UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
    For the Fiscal year ended September 30, 1998

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 
    For the transition period from______________________to______________________

                        Commission File Number: 0-132-58

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

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

                    3131 Zanker Road, San Jose, 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
December 8, 1998, was approximately $773,344,000. 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 December 8,
1998 was 27,694,517.

                       DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of Annual Report to Stockholders for fiscal year ended September 30,
1998 - Items 5, 6, 7, 8 and 14.


<PAGE>


<TABLE>
                              BOOLE & BABBAGE, INC.
                                    FORM 10-K
                          YEAR ENDED SEPTEMBER 30, 1998
                                Table of Contents
<CAPTION>
Item
Number                                                                      Page
------                                                                      ----

                                     PART I
<S>  <C>                                                                                      <C>
1.   Business................................................................................ 1

2.   Properties.............................................................................. 7

3.   Legal Proceedings....................................................................... 7

4.   Submission of Matters to a Vote of Security Holders..................................... 7

                                     PART II

5.   Market for the Registrant's Common Stock and Related Stockholder Matters................ 8

6.   Selected Consolidated Financial Data.................................................... 8

7.   Management's Discussion and Analysis of Financial Condition and Results of Operations... 8

7A.  Quantitative and Qualitative Disclosures about Market Risk.............................. 8

8.   Financial Statements and Supplementary Data............................................. 8

9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 8

                                    PART III

10.  Directors and Executive Officers of the Registrant...................................... 9

11.  Executive Compensation.................................................................. 10

12.  Security Ownership of Certain Beneficial Owners and Management.......................... 15

13.  Certain Relationships and Related Transactions.......................................... 17

                                     PART IV

14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................ 18


Signatures................................................................................... 21
</TABLE>


<PAGE>

                                     PART I


ITEM 1.  BUSINESS


General

Boole & Babbage,  Inc.  ("Boole & Babbage" or the  "Company"),  founded in 1967,
develops  and markets  enterprise  automation  software  solutions  for managing
service levels in multivendor, distributed computing environments.

The  Company's  products are used by  information  systems  professionals  whose
organizations   rely  on  the   availability   and   performance   of  their  IT
infrastructure  and the  applications it supports to conduct  business.  Boole &
Babbage is  committed to the quality of the products and services it provides to
its customers and  continually  invests in research and  development to maintain
the quality of its software products.

See Note 7 of Notes to Consolidated  Financial  Statements for certain financial
information with respect to the Company's foreign operations.


Market

Over the last 30 years,  systems  management has evolved from simply  monitoring
resource usage in a single  mainframe to automated  management of  client/server
applications  across  the  information  system  enterprise.  This  includes  the
monitoring  and  management of  mainframes,  servers,  networks,  middleware and
applications from disparate vendors and across a myriad of platforms.

The explosive  growth of computing  resources  poses new  challenges for systems
management.  Organizations are increasingly dependent on information systems for
their 24x7  operations.  If  systems  fail to  deliver  service to the  internal
end-user,  there can be an immediate impact on external customers and the bottom
line.

Today's  typical  computing   environment  includes  mainframes,   workstations,
applications,  middleware,  databases and Web technologies  dispersed throughout
the organization. In this scenario,  applications become increasingly complex as
they support more business  functions and are distributed  across the enterprise
on downsized platforms.

Along  with the task of  supporting  this  complex,  mission-critical  resource,
corporate IT departments are under  continuous  pressure to reduce all the costs
associated with information  systems and their  management--hardware,  software,
networks and personnel.

Despite recent consolidations, a smaller field of software vendors has been slow
to deliver  significant  integration among systems  management tools,  while the
market continues to demand out-of-the-box interoperability of diverse products.

In the  face  of  these  market  dynamics,  traditional  approaches  to  systems
management--which   focuses  on  managing  discrete  components  such  as  CPUs,
subsystems,  devices and  networks--  cannot meet the  challenge of managing the
service  levels  required  by  the  end-users  connected  to  the  corporate  IT
infrastructure.  These users demand that systems  management focuses on the same
mission-critical applications they rely on.

                                       1

<PAGE>

Today,  Boole & Babbage is focused on delivering the next  generation of service
level  management  tools needed to respond to these  challenges  with its latest
product  initiative:  Desired State  Management.  In support of this  initiative
which is designed to allow  organizations  to express IT management  policies in
business  terms,  Boole  &  Babbage  has  introduced  a  new  Windows  NT-based,
Web-enabled  family of clients,  called the  Explorer,  that provide  users with
increased  flexibility and lower  complexity in managing the entire  enterprise.
Additionally,  the Company has outlined  plans for several  other new  products,
including new servers and agents, and initiatives that support the Desired State
Management computing model.


Product Strategy:   Service Level Management for Distributed Systems

Simplifying the management of enterprises  and ensuring  system  availability is
the driving force behind Boole & Babbage software solutions. Its products enable
leading worldwide  organizations with large and complex  Information  Technology
(IT) systems to reduce  operational costs and improve service delivery.  Through
advanced  interoperability  with leading frameworks and a flexible  architecture
easily  scaled to  customer  requirements,  Boole & Babbage  products  deliver a
comprehensive   systems  management  and  automation  solution  for  the  entire
enterprise, including applications, middleware, databases and Web technologies.

The Boole & Babbage set of service level  management  offerings is an end-to-end
open solution -- without any boundaries to the type of IT components that can be
reached. If an enterprise has SNMP- and CMIP-managed  equipment, or is committed
to one of the  leading  frameworks  from  IBM/Tivoli,  HP or SUN,  then  Boole &
Babbage  service  level  management   solutions  fit  with  and  complement  the
customer's  specific   environment  without  extensive  changes.  The  Company's
products accept any type of alert from non-standard-conforming environments such
as legacy,  network  equipment,  environmental  systems  and/or  older  midrange
systems and allow for implementation through ready-to-use, knowledge bases.


Explorer Family for Proactive Service Level Management

By  focusing on service  level  management  at the  application  level,  the new
Explorer product  architecture  allows  businesses to reduce the  implementation
process;  lower the burden and costs involved in  maintenance;  and  effectively
close the gap between IT management and business units.

