>   38
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 2. PROPERTY AND EQUIPMENT

     Property and equipment as of December 31, 2000 and 1999, consisted of the
following:

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               2000       1999
                                                              -------    ------
<S>                                                           <C>        <C>
Computer equipment and purchased software...................  $19,445    $2,057
Office furniture and fixtures...............................      498       440
Leasehold improvements......................................    4,028        24
Vehicles....................................................       36        15
                                                              -------    ------
                                                               24,007     2,536
Less accumulated depreciation and amortization..............   (3,505)     (369)
                                                              -------    ------
                                                              $20,502    $2,167
                                                              =======    ======
</TABLE>

     Depreciation and amortization expense for the years ended December 31,
2000, 1999 and 1998 was $3,136, $254 and $57, respectively.

     On June 27, 2000 WebEx acquired $2,396 in computer equipment under a
capital lease. The lease has a term of three years and requires monthly payments
of $75.

NOTE 3. STOCKHOLDERS' EQUITY

(a) INITIAL PUBLIC OFFERING

     On August 2, 2000 the Company closed its initial public offering of
3,500,000 shares of its common stock at a price of $14 per share. On August 3,
2000 the managing underwriters of the offering exercised an over-allotment
option for 525,000 shares of common stock at a price of $14 per share. Net
proceeds of the offering were approximately $50,740 after deducting underwriter
discounts, commissions and other offering expenses.

(b) CONVERTIBLE PREFERRED STOCK

     Convertible preferred stock outstanding as of December 31, 1999 was as
follows.

<TABLE>
<CAPTION>
                 DECEMBER 31, 1999
        -----------------------------------
          SHARES     ISSUED AND    CARRYING
SERIES  AUTHORIZED   OUTSTANDING    VALUE
------  ----------   -----------   --------
<S>     <C>          <C>           <C>
  A      1,144,474    1,144,474    $ 1,288
  B      4,598,383    4,598,383      5,817
  C      8,856,262    7,334,194     22,003
        ----------   ----------    -------
        14,599,119   13,077,051    $29,108
        ==========   ==========    =======
</TABLE>

     Rights, preferences and privileges of the holders of Series A, B and C
convertible preferred stock were as follows:

     - Dividends are noncumulative and payable only upon declaration by WebEx's
       Board of Directors at a rate of $0.1125, $0.1265 and $0.24 per share for
       Series A, B and C preferred stock, respectively.

     - Holders of Series A, B and C preferred stock have a liquidation
       preference of $1.125, $1.265 and $3.00 per share, respectively, plus any
       declared but unpaid dividends over holders of common stock and other
       junior equity securities.

                                        36
<PAGE>   39
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

     - Each share of Series A, B and C preferred stock is convertible at any
       time into one share of common stock subject to certain antidilution
       provisions. All shares will convert to common stock automatically on the
       date WebEx successfully completes an initial public offering if the share
       price is at least $10.00 per share and aggregate proceeds exceed $20,000.

     - Each holder of preferred stock has voting rights equal to the number of
       shares of common stock into which such shares could be converted.

     Each share of convertible preferred stock was converted to one share of
common stock automatically upon the closing of our initial public offering on
August 2, 2000.

(c) STOCK PURCHASE WARRANTS

     In March 2000, WebEx issued fully vested and exercisable warrants to
purchase 339,915 shares of Series D preferred stock at an exercise price per
share of $12.50 to a distribution partner in connection with an exclusive
distribution, advertising and promotion agreement. These warrants to purchase
preferred stock were converted into warrants to purchase common stock as a
result of the initial public offering. Under the agreement, the distribution
partner will include and promote WebEx services as part of its portal services.
In addition to the warrants, the agreement provides for payments to the
distribution partner for initial set-up fees, achievement of customer milestones
at defined dates, and advertising. The fair value of the warrants was determined
to be $1,737 using the Black-Scholes option pricing model with the following
assumptions: contractual life of 712 days, no dividends, risk free interest rate
of 5.5% and volatility of 70%. The fair value of the warrants was recorded as
deferred equity-based compensation and is being amortized over the one year term
beginning on the effective launch date of the portal arrangement. Amortization
expense recorded during 2000 was $709.

