UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                FORM 10-K/A No. 1

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

     For the Fiscal year ended September 30, 1997
                                       OR

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

     For the transition period from___________to___________

                        Commission File Number: 0-132-58

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

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

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

Registrant's telephone number, including area code: (408) 526-3000

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

Securities  registered pursuant to Section 12(g) of the Act: Common Stock, $.001
par value (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  voting  stock  held by  nonaffiliates  of the
registrant,  based upon the average  bid and asked price of the Common  Stock on
November 28, 1997, was approximately  $503,252,809.  Shares of Common Stock held
by each  officer and  director  have been  excluded  because such persons may be
deemed  to  be  affiliates.  This  determination  of  affiliate  status  is  not
necessarily a conclusive determination for other purposes.

The number of shares  outstanding of the  registrant's  Common Stock on November
28, 1997 was 18,866,547.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of Annual Report to  Stockholders  for fiscal year ended September
     30, 1997 - Items 5, 6, 7, 8 and 14.

2.   Portions of Proxy  Statement  dated January 15, 1998 - Items 10, 11, 12 and
     13.


<PAGE>

<TABLE>
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>

                                                                            Years ended September 30,
                                         ----------------------------------------------------------------------------
(In thousands, except per share amounts)    1997            1996           1995(a)          1994            1993
---------------------------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>             <C>             <C>             <C>     
Revenue                                     $197,097        $180,151        $169,027        $141,600        $121,015

Expenses                                     185,283         167,322         156,242         137,234         116,834
                                         ------------    ------------    ------------   -------------   -------------
       Operating Income                       11,814          12,829          12,785           4,366           4,181

Interest and other income, net                 9,180           5,643           5,414           1,306           1,411
                                         ------------    ------------    ------------   -------------   -------------
Income before income taxes                    20,994          18,472          18,199           5,672           5,592

Provision for income taxes                     7,525           7,015           5,076           3,570           3,519
                                         ------------    ------------    ------------   -------------   -------------

Net income                                  $ 13,469        $ 11,457        $ 13,123          $2,102          $2,073
                                         ============    ============    ============   =============   =============

Basic earnings per share                       $0.49           $0.43           $0.51           $0.09           $0.09

Diluted earnings per share                     $0.45           $0.40           $0.47           $0.08           $0.08

Weighted average common shares                27,715          26,565          25,535          24,285          23,395
outstanding

Weighted average common shares                30,145          28,815          27,700          25,725          25,470
outstanding assuming dilution


Balance sheet data:
Cash, cash equivalents and short-term       $ 56,973        $ 62,010        $ 42,047        $ 39,794        $ 24,224
investments
Total assets                                $260,144        $224,540        $182,827        $145,621        $106,450
Long-term debt                              $  1,845        $  3,269        $  2,075        $  7,830        $  9,684
Deferred maintenance revenue                $ 91,714        $ 80,190        $ 61,468        $ 49,172        $ 33,893
Stockholders' equity                        $118,502        $ 95,064        $ 78,501        $ 47,482        $ 29,481
<FN>
(a) Includes  $1.507  million  ($0.06 basic earnings per share and $0.05 diluted
per share) of extraordinary gain on forgiveness of debt in fiscal 1995.
</FN>
</TABLE>

                                       1

<PAGE>

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

The table  below sets forth the  results of  operations  of the  Company for the
three fiscal years ended September 30, 1997:
<CAPTION>
                                                      PERCENTAGE OF REVENUE                        YEAR-TO-YEAR
                                                    YEARS ENDED SEPTEMBER 30,                   PERCENTAGE CHANGE
                                             -----------------------------------------      ---------------------------
                                                1997           1996          1995            97 vs. 96      96 vs. 95
-----------------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>            <C>                <C>            <C>
Revenue:
     Product licensing                            55.3%          52.9%          53.0%             14.4%           6.3%
     Maintenance fees and other                   44.7%          47.1%          47.0%              3.8%           6.9%
                                             -----------    -----------   ------------      ------------   ------------
         Total revenue                           100.0%         100.0%         100.0%              9.4%           6.6%