Delivering  seamless  interoperability  across all Boole & Babbage product lines
from  a Web  browser  or  native  Microsoft  Windows  NT-based,  graphical  user
interface,  the  Explorer  family  of  clients  share  the same  object-oriented
technology.

Boole & Babbage  has also  incorporated  a  highly-graphical  3D and video  user
interface,  secure  remote  access and  complete  platform  independence,  via a
full-function Web browser, to all its Explorer offerings. Products include:

COMMAND/POST  Explorer and  MAX/Enterprise  Explorer for distributed  end-to-end
enterprise management.

SpaceView Explorer for comprehensive storage management.

Command MQ Explorer for end-to-end management of message-oriented middleware.

MainView  Explorer for management of Parallel Sysplex and traditional  mainframe
environments.

                                       2

<PAGE>

COMMAND/POST:   End-to-end Availability Management for Distributed Systems

COMMAND/POST is at the core of the Company's  service level management  strategy
and is  installed  in more  than  600  customer  sites  worldwide.  COMMAND/POST
functions  as  a  central  point-of-control  for  managing  and  automating  all
computers,  networks and applications. It is integrated with all Boole & Babbage
product  lines,  as well as many of the  leading  help desk  problem  management
products  and  frameworks.   COMMAND/POST  uses  a  combination  of  agent-  and
message-based  capabilities  to extend the reach and scalability to any level of
the enterprise.

COMMAND/POST finds problems and pinpoints the actual causes of enterprise system
failures,  triggers rapid corrective actions,  interacts with problem management
systems and  escalates  problem  resolution to the  appropriate  level to ensure
rapid   restoration   of  service.   Customers  gain  increases  in  application
availability  while limiting required manual  intervention by systems management
professionals.

By  consolidating  enterprise  information  to a  central  console,  operational
staffing  requirements  are  reduced,  freeing up resources  for more  strategic
functions  while  the  overall  control  of  the  complex   information   system
infrastructure is enhanced. In the last four years,  COMMAND/POST has emerged as
a valuable tool for  centralized,  proactive  Help Desk  management;  an area of
renewed focus for corporate  enterprises.  And through  partnerships  with other
market  leaders  such  as  HP,  IBM/Tivoli  and  SUN,  COMMAND/POST  has  gained
acceptance  as  the  system  integrator  for  various  point  solutions.   These
partnerships   deliver  to  COMMAND/POST   users  the  benefits  of  integrated,
complementary products from customers' preferred vendors.

COMMAND/POST provides:

        Immediate improvements in availability and performance through automated
        recovery  and failure  prevention  across  WANs,  LANs,  mainframes  and
        minicomputers.

        Low-cost  implementation of connectivity through packaged interfaces and
        tools for message and alert filtering.

        An open architecture through interfaces to virtually any device.

        Increased operator productivity through console and alert consolidation,
        a  graphical  interface  and  graphical  representations  of  enterprise
        configuration.

        Customization  of  data  presentation  on  a  NT,  UNIX  or  web-enabled
        workstation.


COMMAND/POST Power Modules:   Distributed Enterprise Intelligence

Power  Modules are  agent-based  solutions  for  managing a variety of different
operating system platforms, middleware and applications. Power Modules exist for
multiple  versions of UNIX,  Windows NT, OS/400,  OS/2,  NetWare,  IBM MQSeries,
Microsoft MSMQ and SAP R/3.

Each  Power  Module  is  focused  on   increasing   availability   by  providing
surveillance and resolution of conditions that can affect applications,  servers
or  workstations.  Integrated  management  of Power  Modules and the alerts they
generate is performed from either the  enterprise  central point of control at a
COMMAND/POST console, or from a local domain-level COMMAND/POST console.

                                       3

<PAGE>

MainView:  Mainframe and Parallel Sysplex Server Management

The Boole & Babbage integrated  MainView family of products provides  automation
and  performance  management  for the IBM  S/390  enterprise  servers.  MainView
products   provide   flexibility  and  efficiency  in  data  collection   across
multipleOS/390  systems  including  Parallel Sysplex  environments.  On a single
screen,  application-focused  views help  ensure that  service and  availability
goals are being met across the entire enterprise.

In the  mainframe  area,  IBM has  announced  several  aggressive  and strategic
initiatives,  destined to position the OS/390  operating system as an enterprise
server  operating  system.  With the  introduction  of the  System/390  Parallel
processors,  which essentially  reproduce the OS/390 operating system on a chip,
IBM has given an  indication of its plan to  accommodate  market demand for more
efficient parallel processors.

Customers  benefit from greater  efficiency  and cost  reduction  with  parallel
processors,  however,  they are also faced with an attendant  increase in system
complexity.  Boole & Babbage  was the first  software  vendor to offer  products
specifically  designed to handle the systems  management  needs of the  Parallel
Sysplex environment.

The  Company's  mainframe  products  operate  only with  certain  IBM  operating
systems.  IBM has often modified or changed its operating systems and introduced
new computer  systems.  The Company  believes  that IBM's  successive  operating
systems and mainframe  architectures have been and will be designed to allow IBM
customers to enhance their systems and use new software as well as to modify and
use their existing software.  The Company must adapt its products to accommodate
these IBM  changes in order to license  its  products  to new  customers  and to
obtain maintenance contracts from existing customers.

Boole & Babbage  works  closely  with IBM to ensure that its  products  are kept
current with their product releases. The companies exchange information and work
cooperatively to ensure consistent service to their mutual customers.
IBM is also a customer and user of Boole & Babbage products.

While it is not anticipated that parallel  processors will  immediately  replace
all  traditional  mainframes,  Boole  &  Babbage  is  well  positioned  for  the
coexistence  of both types of processors  as they evolve to new roles.  In fact,
many large  firms are  investing  in Boole & Babbage  Sysplex-ready  products in
order to prepare their systems management infrastructure for a smooth transition
to  parallel  processors.  The  flexibility  of  the  MainView  architecture  is
beneficial  in  both  a  parallel  processing  environment  and  in  traditional
mainframe  computing by making it possible to group resource  activities in ways
that are meaningful to a particular business.