     Included in prepaid expenses as of December 31, 2000 is the unamortized
portion of a $1,000 payment of the set-up fees paid by WebEx for the portal
arrangement. These fees are being amortized over a one year term beginning on
the effective launch date of the portal arrangement. Current period amortization
expense for 2000 and unamortized set-up fees at December 31, 2000 were $411 and
$589, respectively.

     This agreement also provides for WebEx to make up to four quarterly
payments of $1,000 each upon the successful completion of specified milestones
by the distribution partner and purchase a minimum level of advertising services
from the distribution partner. The milestone payments will be expensed during
the term of the agreement. The first milestone date occurred during 2000 and
WebEx accrued the related payments as a marketing expense in 2000. This
agreement was effectively terminated on March 22, 2001. See discussion of
subsequent events at Note 8.

     On April 30, 1999, WebEx issued warrants to purchase 450,000 shares of
Series C preferred stock at an exercise price of $0.01 per share expiring April
30, 2000. The warrants became exercisable if the recipient fulfilled a
performance commitment to enter into a revenue sharing arrangement or upon the
occurrence of an initial public offering. On April 30, 2000 this warrant was
forfeited since the vesting conditions were not met prior to the expiration
date.

(d) STOCK PLANS

     WebEx was originally authorized to issue up to 6,400,000 shares of common
stock in connection with its 1998 stock option plan to directors, employees and
consultants. The 1998 stock option plan provides for the issuance of incentive
stock options or nonstatutory stock options. During 2000, WebEx increased the
number of common stock reserved for issuance under the 1998 stock option plan by
an aggregate of 5,000,000 shares.

     Under the 1998 stock option plan, vesting begins on the date of employment
with 25% of the rights becoming vested one year after the vesting start date.
The remaining 75% of the rights become vested at the

                                        37
<PAGE>   40
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

rate of 2.08% per month, over the next 36 months. Options generally expire in 10
years; however, expiration may occur earlier in the event of termination or
death.

     The exercise price for stock options is not less than 85%, in the case of
nonqualified stock options, and 100%, in the case of incentive stock options, of
the fair market value of the underlying common stock on the date of grant.

     Effective March 2000, the 1998 stock option plan was amended to include
stock purchase rights for early exercise of non-vested stock options that are
subject to a restricted stock purchase agreement whereby WebEx has the right to
repurchase stock upon the voluntary or involuntary termination of the
purchaser's employment with WebEx at the original issuance cost. WebEx's
repurchase right lapses at the same rate as the original option vested. As of
December 31, 2000, there was a total of 3,243,109 restricted common shares
outstanding subject to repurchase at a weighted average exercise price per share
of $0.92.

     On June 17, 2000, WebEx's stockholders approved the 2000 Stock Incentive
Plan and 2000 Employee Stock Purchase Plan. The 2000 Incentive Stock Plan
provides for the direct award or sale of shares of common stock and for the
grant of options to purchase shares of common stock. Under the 2000 Stock
Incentive Plan, 9,000,000 shares of common stock have been authorized for
issuance. The 2000 Employee Stock Purchase Plan provides eligible employees the
right to purchase common stock during the offering period at 85% of the lower of
the fair value of common stock on the first day of the offering period or the
last day of each 6 month accumulation period within that offering period. While
the plan is in effect, the 24 month offering periods and the 6 month
accumulation periods will commence each calendar year on May 1 and November 1.
Under the 2000 Employee Stock Purchase Plan, 2,000,000 shares of common stock
have been reserved for issuance. As of December 31, 2000, 79,025 shares have
been issued under the 2000 Employee Stock Purchase Plan.