Costs and expenses:
     Cost of product licensing                     7.6%           8.5%           7.7%             -2.1%          18.4%
     Cost of maintenance fees and other           10.0%          10.8%          10.8%              1.4%           6.3%
     Product development                          12.6%          12.5%          12.5%             11.4%           6.0%
     Sales and marketing                          48.6%          50.9%          51.3%              4.4%           5.8%
     General and administrative                    9.4%          10.1%          10.1%              0.6%           7.3%
     Acquisition and nonrecurring costs            5.7%          --             --                 N/A            N/A
                                             -----------    -----------   ------------      ------------   ------------
         Total costs and expenses                 93.9%          92.8%          92.4%             10.7%           7.1%
                                             -----------    -----------   ------------      ------------   ------------

         Operating income                          6.1%           7.2%           7.6%             -7.9%           0.3%

Interest and other income, net                     4.7%           3.1%           2.3%             62.7%          44.4%
                                             -----------    -----------   ------------      ------------   ------------
Income before provision for income taxes          10.8%          10.3%           9.9%             13.7%          10.7%
Provision for income taxes                         3.8%           3.9%           3.0%              7.3%          38.2%
                                             -----------    -----------   ------------      ------------   ------------
Net income before extraordinary item               7.0%           6.4%           6.9%             17.6%          -1.4%
Extraordinary gain on forgiveness of debt         --              --             0.9%              N/A            N/A
                                             -----------    -----------   ------------      ------------   ------------
Net income                                         7.0%           6.4%           7.8%             17.6%         -12.7%
                                             ===========    ===========   ============      ============   ============
</TABLE>

Forward-Looking Information

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

Acquisition

On January 16, 1997, the Company  acquired all of the outstanding  capital stock
of MAXM Systems Corporation  ("MAXM"), a privately held company, in exchange for
up to 1,137,115  shares of Boole & Babbage  common stock.  The  transaction  was
accounted  for  using  the  pooling  of  interests   method  and  the  Company's
consolidated  financial  statements  for all prior periods have been restated to
include the results of MAXM.

                                       2

<PAGE>



Revenue
<TABLE>
The Company  derives  its  revenues  primarily  from the  licensing  of computer
software  programs,   the  sales  of  software  maintenance  services  and  from
consulting and  educational  services.  The following  table shows  year-to-year
percentage changes as reported; without the effect of currency rate changes; and
without the revenues of MAXM for all periods.
<CAPTION>
                                                          Without Currency                 Without MAXM
Growth Rates:                    As Reported                   Effect                         Results
-------------             --------------------------    ------------------------     -----------------------
Product Licensing           97 vs. 96     96 vs. 95     97 vs. 96     96 vs. 95    97 vs. 96     96 vs. 95
<S>                           <C>          <C>            <C>          <C>           <C>           <C>
Product Group:
--------------
  Client/Server                4.9%         16.0%         13.2%         17.5%        43.6%         73.4%
  Mainframe                   18.0%          3.0%         26.4%          4.9%        26.4%          4.9%
                              -----         -----         -----         -----        -----         -----
                              14.4%          6.3%         22.7%          8.1%        30.2%         14.9%
                              =====         =====         =====         =====        =====         =====
Sales Channel:
--------------
  Domestic                    23.5%        (5.9%)         23.5%        (5.9%)        35.2%         17.9%
  International                9.8%         13.7%         22.3%         16.6%        27.8%         13.6%
                              -----         -----         -----         -----        -----         -----
                              14.4%          6.3%         22.7%          8.1%        30.2%         14.9%
                              =====         =====         =====         =====        =====         =====

Maintenance fees
and other                      3.8%          6.9%         10.6%          8.6%        15.0%          5.5%
                              =====         =====         =====         =====        =====         =====

Total revenue                  9.4%          6.6%         17.0%          8.3%        23.1%         10.3%
                              =====         =====         =====         =====        =====         =====
</TABLE>
The effect of currency  rates  decreased the rate of revenue growth from 1996 to
1997 by 7.6%.  This  decrease  is  attributable  to a 2%  decrease in the German
deutsche  mark and a 1%  decrease  in the  French  franc,  Japanese  yen,  Dutch
guilder, Italian lira and Spanish peseta, respectively. All other currencies had
an immaterial  impact on revenue.  Foreign  currency rates decreased the rate of
revenue  growth  from  1995  to 1996  by  1.7%.  No  individual  currency  had a
significant impact on the rate of revenue growth.