Command MQ:  End-to-end Middleware Management

Command MQ is a fully integrated solution that provides availability  management
and automation,  performance and operations  management,  and  configuration and
administration of distributed  message-queuing middleware networks. Based on the
Boole  &  Babbage  agent  and  message-based  technology,   Command  MQ  manages
message-queuing middleware products such as MQSeries and MSMQ. Platform coverage
spans S/390, HP-UX, Sun Solaris, DEC VMS, AIX, OS/400, OS/2, and Windows NT.

From a single console, Command MQ presents a consummate view of the availability
and  performance  of the  middleware  layer  network and how it is affecting the
mission-critical  applications it supports.  Command MQ is capable of monitoring
all middleware components,  such as queue managers, queues and channels, as well
as the IT elements in the surrounding network.

Command  MQ  is  highly  interoperable  with  enterprise   management  consoles,
including HP OpenView, Tivoli TME 10, and Boole & Babbage COMMAND/POST.

                                       4

<PAGE>

SpaceView:  End-to-end Storage Management and Automation

Boole & Babbage sells  products that address the  management  and  automation of
mainframe and client/server disk (DASD) storage subsystems.

Its SpaceView offering provides enterprise-wide,  integrated storage management.
Over 3,000 data  centers  worldwide  use the  SpaceView  family of  products  to
automate  storage  management  across the  enterprise.  Components  of SpaceView
dynamically recover from errors caused by space shortages,  extend IBM's storage
management  utilities with more  sophisticated file placement and better control
of  archiving,  report on disk  utilization  by  physical  volume or by business
application,  and  increase  performance  of  specific  types  of  jobs  through
extensive buffering.


Third-party Products

The Company also sells a number of products from independent  software  vendors;
these  third-party   products   complement  the  Company's  strategy  by  adding
applications  such as  Scheduling,  Tape,  Output and Printing  management,  JCL
management,  Desktop to  Mainframe  Connectivity  etc. The  following  companies
provide products for the European and international market: Diversified Software
Systems,  Inc.,  New  Dimension  Software,  Simware,  Inc.,  and  Tone  Software
Corporation.


COMMAND/POST,  MainView and MAX/Enterprise are registered  trademarks of Boole &
Babbage;  Inc.  SpaceView  is a  trademark  of Boole &  Babbage,  Inc.  IBM is a
registered trademark of International Business Machines Corporation.  MVS, CICS,
IMS,  DB2,  NetView and  SystemView  are  trademarks of  International  Business
Machines Corporation.


Customer Support and Product Maintenance

The Company offers product maintenance,  which includes maintenance and updating
of product  capabilities  to  accommodate  changes in a customer's  hardware and
software. An initial period, ranging from six months to one year, of maintenance
is included in all of the Company's software licenses.  Thereafter,  the Company
offers optional  maintenance renewals at prices that generally range from 15% to
17.5%  annually  of the  current  product  price.  Customers  may also  elect to
purchase  advance  maintenance at the time of product  licensing for maintenance
periods   beyond  the  first  year.   The  Company   also   provides   extensive
computer-supported  problem  solving  capabilities  over the  telephone  for its
customers as part of their  maintenance  contracts.  The Company  believes  that
support of its  customers  and products is very  important,  and it  continually
attempts to improve its support  systems and techniques.  The Company's  current
annual maintenance cancellation rate is approximately 10%.


Consulting, Education and Computer Services

Consulting and  educational  services with regard to the  application of Boole &
Babbage  products  are  provided  to  customers  on a fee basis.  The  Company's
computer  services  division  provides   mainframe   computing   services  on  a
time-sharing basis to corporate affiliates and non-affiliates.

                                       5

<PAGE>

Marketing and Customers

The  Company  sells  its  products  domestically  through  its own  distribution
division,  Boole & Babbage North America.  In Europe, the Company's products are
sold through its European  subsidiary,  Boole & Babbage Europe. In areas outside
of North America and Europe,  the Company has a wholly-owned  sales  subsidiary,
Boole & Babbage  Australasia Pty. Ltd, in Australia and a  majority-owned  sales
subsidiary,  Joint Systems & Technology,  in Japan. In addition to its own sales
staff, the Company has agreements with several independent  marketing agents who
serve  international  markets in which the  Company  has not  established  sales
offices.

The process of configuring the Company's  products to meet the specific hardware
and  software  requirements  of the  environments  in which they will be used is
rapid;  consequently,  shipments are generally  made within one week of the time
the order is  received.  In  addition,  the  Company  offers its  customers  the
opportunity to use its products on a trial basis such that upon final acceptance
by the customer, full installation has already been completed.
Accordingly, the Company has no significant backlog of orders at any time.

The  Company's   customers  are  generally   large   corporate  and   government
organizations  including  industrial  companies,   commercial  banks,  insurance
companies,   communications  companies,  retailers,   transportation  companies,
utilities,  health care and  educational  institutions,  and federal,  state and
local  governments.  No customer accounted for greater than 10% of the Company's
revenue in 1998, 1997 or 1996.

The Company's  commitment to customer  satisfaction  and service is reflected in
its policies regarding day-to-day operations and product maintenance, as well as
in its efforts to establish forums for customer interaction and dialogue.

Boole & Babbage has more than 12,500 products installed at more than 6,000 sites
worldwide.  In each of the last  three  fiscal  years,  a large  portion  of the
Company's product revenue was from additional licensing by existing customers of
either new products or products for additional sites.


Competition

The computer  software industry is highly  competitive.  There are several large
software  vendors  that  have  substantially  greater  financial  and  technical
resources  than the  Company;  in the future,  these  companies  may develop and
market  products  similar  to  those  offered  by Boole &  Babbage.  Competitive
products are currently  offered by a number of independent  software  companies.
The  most  important   consideration  for  customers  of  performance   capacity
management,  automated  operations,  and network management software are product
and product line capability,  integration, on-going product enhancement, ease of
installation   and  use,   reliability   and  quality  of   technical   support,
documentation and training,  name recognition,  vendor experience and stability,
and, to a lesser extent,  price. The Company believes that it competes favorably
in all of these areas.