     A summary of the options activity under the 1998 and 2000 stock option
plans for the years ended December 31, 2000, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                            DECEMBER 31, 2000         DECEMBER 31, 1999         DECEMBER 31, 1998
                          ----------------------    ----------------------    ---------------------
                                        WEIGHTED                  WEIGHTED                 WEIGHTED
                                        AVERAGE                   AVERAGE                  AVERAGE
                          NUMBER OF     EXERCISE    NUMBER OF     EXERCISE    NUMBER OF    EXERCISE
                            SHARES       PRICE        SHARES       PRICE       SHARES       PRICE
                          ----------    --------    ----------    --------    ---------    --------
<S>                       <C>           <C>         <C>           <C>         <C>          <C>
Outstanding at beginning
  of period.............   4,675,775     $0.303     $2,676,207     $0.136            --     $   --
Granted.................   6,247,950      8.027      3,296,861      0.389     3,193,080      0.121
Exercised...............  (5,994,054)     0.658       (567,793)     0.172      (479,373)     0.043
Canceled................    (243,947)     6.267       (729,500)     0.182       (37,500)     0.050
                          ----------     ------     ----------     ------     ---------     ------
Outstanding at end of
  period................   4,685,724     $9.836      4,675,775     $0.303     2,676,207     $0.136
                          ==========     ======     ==========     ======     =========     ======
Options vested at end of
  period................     452,392     $2.060      1,440,577     $0.239       179,246     $0.052
                          ==========     ======     ==========     ======     =========     ======
</TABLE>

                                        38
<PAGE>   41
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

     As of December 31, 2000 the exercise prices and weighted average remaining
contractual life of outstanding options were as follows:

<TABLE>
<CAPTION>
                                 OPTIONS OUTSTANDING
                  -------------------------------------------------
                                WEIGHTED-AVERAGE                            OPTIONS VESTED
                                   REMAINING                          --------------------------
    RANGE OF        NUMBER      CONTRACTUAL LIFE   WEIGHTED-AVERAGE   NUMBER    WEIGHTED-AVERAGE
EXERCISE PRICES   OUTSTANDING       (YEARS)         EXERCISE PRICE    VESTED     EXERCISE PRICE
----------------  -----------   ----------------   ----------------   -------   ----------------
<S>               <C>           <C>                <C>                <C>       <C>
$ 0.005 -  3.000   2,105,824          8.90             $ 1.020        390,104       $ 0.746
  6.000 - 11.000   1,875,300          9.37             $ 9.964         59,605       $ 9.682
 11.500 - 29.875     178,800          9.82             $24.268          2,083       $20.875
 30.375 - 39.625     302,800          9.77             $35.059            600       $34.125
 42.313 - 55.375     223,000          9.77             $46.192              0       $    --
                   ---------          ----             -------        -------       -------
                   4,685,724          9.22             $ 9.836        452,392       $ 2.060
                   =========          ====             =======        =======       =======
</TABLE>

     WebEx uses the intrinsic-value method of accounting for its employee
equity-based compensation plans. In 2000, 1999 and 1998, WebEx recorded deferred
stock-based compensation for the excess of the fair value of common stock over
the exercise price of stock options on the date of grant.

     Had compensation costs been determined in accordance with SFAS No. 123 for
all of WebEx's equity-based compensation plans, net loss and basic and diluted
net loss per share would have been as follows:

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                                         ----------------------------
                                                          2000       1999       1998
                                                         -------    -------    ------
<S>                                                      <C>        <C>        <C>
Net loss:
  As reported..........................................  $80,426    $14,371    $2,335
  Pro forma............................................   84,465     14,434     2,350
Basic and diluted net loss per share:
  As reported..........................................  $  3.81    $  1.34    $ 0.23
  Pro forma............................................     4.00       1.35      0.23
</TABLE>