Product Licensing

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

Products

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

     Mainframe  products  include Plex products which enable customers to handle
large  groups of  computer  processors,  particularly  the  parallel  processing
machines from IBM. In the mainframe  market,  industry  analysts have  projected
that systems  management  spending will only grow at  approximately  5% per year
through the year 2000.  They also  project that while the majority of large data
centers have adopted a sysplex strategy,  mid-size data centers will not broadly
adopt these parallel  processors until 1998 or later.  Thus,  despite a flattish
mainframe  market,  the Company's product licensing growth has benefited by data
centers  adopting  this new  technology.  This has also helped to  increase  the
number of 

                                       3

<PAGE>
competitive  replacements  which  in 1997  accounted  for  approximately  16% of
licensing revenue compared with approximately 11% in 1996. These occur primarily
through multi-year licensing agreements which comprised approximately 50% of the
licensing  revenue  in 1997  and  1996.  Thus,  future  growth  rates  could  be
materially  and  adversely  affected if these  parallel  processors  do not gain
significant  market  acceptance among the mid-size data centers,  if the rate of
successful  competitive  replacements slows, or if customer spending shifts away
from traditional  mainframes to technology  platforms where the Company does not
have significant product acceptance

     A price increase on selected  products was implemented in January 1997, but
did not have a significant  effect on recognized  revenue in 1997. Price changes
during 1996 and 1995 were not significant.

Markets

Domestic:

Domestic  licensing  comprised 36.1%, 33.5% and 37.8% of total product licensing
for 1997, 1996, and 1995,  respectively.  Domestic product  licensing grew 23.5%
overall in 1997 versus the decrease of 5.9% in 1996 which had resulted primarily
from decreased  productivity in the telesales  group.  For growth to continue in
the  domestic  market,  the  company  is  dependent  on  continued  productivity
increases as well as the ability to generate larger size transactions, primarily
through multi-year contracts and competitive replacements.

International:

In 1997, the Company's licensing from its international operations, comprised of
foreign  subsidiaries and marketing agents,  increased 9.8% as a result of solid
growth in all channels despite unfavorable currency exchange rates. In 1996, the
Company's  licensing  from its  international  operations  increased  13.7% as a
result of  strong  growth in Europe  which was  somewhat  offset by  unfavorable
currency  exchange rates.  Significant  revenue in foreign  currencies came from
sales in  Germany,  France,  Britain,  Italy and  Japan.  Sales in each of these
countries were between 5% and 11% of total revenue in 1997 and 1996. The Company
has a hedging  strategy to attempt to minimize the short-term  impact of foreign
currency  fluctuations  on its net asset  position  in  foreign  currencies.  At
September 30, 1997, the Company had approximately  $50.4 million of open forward
exchange  contracts to hedge its foreign currency  fluctuations on its net asset
position.  The Company had approximately $10.7 million of its net asset position
unhedged.  The Company does not have any  commitments  denominated in currencies
other than the  operation's  functional  currencies.  In  addition  to the risks
described  above,  since the  majority  of product  licensing  is  derived  from
international  markets,  the Company's overall  operations and financial results
could be significantly and adversely affected by such  international  factors as
changes in currency  exchange rates and specific  regional or country  political
and economic circumstances.