Product Protection

The Company  relies on a combination  of contract,  patent,  copyright and trade
secret  laws,  as well as various  other  measures,  to protect  its rights with
respect  to  its  software  products.   The  Company  seeks  protection  of  its
proprietary  interest in its  products  and trade  secrets and holds  registered
related  documentation.  The Company does not believe that any single  contract,
patent,  or copyright  or trademark is material to its business as a whole.  The
Company  does not sell or  transfer  title to its  products  to  customers.  The
products are licensed on a "right-to-use" basis pursuant to a perpetual license,
which is  nontransferable  and restricts  use of the products to the  customer's
internal purposes on specified computers at specified sites.

                                       6

<PAGE>

Research and Development

The  computer  hardware  and  software  industries  are  characterized  by rapid
technological change, which requires a continuing high level of expenditures for
the  development  and  maintenance  of software  products.  It is customary  for
modifications  to be made to a software product as experience with its use grows
or as changes in  manufactures'  hardware and  software so require.  In 1998 the
Company  reinvested 17% of its Boole product revenues in R&D activities aimed at
both enhancing the existing  products and adding several new ones. R&D costs net
of amounts  capitalized  were  $24,058,000,  $22,357,000 and $20,872,000 for the
years ended September 30, 1998, 1997 and 1996, respectively.


Employees

As of September  30, 1998 Boole & Babbage  employed  approximately  930 persons,
including  sales,  marketing and related  activities;  product  development  and
customer support; and management, administration and finance. Of such employees,
approximately  555 are employed in the United States and  approximately  375 are
employed in foreign countries.  The Company believes that its employee relations
are good.


ITEM 2.  PROPERTIES

Boole & Babbage's principal administrative,  marketing, research and development
and support  groups are located in one  facility in San Jose,  California.  This
facility is occupied  under a lease that expires on March 31, 2000.  The Company
believes  that this facility is adequate for its current needs and that suitable
additional  or  substitute  space  will be  available  as needed to  accommodate
physical expansion of the Company's operations.  In addition, the Company leases
several sales and service facilities throughout North America, Europe, Japan and
Australia under leases that expire on dates ranging through 2018.


ITEM 3.  LEGAL PROCEEDINGS

     Platinum Technology,  Inc., ("Platinum"),  filed a Complaint and Motion for
Preliminary  Injunction on Nov. 13, 1998 in the Circuit Court of the  Eighteenth
Judicial Circuit Chancery Division, Dupage County, Wheaton, Ill.

The  complaint  alleges  that the  Company  is in  breach  of a  standstill  and
exclusive negotiation  agreement with Platinum,  and further, that BMC Software,
Inc.  tortiously  interfered with such alleged  agreement when it negotiated and
executed the merger agreement announced on Nov. 2, 1998. Platinum seeks entry of
an  injunction  voiding  this  merger  agreement  and  requiring  the Company to
negotiate exclusively with it for an uninterrupted 120-day period.

The Company is currently  evaluating  the complaint but believes that the claims
by Platinum are without merit,  and intends to vigorously  defend itself against
the allegations in the complaint.  The Company continues to believe that the BMC
merger agreement is in the best interests of its shareholders.


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 ended September 30, 1998.

                                       7

<PAGE>

PART II


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

     The information  contained  under the caption "Market for the  Registrant's
Common  Stock and  Related  Stockholder  Matters"  on page 29 of the 1998 Annual
Report to the Stockholders is incorporated herein by reference.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

     The  information  contained  under  the  caption,   "Selected  Consolidated
Financial  Data"  in  the  1998  Annual  Report  to  Stockholders  on  page 1 is
incorporated herein by reference.


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

     The information contained under the caption,  "Management's  Discussion and
Analysis of Financial  Condition and Results of  Operations"  in the 1998 Annual
Report to Stockholders on pages 3 - 11 is incorporated herein by reference.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The information contained under the caption,  "Management's  Discussion and
Analysis of Financial  Condition and Results of  Operations"  in the 1998 Annual
Report to Stockholders on pages 3 - 11 is incorporated herein by reference.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Consolidated  financial statements for Boole & Babbage,  Inc. are contained
on pages 12 - 15 of the 1998 Annual Report to Stockholders  and are incorporated
herein  by  reference.  Supplementary  data is  contained  on page 1 of the 1998
Annual Report to Stockholders and is incorporated herein by reference.


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

     Not applicable.

                                       8

<PAGE>

PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

FRANKLIN P. JOHNSON, JR.

      Franklin P. Johnson,  Jr., age 70, has served as a director of the Company
since  1967 and was  elected  Chairman  of the  Board in 1971.  He is a  general
partner of Asset Management Partners,  a venture capital partnership,  and other
related venture capital partnerships. He has been a venture capital investor for
more than five years.  Mr.  Johnson is also a director  of Amgen  Inc.,  Applied
Microcircuits Corporation and IDEC Pharmaceuticals Corp.

PAUL E. NEWTON

      Paul E.  Newton,  age 55, has served as a director  of the  Company  since
April  1988 and was  appointed  President  and Chief  Executive  Officer  of the
Company  in  October  1991.  He  served  as  President  and  director  of Ingres
Corporation,  a relational  database software company  ("Ingres"),  from January
1987 to October 1990.  Mr. Newton  served as Chief  Operating  Officer of Ingres
from January 1987 until September 1988 and as Chief Executive  Officer of Ingres
from September 1988 through October 1990.

JOHANNES S. BRUGGELING

      Johannes  S.  Bruggeling,  age 53, has served as a director of the Company
since  July 1988.  He was  appointed  Executive  Vice  President,  International
Operations  of the Company and  President,  Boole & Babbage  Europe,  in October
1991.  He was a co-founder  in 1978 of The European  Software  Company,  now the
Company's wholly-owned subsidiary, Boole & Babbage Europe, and was its President
from 1982 until April  1989.  He also served as  President  and Chief  Executive
Officer of the Company from July 1988 through October 1991.

TERRY R. MCGOWAN

      Terry R.  McGowan,  age 51, has served as a director of the Company  since
February  1992.  Mr.  McGowan  has  been the  Chairman  of the  Board of  Action
Technologies,  Inc., a software  company,  since June 1997. He was President and
Chief Executive Officer from May 1995 until June 1997. Previously,  he served as
President and Chief Operating Officer of  KnowledgeWare,  Inc., a computer-aided
software  company,  from August 1985 until  September  1991.  Mr.  McGowan is an
advisor to the board of directors of several other software companies.