     The fair value of each option granted during the period subsequent to the
filing of our registration statement on Form S-1 with the Securities and
Exchange Commission on July 27, 2000 and through December 31, 2000 was estimated
on the date of grant using the Black-Scholes option-pricing model, using the
following assumptions: no dividends, expected life of 3.5 years, expected
volatility of 90% and risk-free interest rate of 6.21%. The fair value of each
option granted during the remainder of the year ended December 31, 2000 and the
years ended December 31, 1999 and 1998 was estimated on the date of grant using
the minimum value method with the following weighted-average assumptions: no
dividends, expected life of 3.5 years and a risk free interest rate of 6.39%,
5.78% and 5.0%, respectively. The weighted-average fair value of the options
granted during the years ended December 31, 2000, 1999 and 1998 was $9.70, $3.29
and $0.26 per share, respectively.

     The fair value of employee stock purchase rights granted under the 2000
Employee Stock Purchase Plan was estimated using Black-Scholes option-pricing
model using the following weighted average assumptions: no dividends, expected
life of 1.35 years, expected volatility of 90% and a risk free interest rate of
7.67%. The weighted-average fair value of employee stock purchase rights granted
under the 2000 Employee Stock Purchase Plan during the year-ended December 31,
2000 was $7.12 per share.

                                        39
<PAGE>   42
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 4. INCOME TAXES

     WebEx's reported income tax expense for the years ended December 31, 1998,
1999, and 2000 differs from the amount obtained by applying the federal
statutory income tax rate of 35% to loss before income taxes due to the full
valuation allowance recorded against deferred tax assets generated during the
periods.

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 2000 and
1999 are as follows:

<TABLE>
<CAPTION>
                                                                2000       1999
                                                              --------    -------
<S>                                                           <C>         <C>
Deferred tax assets:
  Reserves and accruals.....................................  $  1,316    $   240
  Equity compensation.......................................     3,677         --
  Capital loss carryforward.................................        29         29
  Intangible assets.........................................       458         --
  Deferred revenue..........................................        38         --
  Net operating loss and tax credit carryforwards...........    25,662      5,225
                                                              --------    -------
  Gross deferred tax assets.................................    31,180      5,494
  Less valuation allowance..................................   (30,292)    (5,407)
                                                              --------    -------
          Total deferred tax assets.........................       888         87
Deferred tax liabilities:
  Other.....................................................         3         --
  Property and equipment....................................       885         87
                                                              --------    -------
          Total deferred tax liabilities....................       888         87
          Net deferred tax assets...........................  $     --    $    --
                                                              ========    =======
</TABLE>

     The net change in the total valuation allowance for the years ended
December 31, 1999 and 2000, was a net increase of $4,604 and $24,885,
respectively.

     As of December 31, 2000, WebEx has net operating loss carryforwards for
federal and California income tax purposes of approximately $65,100 and $32,400,
respectively. The federal net operating loss carryforward begins to expire in
2018. The California net operating loss carryforward begins to expire in 2003.

     As of December 31, 2000, WebEx has research and development credit
carryovers for federal and California income tax purposes of approximately $400
and $347, respectively. The federal research credit expires beginning in the
year 2019. The California research credit can be carried forward indefinitely.

     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management does not believe
it is more likely than not that the deferred tax assets will be realized;
accordingly, a full valuation allowance has been established and no deferred tax
asset and related tax benefit have been recognized in the accompanying
consolidated financial statements.

     Federal and California tax laws impose substantial restrictions on the
utilization of net operating loss carryforwards in the event of an "ownership
change" for tax purposes, as defined in Section 382 of the Internal Revenue
Code. WebEx's ability to utilize its net operating loss and tax credit
carryforwards may be subject to restriction pursuant to these provisions.

                                        40
<PAGE>   43
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 5. COMMITMENTS

     WebEx leases certain equipment and occupies facilities rented under
non-cancelable operating leases expiring through 2008.