Maintenance Fees and Other

Maintenance  revenue is generated from services the Company  provides  including
technical support, product enhancements,  system updates and user documentation.
Maintenance  revenue also includes  maintenance  services for an initial  period
ranging from six months to one year which is included in the initial charge when
the  Company  licenses  its  software  products  under  a  long-term  agreement.
Thereafter on each  anniversary  date of the license,  the customer may elect to
renew its  maintenance  agreement with the Company.  Customers may also elect to
purchase  advance  maintenance at the time of product  licensing for maintenance
periods beyond the first year. Included in maintenance fees and other is revenue
from consulting and educational services,  computer services, hardware sales and
royalties  from IBM for the jointly  developed  CICS product.  In July 1996, the
Company  entered  into a long-term  licensing  agreement  requiring  IBM to make
royalty payments,  based upon their sales of the product, of up to approximately
$10 million for the period  from the fourth  quarter of 1996  through the second
quarter of fiscal 1999.  The Company has  recognized  $5.4 million in revenue of
which $4.3 million has been paid through  September 30, 1997. Since there are no
minimum  generated  amounts,   actual  royalties  due  to  the  Company  may  be
significantly below the annual maximum amounts.

     The  increases  in  maintenance  fees and other are  mainly  the  result of
increased  product licensing in the previous years combined with relatively high
renewal rates and increased royalties from IBM under the July 1996 agreement.

     In both years,  the  maintenance  revenue  growth  rates are lower than the
licensing  growth rates primarily as a result of fewer customer sites due to the
consolidation  of  customer  data  centers;   reduced  revenue  associated  with
customers'  conversion to non-CPU  specific  pricing  systems such as MIPS-based
pricing;  and higher  discount  levels  offered by the Company on  multiple-year
maintenance packages.

     The Company  anticipates that maintenance revenue in 1998 will increase due
to the higher license  revenue  growth in 1997,  although it will continue to be
negatively  impacted by reduced  revenue  associated  with site  consolidations,
non-CPU specific pricing and discounted multiple-year maintenance packages.

                                       4
<PAGE>

     The Company must  continue to generate new product  licensing  revenues and
also continue to provide high quality maintenance support and upgrades to ensure
future maintenance revenue increases.

Costs and expenses
<TABLE>
The following table shows year-to-year percentage changes of costs and expenses,
excluding  acquisition and non-recurring costs, as reported;  without the effect
of currency  rate changes;  and without the costs and expenses  relating to MAXM
for all periods.
<CAPTION>

                                                          Without Currency                 Without MAXM
Growth Rates:                    As Reported                   Effect                         Results
                          --------------------------    ------------------------     -----------------------
                            97 vs. 96     96 vs. 95     97 vs. 96     96 vs. 95     97 vs. 96    96 vs. 95
<S>                             <C>           <C>           <C>           <C>           <C>          <C>
Cost of product
licensing                       (2.1%)        18.4%          6.9%         20.1%         11.8%        20.4%

Cost of maintenance                                                                             
fees and other                   1.4%          6.3%          7.9%          9.2%         21.7%         4.9%

Product development             11.4%          6.0%         13.0%          6.3%         17.8%        16.5%

Sales and marketing              4.4%          5.8%         11.2%          7.4%         19.7%         6.5%

General and
administrative                   0.6%          7.3%          5.1%          8.6%         14.4%         7.3%
                                -----         -----         -----         -----         -----        -----
       Total costs and
        expenses                 4.0%          7.1%         10.0%          8.7%         18.3%         8.9%
                                =====         =====         =====         =====         =====        =====
</TABLE>

The effect of currency  rates  decreased  the growth rate of costs and  expenses
from 1996 to 1997 by 6.0%. This decrease is attributable to a 2% decrease in the
German deutsche mark and a 1% decrease in the French franc. All other currencies
did not have a significant  impact on the change in costs and expenses.  Foreign
currency rates decreased the growth rate of costs and expenses from 1995 to 1996
by 1.6%. No individual  currency had a significant  impact on the rate of growth
of costs and expenses.

Cost of Product Licensing

Cost of product  licensing  consists  primarily of royalties paid to independent
software  authors  and  amortization  of  purchased  and  internally   developed
software.  In both years, the increases were primarily due to higher third-party
royalties from increased third-party licensing in Europe and Japan. In the third
quarter of 1996 there was a charge of  approximately $1 million on the remaining
royalty commitments on a third-party  product.  In general,  fluctuations in the
relationship  of cost of product  licensing  to revenue are caused  primarily by
changes in licensing  revenue  mix,  royalty  agreements,  and  amortization  of
capitalized software.