DAVID B. WRIGHT

      David B. Wright,  age 49, served as director of the Company since February
1998.  Mr.  Wright is President  and CEO of Amdahl  Corporation,  a hardware and
software  company.  He joined  Amdahl  Corporation  in 1987 as a  regional  Vice
President of Sales. After being named Vice President of Commercial U.S. Sales in
1989 and Vice President and General  Manager of European  Operations in 1992, he
was appointed Vice President and General Manager of Worldwide  Field  Operations
in 1993. In January 1996 he became  Executive  Vice  President of the Enterprise
Computing Group. From 1976 to 1987, Mr. Wright was employed in various staff and
management positions at IBM Corporation.

RAYMOND E. CAIRNS

      Raymond E. Cairns,  age 66, has served as a director of the Company  since
November  1992.  In 1992,  Mr.  Cairns  retired from E.I.  Dupont De Nemours,  a
chemical company, where he had been employed since 1962, most recently as Senior
Vice  President  -  Information  Systems and Member of the  Corporate  Operating
Committee.

                                       9

<PAGE>

EXECUTIVE OFFICERS
<TABLE>
      Officers are appointed  annually by the Board and serve at the  discretion
of the Board. Set forth below is information regarding executive officers of the
Company who are not directors of the Company:
<CAPTION>
       Name                       Age                                   Position
--------------------              ---           -----------------------------------------------------------
<S>                                <C>          <C>
James E. C. Black                  50           Senior Vice President, Engineering

Richard A. Harrit                  47           Senior Vice President, North American Operations

Arthur F. Knapp, Jr.               50           Senior Vice President, Chief Financial Officer and Secretary

Saverio Merlo                      47           Senior Vice President, Marketing
</TABLE>
        Mr. Black  joined the Company in April 1994 as Senior Vice  President of
Engineering.  From 1991 to March 1994,  he was a principal at Diablo  Management
Group, an organization  specializing in assisting  companies with dynamic market
changes.  Previously, Mr. Black held technology positions at Ingres Corporation,
UCCEL  Corporation,  a  software  company,  Texas  Instruments,  an  electronics
company, and CAP Gemini, a computer consulting company.

        Mr.  Harrit  joined the Company in July 1997 as Senior  Vice  President,
North  American  Operations.  Prior to  joining  the  Company,  Mr.  Harrit  was
President of AmeriData Computer Rentals,  a Division of AmeriData/GE.  From June
1990 until  October  1994,  Mr.  Harrit  served as President  of Genstar  Rental
Electronics,  Inc. Both of these  companies  were in the business of renting and
leasing high technology equipment to industry and government.

        Mr. Knapp joined the Company in November 1991 as Chief Financial Officer
and Senior Vice  President.  From March 1989 to October 1991, he was employed by
Legent Corp., a worldwide developer and distributor of productivity  enhancement
system  software,  serving as Vice President and Chief Financial  Officer.  From
1984  through  March  1989,  he  was  employed  by  Duquesne  Systems,  Inc.  (a
predecessor  company  to  Legent  Corp.),  where he  served  as Vice  President,
Controller  and  Chief  Financial  Officer.  Mr.  Knapp  is a  Certified  Public
Accountant and a Certified Management Accountant.

        Mr.  Merlo has been  employed  by the  Company  for the past 14 years in
various  operational,  technical  and  marketing  capacities.  After a four-year
tenure as director of the MVS product center, Mr. Merlo served as Vice President
of  Marketing  for Boole & Babbage  Europe from 1989 until 1991.  During  fiscal
1991, Mr. Merlo was appointed Senior Vice President of Marketing.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

        Each non-employee  director of the Company receives a quarterly retainer
fee of $2,000  (plus  $5,250  for  serving as  Chairman  of the Board) and a per
meeting  fee of $400  (except  for  the  Chairman).  In the  fiscal  year  ended
September 30, 1998, the total  compensation  paid to non-employee  directors was
$59,000.   The  members  of  the  Board  of  Directors  are  also  eligible  for
reimbursement for their expenses incurred in connection with attendance at Board
meetings in accordance with Company policy.

     Under the terms of the 1993 Non-Employee Directors' Stock Option Plan, each
non-employee  director  of  the  Company  (except  the  Chairman)  automatically
receives an option to purchase 7,500 shares of the Company's Common Stock, as an
incentive  to  encourage  maximum  efforts  for the  success of the  Company and
continued service on the Board.  (Prior to an October 30, 1997 amendment to this
plan,   non-employee  directors  received  options  to  purchase  10,125  shares
annually.)  Non-employee  directors joining the Board for the first time receive
an option to purchase  30,000  shares.  In the fiscal year ended  September  30,
1998,  Messrs.,  McGowan and Cairns were each granted  options to purchase 7,500
shares of Common Stock  pursuant to the Company's 1993  Non-Employee  Directors'
Stock Option Plan at an exercise  price of $21.42 per share,  which was equal to
the fair market  value of the  Company's  Common Stock on the date of the grant.
Mr. Wright,  elected to the Board on February 18, 1998,  was granted  options to
purchase   30,000  shares  of  Common  Stock  pursuant  to  the  Company's  1993
Non-Employee  Directors'  Stock  Option plan at an exercise  price of $22.17 per
share, which was equal to the fair market value of the Company's Common Stock on
the date of the grant.

                                       10

<PAGE>
<TABLE>
                       COMPENSATION OF EXECUTIVE OFFICERS
                             SUMMARY OF COMPENSATION

        The following table shows for the fiscal years ended September 30, 1996,
1997 and 1998, compensation awarded or paid to, or earned by the Company's Chief
Executive  Officer and its five other  executive  officers at September 30, 1998
(the "Named Executive Officers"):
<CAPTION>
                                                  SUMMARY COMPENSATION TABLE

                            Annual Compensation                                     Long Term Compensation
---------------------------------------------------------------------------   --------------------------------
                                                                                 Securities        All Other
             Name and                                                            Underlying         Compen-
             Principal                                Salary         Bonus       Options(1)        sation(2)
             Position                     Year          ($)           ($)            (#)              ($)
----------------------------------     ---------      ------         -----    ----------------- --------------
<S>                                       <C>         <C>            <C>           <C>               <C>  
Mr. Paul E. Newton                        1998        347,304        495,266       200,000           2,000
President and Chief Executive Officer     1997        330,768        358,222            --           1,125
                                          1996        315,000        266,805       180,000             683
                                                                     