     Future minimum payments, by year and in the aggregate, under the capital
and non-cancelable operating leases as of December 31, 2000, are as follows

<TABLE>
<CAPTION>
                                                                   NON-CANCELABLE
                                                        CAPITAL      OPERATING
               YEAR ENDING DECEMBER 31,                 LEASES         LEASES
               ------------------------                 -------    --------------
<S>                                                     <C>        <C>
2001..................................................   1,050          4,284
2002..................................................     900          4,423
2003..................................................     450          4,546
2004..................................................                  4,298
2005..................................................                  3,220
thereafter............................................                  5,423
                                                         -----         ------
Future minimum lease payments.........................   2,400         26,194
                                                                       ======
Less: amount representing interest....................     243
                                                         -----
Present value of minimum lease payments...............   2,157
Less current portion..................................     888
                                                         -----
                                                         1,269
                                                         =====
</TABLE>

     Rent expense under non-cancelable operating leases was $2,201, $447 and
$134 for the years ended December 31, 2000, 1999 and 1998, respectively.

     At December 31, 2000, WebEx has material purchase commitments totaling
approximately $8.4 million for equipment purchases and the construction of
leasehold improvements at new leased facilities.

NOTE 6. SIGNIFICANT CUSTOMER INFORMATION AND SEGMENT REPORTING

     SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, establishes standards for the reporting by business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The method for determining what information to report is
based on the way that management organizes the operating segments within WebEx
for making operating decisions and assessing performance.

     WebEx's chief operating decision-maker, is considered to be the chief
executive officer (CEO). The CEO reviews financial information presented on a
consolidated basis for purposes of making operating decisions and assessing
financial performance. The financial information reviewed by the CEO is
identical to the information presented in the accompanying condensed
consolidated statements of operations. Therefore, WebEx has determined that it
operates in a single operating segment, specifically, web communication
services.

                                        41
<PAGE>   44
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

     Significant customer information is as follows:

<TABLE>
<CAPTION>
                                                              PERCENT OF TOTAL REVENUES
                                                              YEARS ENDED DECEMBER 31,
                                                              -------------------------
                                                              2000      1999      1998
                                                              -----     -----     -----
<S>                                                           <C>       <C>       <C>
Customer A..................................................   --        --        20%
Customer B..................................................   --        --        30%
Customer C..................................................   --        16%       40%
</TABLE>

     As of December 31, 2000, all material assets and customers of WebEx were
located in the United States. WebEx's revenue was primarily derived from the
following products and services:

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                              ------------------------
                                                               2000     1999     1998
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Contract development services...............................      --   $  169   $1,487
Software products...........................................     182      795      500
Hosted services.............................................  25,207    1,643       --
</TABLE>

NOTE 7. RELATED PARTY TRANSACTIONS

     WebEx has contracts for engineering services with two companies in China
owned by the spouse of one of our founding executives, who is also a major
stockholder. These companies provide a significant amount of quality assurance
testing and software development activities for WebEx. Amounts paid for
engineering services to these companies for the year ended December 31, 2000,
1999 and 1998 were $2,602, $290 and $20, respectively.

     Due to related party at December 31, 1999 represented a note payable to an
officer for unpaid compensation. The note was paid in full on July 6, 2000.

     In April 2000, WebEx loaned $3,600 to the CEO. The loan matures in April
2002, bears interest at a rate of 6.5% per annum, and is secured by the personal
residence of the CEO and 1,000,000 shares of WebEx common stock. The loan was
originally secured by 3,000,000 shares of WebEx common stock. This amount was
reduced by action of the disinterested members of the Board of Directors on
October 17, 2000.

     WebEx recorded revenue of $0, $418 and $796 for the years ended December
31, 2000, 1999 and 1998, respectively, from Baan, a software company which was
affiliated with a member of WebEx's Board of Directors and a major shareholder.

     For the year ended December 31, 2000, TIBCO Software, Inc. paid WebEx
$125,088 for our services. Vivek Ranadive, one of our directors, is the
President, Chief Executive Officer and Chairman of the Board of TIBCO Software.
During 2000, WebEx acquired $2,300 of software products from TIBCO.