Cost of Maintenance Fees and Other

Cost of  maintenance  fees  and  other  consists  primarily  of cost of  product
maintenance   support,   royalties   paid  to  independent   software   authors,
amortization of purchased and internally developed software, the cost to provide
educational  and  consulting  services  and costs  related to  certain  computer
services.  In  1997,  the  increase  was due  primarily  to  higher  third-party
royalties  in  Europe  as a result of the  expiration  of a reduced  rate from a
third-party vendor which was in effect from the second quarter of fiscal 1995 to
the fourth quarter of fiscal 1996. Cost of educational  and consulting  services
was  up in  proportion  to the  services  revenue  increase  although  this  was
partially offset by lower  maintenance  support costs. In 1996, the increase was
primarily due to higher cost of educational  and consulting  services  partially
offset by lower maintenance  support costs and software  amortization.  Software
amortization was down due to write-offs in 1995 of certain software products and
the full amortization of products  purchased in July 1991.  Maintenance  support
costs  are  down as a result  of more  efficient  processes  which  allowed  the
redeployment  of  personnel  to research and  development  ("R&D").  In general,
fluctuations  in the  relationship  of cost of  maintenance  fees  and  other to
revenue are caused primarily by changes in maintenance revenue mix,  educational
and  consulting  revenue,   maintenance   support,   royalty   agreements,   and
amortization of capitalized software.

                                       5

<PAGE>

Product Development

In 1997,  the  increase in product  development  is  primarily  due to increased
headcount and consulting  costs. The increase in 1996 is due to higher personnel
costs as  headcount  replacements  were filled and certain  maintenance  support
employees were transferred to R&D. The Company capitalizes  development costs in
accordance  with  Statement of  Financial  Accounting  Standards  No. 86. To the
extent the Company  capitalizes its product  development costs, the effect is to
defer such costs to future  periods and match them to the revenue  generated  by
the products.  Product development  expenses may fluctuate annually depending in
part upon the number and status of internal software development projects.

Sales and Marketing

In 1997,  the increase in sales and  marketing  was primarily a result of higher
sales commissions on increased product licensing.  In addition,  1997 had higher
product marketing costs and  international  sales costs. The increase in 1996 is
primarily  a result of higher  commissions  on  increased  sales.  Higher  sales
personnel costs internationally were partially offset by lower product marketing
costs.

General and Administrative

The increase in costs in 1997 is primarily  attributable to higher personnel and
consulting costs,  European facility costs and performance-based  accruals.  The
increase in 1996 was primarily a result of a prior year lease termination credit
combined with higher 1996 facilities  costs for relocating  certain European and
Japanese offices.

Acquisition and Non-recurring Costs

During the second quarter of 1997, the Company had  approximately  $11.3 million
of non-recurring  costs comprised of $1 million of purchased R&D costs and $10.3
million of acquisition  costs related to the purchase of MAXM. These acquisition
costs  consisted  primarily  of $4.0  million of  termination  costs  related to
reseller  agreements,  $2.8  million of employee  costs,  $1.6  million of costs
related to closing redundant  facilities and $1.9 million of legal,  accounting,
broker fees and other.

Interest and Other Income, Net

Interest and other income consists principally of interest income or expense and
gain or loss from sales of  investments,  currency  or  disposal  of assets.  An
increase of 62.7% over 1996 was primarily the result of higher  interest  income
on more lease contracts  receivable,  lower interest expense as the MAXM line of
credit was paid off in 1997 and less currency losses. The 44.4% increase in 1996
was  primarily  the  result of more  interest  income as gross  lease  contracts
receivable  was higher and there was  approximately  $300,000 of gain on sale of
investment  securities  versus a $300,000  loss in 1995.  These  increases  were
somewhat  mitigated by higher currency losses.  As further  described in Note 1,
the Company has a hedging  program to attempt to reduce its exposure to currency
fluctuations.