Mr. Johannes S. Bruggeling                1998        314,045        261,434       100,000              --
Executive Vice President,                 1997(3)     298,259        246,004            --              --
International Operations and              1996        318,613        216,558       112,500              --
President, Boole & Babbage Europe                                    
                                                                     
Mr. James E. C. Black                     1998        201,720        184,178        90,000           2,000
Senior Vice President                     1997        192,120        127,880            --           1,125
Engineering                               1996        182,970         90,721        90,000             427
                                                                     
Mr. Richard A. Harrit                     1998        191,625        152,236        65,000            2000
Senior Vice President, North              1997         32,769         36,100       135,000              --
American Operations                       1996             --             --            --              --
                                                                     
Mr. Arthur F. Knapp, Jr.                  1998        197,668        176,884       100,000           2,000
Senior Vice President and Chief           1997        188,244        122,812            --           1,125
Financial Officer                         1996        179,214         87,085       112,500             683
                                                                     
Mr. Saverio Merlo                         1998        192,150        173,322        90,000           2,000
Senior Vice President,                    1997        183,015        120,356            --           1,125
Marketing                                 1996        174,300         85,378        90,000             683
                                                                   
------------------------------
<FN>
(1) The Company has no stock appreciation rights (SARs).
(2) Includes the Company's matching payments under its 401(k) plan. As permitted
    by rules promulgated by the Commission, no amounts are shown with respect to
    certain "perquisites," where such amounts do not exceed the lesser of 10% of
    salary and bonus or $50,000.
(3) Mr.  Bruggeling's  compensation  was paid in non-U.S.  currency and has been
    translated to U.S.  dollars at the average  currency  exchange rate for each
    indicated year.
</FN>
</TABLE>

                                       11

<PAGE>

                        STOCK OPTION GRANTS AND EXERCISES

        The Company  grants  options to its  executive  officers  under the 1995
Option Plan. As of September 30, 1998,  options to purchase a total of 2,464,139
shares had been  granted  and were  outstanding  under the 1995  Option Plan and
options to purchase 165,437 shares remained available for grant thereunder.
<TABLE>
        The following  tables show for the fiscal year ended September 30, 1998,
certain information regarding options granted to, exercised by, and held at year
end by the Named Executive Officers.
<CAPTION>
                        Option Grants in Last Fiscal Year
                                                                              Potential
                                                                          Realizable Value at
                                                                           Assumed Annual
                                                                         Rates of Stock Price
                                                                             Appreciation
                           Individual Grants                               for Option Term(3)
-----------------------------------------------------------------          ------------------
                                 % of
                                 Total
                  Securities     Options
                  Underlying     Granted to  Exercise
                  Options        Employees   or Base      Expira-
                  Granted        in Fiscal   Price        tion
 Name              (#)(1)        Year(2)     ($/Share)    Date          5% ($)         10% ($)
 ----             --------       ---------   ---------    --------      ------         -------
<S>                 <C>            <C>         <C>        <C>          <C>             <C>      
Mr. Newton          200,000        13.82       21.88      09/09/08     2,752,043       6,974,217
Mr. Bruggeling      100,000         6.91       21.88      09/09/08     1,376,021       3,487,108
Mr. Black            90,000         6.22       21.88      09/09/08     1,238,419       3,138,398
Mr. Harrit           65,000         4.49       21.88      09/09/08       894,414       2,266,620
Mr. Knapp           100,000         6.91       21.88      09/09/08     1,376,021       3,487,109
Mr. Merlo            90,000         6.22       21.88      09/09/08     1,238,419       3,138,398
<FN>
(1)     Options  vest in  cumulative  increments  over a period  of four  years.
        Option  grants  to  executive  officers  prior  to  September  10,  1993
        generally  include a provision  whereby  upon the sale,  acquisition  or
        merger of the Company in a transaction  or series of  transactions,  the
        vesting of such options shall  accelerate  such that an  additional  two
        months of  vesting  shall  accrue  for each  month  that such  executive
        officer shall have been employed by the Company  between October 1, 1991
        (or the date of commencement of such executive officer's employment with
        the Company,  if later) and the closing date of any such  transaction or
        series of transactions.  Option grants to executive officers on or after
        September 10, 1993 include a provision  whereby upon the  termination or
        resignation of an executive  officer within one year following the sale,
        acquisition  or merger of the  Company,  such  officer's  options  shall
        immediately vest in full.

(2)     Based on options to purchase  1,446,850  shares granted to all employees
        in fiscal year 1998.

(3)     The potential realizable value is based on the term of the option at its
        time of grant (10 years).  It is  calculated  by assuming that the stock
        price on the date of grant  appreciates  at the  indicated  annual rate,
        compounded  annually  for the  entire  term of the  option  and that the
        option  is  exercised  and  sold on the  last  day of its  term  for the
        appreciated  stock price. No gain to the optionee is possible unless the
        stock  price  increases  over the option  term which  will  benefit  all
        stockholders.
</FN>
</TABLE>

                                       12

<PAGE>
<TABLE>
AGGREGATED  OPTION EXERCISES  IN LAST  FISCAL YEAR,  AND FISCAL  YEAR-END OPTION
VALUES
<CAPTION>

                                                                                                    Value of
                                                                            Number of               Unexercised
                                                                            Unexercised             In-the-Money
                                                                            Options at              Options at
                                                                            FY-End (#)              FY-End($)(2)
                             Shares Acquired            Value               Exercisable/            Exercisable/
Name                         on Exercise (#)            Realized(1)($)      Unexercisable           Unexercisable
----                         ---------------            --------------      -------------           -------------
<S>                              <C>                      <C>             <C>                 <C>
Mr. Newton                       165,000                  3,283,920       1,201,876/323,750   22,164,209/1,943,500
Mr. Bruggeling                        --                         --         252,423/162,579      4,014,985/945,383
Mr. Black                         37,500                   592,070          271,851/140,274      4,603,973/773,362
Mr. Harrit                            --                         --          33,750/166,250        250,425/840,325
Mr. Knapp                         57,500                  1,120,400         315,390/162,579      5,442,663/945,383
Mr. Merlo                         24,750                    491,810         218,600/140,274      3,686,693/773,362
                                                        
------------------------------------------
<FN>
(1)     Value realized is based on the fair market value of the Company's Common
        Stock on the date of  exercise  minus  the  exercise  price and does not
        necessarily indicate that the optionee sold such stock.