NOTE 8. SUBSEQUENT EVENT

     On March 22, 2001 WebEx entered into an agreement with a distribution
partner that effectively terminates the existing advertising and promotion
agreement with this distribution partner. Under the terms of the agreement all
previously existing obligations of both parties are considered fulfilled, in
addition, WebEx agreed to pay $1,667 in consideration for advertising and
promotions to be provided by the distribution partner through January 2002.
Concurrent with this agreement WebEx entered into a referral agreement with this
distribution partner whereby the distribution partner agreed to refer customers
to WebEx in exchange for a share of the revenue generated from these customers.

                                        42
<PAGE>   45
                           WEBEX COMMUNICATIONS, INC.
                        DECEMBER 31, 2000, 1999 AND 1998

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

     On March 29, 2001 WebEx entered into a Loan and Security Agreement that
allows WebEx to borrow up to $7,500 or 80% of eligible accounts receivable as
defined in the agreement. As of March 29, 2001, available borrowings under the
agreement totaled $7,163. Under the terms of the agreement, WebEx may borrow up
to $2,000 on a revolving credit line that bears interest at 1.5% above the prime
rate and matures on April 30, 2002, and up to $5,500 on term advances that bear
interest at 1.75% above the prime rate and mature on September 30, 2003. The
interest rates will be reduced by 0.5% after a profitability date, defined in
the agreement as the date WebEx achieves a quarterly profit before deduction of
equity-based compensation charges. Amounts borrowed under the revolving credit
line may be repaid and reborrowed at any time prior to the maturity date. Term
advances may be drawn through June 30, 2001, and require only payments of
interest through September 1, 2001, after which all outstanding principal and
interest will be payable in equal monthly installments until the maturity date.
The Loan and Security Agreement is collateralized by all tangible and intangible
assets of WebEx and is subject to compliance with covenants, including a minimum
liquidity ratio, minimum cash balance, minimum tangible net worth, maximum
quarterly operating losses adjusted for equity-based compensation charges, and
minimum quarterly revenues.

NOTE 9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The following table sets forth statement of operations data for each of the
quarterly periods of 1999 and 2000.

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED
                                          ---------------------------------------------------------------------------------------
                                          DEC. 31,   SEPT. 30,   JUNE 30,   MAR. 31,   DEC. 31,   SEPT. 30,   JUNE 30,   MAR. 31,
                                            2000       2000        2000       2000       1999       1999        1999       1999
                                          --------   ---------   --------   --------   --------   ---------   --------   --------
                                                                    (IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                                       <C>        <C>         <C>        <C>        <C>        <C>         <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.............................  $ 11,177   $  7,465    $  4,536   $  2,211   $ 1,141     $   446    $   551    $   469
Cost of revenue.........................     4,441      3,213       1,769        658       383         139        101         65
                                          --------   --------    --------   --------   -------     -------    -------    -------
  Gross profit..........................     6,736      4,252       2,767      1,553       758         307        450        404
Operating expenses:
  Sales and marketing...................    13,882     15,491      12,698      8,736     4,208       2,771      1,471        868
  Research and development..............     4,286      3,439       2,548      1,895     1,172         906        699        584
  General and administrative............     1,924      1,926       1,790        913       695         490        329        218
  Equity-based compensation*............     5,039     11,624       6,431      4,945     1,194         332        336        143
                                          --------   --------    --------   --------   -------     -------    -------    -------
        Total operating expenses........    25,131     32,480      23,467     16,489     7,269       4,499      2,835      1,813
                                          --------   --------    --------   --------   -------     -------    -------    -------
Operating loss..........................   (18,395)   (28,228)    (20,700)   (14,936)   (6,511)     (4,192)    (2,385)    (1,409)
Other income, net.......................       524        772         357        180        22          20         44         41
                                          --------   --------    --------   --------   -------     -------    -------    -------
Net loss................................  $(17,871)  $(27,456)   $(20,343)  $(14,756)  $(6,489)    $(4,172)   $(2,341)   $(1,368)
                                          ========   ========    ========   ========   =======     =======    =======    =======
  *Equity-based compensation:
    Sales and marketing.................  $  2,647   $  3,230    $  2,435   $  1,604   $   393     $   144    $   140    $    44
    Research and development............       796      2,777       1,572      1,259        44          34         21         15
    General and administrative..........     1,596      5,617       2,424      2,082       757         154        175         84
                                          --------   --------    --------   --------   -------     -------    -------    -------
                                          $  5,039   $ 11,624    $  6,431   $  4,945   $ 1,194     $   332    $   336    $   143
                                          ========   ========    ========   ========   =======     =======    =======    =======
</TABLE>