Income Taxes

The effective tax rates were 35.8%,  38.0%,  and 30.4% for 1997,  1996 and 1995,
respectively.  Without  the  impact  of  non-deductible  acquisition  costs  and
pre-acquisition  operating  losses of MAXM,  the effective tax rates were 28.5%,
28.0% and 30.0%,  respectively.  It is anticipated that the Company's  effective
tax rate in 1998 will  approximate  these  non-acquisition  related  rates.  The
Company's  effective tax rates before the valuation allowance for MAXM operating
losses and  non-deductible  acquisition  costs differ from the federal statutory
rate  primarily due to  permanently  invested  earnings of foreign  subsidiaries
being taxed at rates lower than the federal  statutory  rate and tax credits for
increased  research  and  development.  At September  30, 1997,  the Company had
carryforwards  of  MAXM's  pre-acquisition   federal  net  operating  losses  of
approximately $43.8 million that will expire between 2003 and 2012.

Recent Accounting Pronouncements

        SFAS No. 128,  "Earnings  per share," was issued in February 1997 and is
required  for  periods   ending  after  December  15,  1997.  It  requires  dual
presentation of earnings per share ("EPS");  basic EPS and diluted EPS (see Note
1 of Notes to Consolidated Financial Statements).

                                       6

<PAGE>

     SOP 97-2,  "Software Revenue  Recognition," was issued in November 1997 and
is required for periods ending after December 15, 1997. It provides  guidance on
applying GAAP in recognizing revenue on software  transactions and the impact on
the results of operations is not expected to be material.

Liquidity and Capital Resources

At September 30, 1997,  the Company's  cash,  cash  equivalents  and  short-term
investments were $56,973,000.  The Company continues to use installment  payment
plans  to  gain a  competitive  advantage  during  the  sales  process  and  had
outstanding  installment  receivables of $124,792,000 at September 30, 1997. The
Company  periodically  sells  portions of  installments  receivables  subject to
limited recourse provisions. During 1997, the Company sold $8,140,000.

The  Company  continues  to finance  its growth  through  funds  generated  from
operations. For the year ended September 30, 1997 net cash provided by operating
activities   before   acquisition  and   non-recurring   costs  was  $9,726,000.
Acquisition and non-recurring expenses of $9,744,000 were paid in 1997. Net cash
used in investing  activities in 1997 was  $7,690,000,  primarily for internally
developed  and  purchased  capitalized  software,  acquisition  of computers and
related  equipment  and the  purchase  of equity  securities.  Cash  provided by
investing  activities was due to net sales of short-term  investments.  Net cash
provided by financing activities in 1997 was $7,628,000, primarily from the sale
of lease contracts receivable,  the exercise of employee stock options and stock
purchases  through the Employee  Stock  Purchase  Plan.  Cash used for financing
activities  relates  to the  Company's  stock  repurchase  program  and to  debt
payment.

        On July 30, 1997, a share  repurchase plan was adopted which  authorized
the  Company  to  acquire  500,000  shares of its common  stock.  The  Company's
previous  stock  repurchase  plan was  rescinded in  accordance  with pooling of
interest accounting in connection with the MAXM acquisition. During fiscal 1997,
the Company  repurchased 85,000 shares of its common stock, 55,000 of which were
purchased under the new plan, for an aggregate purchase price of $2,072,000.

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

                                       7
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned,  thereunto duly authorized on the 1st of March
1999.

                    BOOLE & BABBAGE, INC.


               By:  /s/ Arthur F. Knapp, Jr.
                    ---------------------------------
                    Arthur F. Knapp, Jr.
                    Chief Financial Officer
                    (Principal Financial and Accounting Officer)

          *                                               *

-----------------------------                 ---------------------------------
Johannes S. Bruggeling                        Terry R. McGowan
Executive Vice President and Director         Director


          *                                               *

-----------------------------                 ---------------------------------
Raymond E. Cairns                             Paul E. Newton
Director                                      President and Director


          *                                               *

-----------------------------                 ---------------------------------
Franklin P. Johnson, Jr.                      David B. Wright
Chairman of the Board of Directors            Director


* By: /s/ Arthur F. Knapp, Jr.
      -----------------------
      Arthur F. Knapp, Jr.
      Attorney-in-Fact