(2)     Fair market value of the  Company's  Common Stock at September  30, 1998
        ($23.25) minus the exercise price of the options.
</FN>
</TABLE>

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)

        The  Compensation  Committee of the Board of Directors  has provided the
following  report with respect to the  compensation  of  executive  officers for
fiscal 1998:

        Compensation for the Company's  executive  officers is determined by the
Compensation  Committee of the Company's  Board of Directors (the  "Committee"),
none of whom is an employee  of the  Company.  The  Committee  establishes  base
salary levels and target  bonuses for the Chief  Executive  Officer  ("CEO") and
other executive officers of the Company at or about the beginning of each fiscal
year.

        The  Company  and  its  Board  believe  that  the  compensation  of  all
employees,  including  executive  officers,  must be  sufficient  to attract and
retain highly qualified personnel and must align compensation with the Company's
short-term and long-term business strategies and performance goals. However, the
current compensation  philosophy is to minimize the amount of salary increase in
favor of (i) more performance  based  compensation such as bonuses and (ii) more
incentives  linked to stockholder  value such as stock options.  There are three
basic elements to executive officer compensation:

Salary.  To insure  that its  compensation  practices  remain  competitive,  the
Company regularly compares its executive compensation to the middle of the range
of  compensation  paid to executives in comparable  positions in other  software
companies  in the  industry  and also in  technology  companies  of similar size
located in Silicon Valley.  Salary increases are granted  generally on an annual
basis and are based on both individual  performance and the standard  percentage
of salary  increase  granted  to other  employees.  Upon  recommendation  of the
Committee,  the Board  approved  the  Company's  fiscal 1998  salary  guidelines
applicable  to all  employees,  including  executives,  pursuant to which salary
increases  would be  targeted  at no more  than  five  percent  (5%) of  current
salaries.  
------------------  
(1)THE MATERIAL IN THIS REPORT IS NOT  "SOLICITING  MATERIAL," IS NOT FILED WITH
THE COMMISSION AND IS NOT TO BE  INCORPORATED IN ANY FILING OF THE COMPANY UNDER
THE SECURITIES ACT OF 1934, AS AMENDED,  OR THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED,  WHETHER MADE BEFORE OR AFTER THE DATE HEREOF  AND  IRRESPECTIVE  OF
ANY GENERAL INCORPORATION LANGUAGE IN ANY FILING.

                                       13

<PAGE>

          Bonuses.  The  Committee  awards  bonuses to the  Company's  executive
officers  and  other  key  employees  pursuant  to an  employee  incentive  plan
established  and approved in the early part of the Company's  fiscal year by the
Committee.  The bonus amounts and persons who will receive bonuses can vary from
year to year.  The  bonus  pool is  calculated  based on a  formula  tied to the
Company's  targeted  earnings  per share.  In 1998,  the plan  included  minimal
payouts  based on  attainment  of 85% of target EPS with no bonus  being paid if
results were below the 85% threshold level. As actual results approach  targeted
levels, the bonus payout increases at an accelerated level. In fiscal year 1998,
target amounts for individual executive officers represented between 33% and 80%
of base salary.

        Stock  Options.  The Company  believes  that employee  equity  ownership
provides  significant  additional  motivation to executive  officers to maximize
value for the  Company's  stockholders.  The  Committee  typically  grants stock
options each year to executive  officers and other key  employees.  These grants
are based on a variety of factors, including total options outstanding and total
unvested  options  outstanding for each officer and key employee,  the financial
performance of the Company and assessment of personal  performance.  Whereas the
bonus plan recognizes  specific  annual  operational  achievements,  the Company
considers the  cumulative  stock option grants as a measure of the  individual's
long-term  potential impact on the Company's  results.  The Committee feels that
stock options are the best method of providing incentives for executive officers
to maximize the long-term success of the Company.

        Chief Executive Officer's Compensation.  The Committee determined that a
5.0%  increase  in the Chief  Executive  Officer's  base salary  represented  an
increase in accordance  with the Company's  policy of increasing  salaries by no
more than five percent (5%). The Committee also  determined that a cash bonus of
$495,266 (out of a total executive  officer bonus pool of $1,403,276) for fiscal
1998 was appropriate in light of the Company's strong financial performance.

        Compliance  with Section  162(m) of the Internal  Revenue Code.  Section
162(m) of the  Internal  Revenue  Code (the  "Code")  limits  the  Company  to a
deduction  for  federal  income  tax  purposes  of no more  than $1  million  of
compensation  paid to  certain  Named  Executive  Officers  in a  taxable  year.
Compensation  above  $1  million  may be  deducted  if it is  "performance-based
compensation"  within the meaning of the Code.  The  Compensation  Committee has
determined  that stock options granted under the Company's 1995 Option Plan with
an  exercise  price at least  equal to the fair  market  value of the  Company's
common  stock on the  date of  grant  shall  be  treated  as  "performance-based
compensation."


                                                    COMPENSATION COMMITTEE
                                                    Franklin P. Johnson, Jr.
                                                    Terry R. McGowan
                                                    David B. Wright

                                       14

<PAGE>



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

<TABLE>
        The  following  table  sets  forth  certain  information  regarding  the
ownership  of the  Company's  Common  Stock as of October  31, 1998 by: (i) each
director and nominee for director;  (ii) each of the executive officers named in
the Summary  Compensation  Table;  (iii) all executive officers and directors of
the Company as a group; and (iv) all those known by the Company to be beneficial
owners of more than five percent (5%) of its Common Stock.
<CAPTION>
                                                                      Beneficial Ownership(1)
                                                               --------------------------------------

                                                               Number of                   Percent of
                      Beneficial Owner                           Shares                      Total(%)
                      ----------------                         ---------                   ----------
<S>                                                             <C>                         <C> 
         Willington Management Company, LLP(2)                  2,208,126                   8.03
           75 State Street
           Boston, MA 02109