                                        43
<PAGE>   46

                                                                     SCHEDULE II

                           WEBEX COMMUNICATIONS, INC.

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               ADDITIONS
                                                         ----------------------
                                                                     CHARGED TO
                                             BEGINNING   CHARGE TO   COSTS AND                      ENDING
      ALLOWANCE FOR DOUBTFUL ACCOUNTS         BALANCE     REVENUE     EXPENSES    DEDUCTIONS(A)    BALANCE
      -------------------------------        ---------   ---------   ----------   -------------   ----------
<S>                                          <C>         <C>         <C>          <C>             <C>
Year Ended December 31, 1998...............    $ --          --           22            --             22
Year Ended December 31, 1999...............    $ 22          --          288            --            310
Year Ended December 31, 2000...............    $310         917        1,272           651          1,848
</TABLE>

---------------
(a) Represents amounts written off against the allowance, net of recoveries.

                                        44
<PAGE>   47

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

     Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by Item 10 of Form 10-K with respect to directors
is incorporated herein by reference from the information contained in the
section entitled "Election of Directors" in the Company's definitive Proxy
Statement for the 2001 Annual Meeting of Stockholders (the "Proxy Statement"),
which proxy statement will be filed with the Securities and Exchange Commission
before April 30, 2001. For information with respect to the executive officers of
the Company, see "Executive Officers" at the end of Part I of this report.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by Item 11 of Form 10-K is incorporated herein by
reference from the information contained in the section entitled "Executive
Compensation and Related Information" in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by Item 12 of Form 10-K is incorporated herein by
reference from the information contained in the section entitled "Stock
Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 13 of Form 10-K is incorporated herein by
reference from the information contained in the section entitled "Certain
Relationships and Related Transactions" in the Proxy Statement.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) The following documents are filed as part of this Report:

        (1) Financial Statements -- See Index to the Consolidated Financials
            Statements and Supplementary Data in Item 8 of this Report.

        (2) Financial Statement Schedules -- See Index to the Consolidated
            Financials Statements and Supplementary Data in Item 8 of this
            Report.

        (3) See Exhibit Index at page 47 of this Report, which index of exhibits
            is incorporated herein by reference.

     (b) Reports on Form 8-K

     None.

     (c) Exhibits -- See Exhibit Index at page 47 of this Report.

     (d) See the Consolidated Financial Statements and Supplementary Data
beginning on page 24 of this Report.

                                        45
<PAGE>   48

                                   SIGNATURES

     Pursuant to the requirements of the Section 13 or 15(d) 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, on this 30th day of
March, 2001.

                                          WEBEX COMMUNICATIONS, INC.

                                          By       /s/ SUBRAH S. IYAR
                                            ------------------------------------
                                                       Subrah S. Iyar
                                                  Chief Executive Officer

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Subrah S. Iyar, Craig Klosterman and
David Farrington, and each of them individually, as his or her attorney-in-fact,
each with full power of substitution, for him or her in any and all capacities,
to sign any and all amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his or her substitute, may do or cause to be done by
virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated:

<TABLE>
<CAPTION>
                     SIGNATURE                                     TITLE                     DATE
                     ---------                                     -----                     ----
<C>                                                  <C>                                <S>
                /s/ SUBRAH S. IYAR                        Chief Executive Officer       March 30, 2001
---------------------------------------------------    (Principal Executive Officer)
                  Subrah S. Iyar                               and Director

                    /s/ MIN ZHU                           President and Director        March 30, 2001
---------------------------------------------------
                      Min Zhu

               /s/ CRAIG KLOSTERMAN                       Chief Financial Officer       March 30, 2001
---------------------------------------------------        (Principal Financial
                 Craig Klosterman                         and Accounting Officer)

                   /s/ JAN BAAN                                  Director               March 30, 2001
---------------------------------------------------
                     Jan Baan

                /s/ SOMSHANKER DAS                               Director               March 30, 2001
---------------------------------------------------
                  Somshanker Das

                /s/ VIVEK RANADIVE                               Director               March 30, 2001
---------------------------------------------------
                  Vivek Ranadive

                 /s/ SCOTT SANDELL                               Director               March 30, 2001
---------------------------------------------------
                   Scott Sandell

                   /s/ DAVID URE                                 Director               March 30, 2001
---------------------------------------------------
                     David Ure
</TABLE>

                                        46
<PAGE>   49

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                      DESCRIPTION OF DOCUMENT
 -------                     -----------------------
<C>        <S>
3.1(2)     Amended and Restated Certificate of Incorporation.
3.2        Amended and Restated Bylaws.
4.1(2)     Form of Common Stock Certificate.
4.2(1)     Amended and Restated Investors' Rights Agreement, dated
           March 30, 2000 by and among the registrant and the parties
           who are signatories thereto.
10.1(1)*   Registrant's Amended and Restated 1998 Stock Plan.
10.2(2)*   Registrant's 2000 Stock Incentive Plan.
10.3(2)*   Registrant's 2000 Employee Stock Purchase Plan.
10.4(2)*   Form of Directors and Officers' Indemnification Agreement.
10.5(1)*   Employment Agreement, dated August 14, 1998, by and between
           the registrant and Subrah S. Iyar.
10.6(1)*   Employment Agreement, dated August 14, 1998, by and between
           the registrant and Min Zhu.
10.7(1)    Lease Agreement by and between Corporate Technology Centre
           Associates II LLC and the registrant, dated June 30, 1999.
10.8(2)    Sublease, dated April 26, 2000 by and between MarchFirst,
           Inc. and the registrant.
10.9(3)    Lease, dated October 25, 2000 by and between the registrant
           and North Valley Tech LLC.
10.10(3)   Lease, dated October 17, 2000 by and between the registrant
           and WDCI, Inc.
10.11(2)*  Loan and Security Agreement, dated April 10, 2000 by and
           between the registrant and Subrah S. Iyar.
23.1       Consent of KPMG LLP.
</TABLE>

---------------
(1) Incorporated by reference from Exhibits 3.4, 4.2, 10.1, 10.5, 10.6 and 10.7,
    respectively, of Registrant's Registration Statement on Form S-1 (File No.
    333-33716) filed with the Securities and Exchange Commission on March 31,
    2000.

(2) Incorporated by reference from Exhibits 3.3, 4.1, 10.2, 10.3, 10.4, 10.8,
    and 10.9, respectively, of Amendment No. 1 to Registrant's Registration
    Statement on Form S-1 (File No. 333-33716) filed with the Securities and
    Exchange Commission on June 21, 2000.

(3) Incorporated by reference from Exhibit 10.1 and 10.2, respectively of
    Registrant's Quarterly Report on Form 10-Q for the quarter ended September
    30, 2000 filed with the Securities and Exchange Commission on November 14,
    2000.

 *  Denotes a management contract or compensatory plan or arrangement.

                                        47