         Franklin P. Johnson, Jr.(3)(7)                         2,076,844                   7.54
           c/o Asset Management Partners
           2275 East Bayshore, Suite 150
           Palo Alto, CA 94303

         FMR Corp.(4)                                           2,206,967                   8.03
           82 Devonshire Street
           Boston, MA 02106

         Private Capital Management, Inc. and related
           entities(5)                                          1,682,927                   6.12
           3003 Tamiami Trail North
           Naples, FL 33940

         Winston Partners, L.P. and related entities(6)         1,637,085                   5.95
           888 Seventh Avenue
           New York, NY 10106

         Paul Newton(7)                                         1,348,321                   4.69

         Johannes Bruggeling(7)                                   843,465                   3.04

         Arthur Knapp, Jr.(7)                                     352,387                   1.27

         James Black(7)                                           282,795                   1.02

         Saverio Merlo(7)                                         241,762                   *

         Raymond Cairns(7)                                         57,693                   *

         Richard Harrit                                            42,769                   *

         Terry  McGowan(7)                                         12,356                   *

         David Wright(7)                                            1,000                   *

         All executive officers and directors
           as a group (10 persons)(8)                          5,259,392                  17.52
<FN>
* Less than one percent.

                                       15

<PAGE>

(1)  This table is based upon  information  supplied by officers,  directors and
     principal  stockholders and Schedules 13D and 13G filed with the SEC. Where
     information  regarding  stockholders is based on Schedules 13D and 13G, the
     number of shares owned is as of the date for which information was provided
     in such schedules, as noted. Unless otherwise indicated in the footnotes to
     this table and subject to community  property laws where applicable and the
     Voting  Agreements   entered  into  between  the  executive   officers  and
     directors, Boole believes that each of the Stockholders named in this table
     has sole voting and investment  power with respect to the shares  indicated
     as  beneficially  owned.  Applicable  percentages  are based on  27,500,992
     shares  outstanding  on October  31,1998,  adjusted  as  required  by rules
     promulgated by the SEC.

(2)  Wellington Management Company LLP ("Wellington"),  is an investment advisor
     registered  with the SEC  under the  Investment  Advisors  Act of 1940,  as
     amended,  and in its capacity as investment advisor,  may be deemed to have
     beneficial   ownership  of  these  shares,  which  are  owned  by  numerous
     investment  advisory clients,  none of which is known to have such interest
     with respect to more than five percent of the class.  Willington has shared
     voting power over 634,614 of these  shares,  and shared  dispositive  power
     over all  2,208,126 of these shares.  The reported  stated number of shares
     beneficially owned is as of June 30,1998.

(3)  Includes  177,574  shares held by Mr.  Johnson's  wife.  Mr. Johnson may be
     deemed to beneficially own these shares but disclaims  beneficial ownership
     of such  shares.  Also  includes  369,562  shares held by Asset  Management
     partners, a limited partnership, of which Mr. Johnson is a general partner.
     Mr. Johnson disclaims beneficial ownership of two- thirds of such shares.

(4)  FMR Corp.  ("FMR"),  in its capacity as a parent  holding  company,  may be
     deemed to be the beneficial  owner of these shares,  1,614,955 of which are
     beneficially  owned by a  wholly-owned  subsidiary,  Fidelity  Management &
     Research  Company,  a  registered  investment  advisor  which  acts  as  an
     investment advisor to various investment companies  ("Funds"),  which holds
     such shares,  and 592,012 of which are beneficially owned by a wholly-owned
     subsidiary,  Fidelity  Management  Trust  Company,  a bank which  serves as
     investment  manager of certain  institutional  accounts  ("Accounts") which
     holds these  shares.  FMR,  Edward C. Johnson 3d,  Chairman of FMR, and the
     Funds each has sole power to dispose of 1,614,955  shares.  Neither FMR nor
     Mr.  Johnson  have sole  power to vote or direct  the  voting of the shares
     owned by the Funds which power  resides  with the Funds'  Board of Trustees
     who carry out the voting under written guidelines established by the Funds'
     Board of  Trustees.  FMR and Mr.  Johnson,  through its control of Fidelity
     Management Trust Company,  has sole voting  disposition  power over 592,012
     shares owned by the Accounts.  Members of Mr.  Johnson's  family and trusts
     for  their  benefit  own  shares  of  common  stock  of  FMR   representing
     approximately  49% of the voting  stock of FMR.  Mr.  Johnson  owns 12% and
     Abigail  P.  Johnson,  a  director  of FMR,  owns  24.5%  of the  aggregate
     outstanding  voting  stock of FMR.  The  reported  stated  number of shares
     beneficially owned is as of February 9, 1998.

(5)  Private Capital  Management,  Inc.  ("PCM"),  in its capacity as investment
     advisor, and Bruce Sherman, PCM's President,  may each be deemed beneficial
     owners of 1,677,927 of these shares, which are held by PCM on behalf of its
     clients.  PCM and Bruce  Sherman have shared  dispositive  power over these
     1,677,927 shares.  Michael Seaman, who has sole power to vote or direct the
     vote of, and sole power to dispose of 5,000  shares,  is an employee of PCM
     or affiliates  thereof and (i) does not exercise sole or shared dispositive
     or  voting  power  with  respect  to the  shares  held by PCM or SPS,  (ii)
     disclaims  beneficial ownership of shares held by Mr. Sherman, PCM and SPS,
     and (iii) disclaims, along with Mr. Sherman, the existence of a group.

(6)  The shares are held by Winston  Partners,  L.P.  Chatterjee Fund Management
     L.P. is the sole general  partner of Winston  Partners,  L.P., and Purnendu
     Chatterjee is the sole general partner of Chatterjee Fund Management, L.P.

(7)  Includes  shares which  certain  executive  officers  and  directors of the
     Company  have the right to acquire  within 60 days after  October  31, 1998
     pursuant  to  outstanding  options as follows:  James E. C. Black,  282,750
     shares;  Johannes S. Bruggeling,  265,783 shares; Raymond E. Cairns, 52,631
     shares; Richard Harrit, 42,187 shares;  Franklin P. Johnson, 50,625 shares;
     Arthur F. Knapp,  Jr.,  328,750  shares;  Terry R. McGowan,  12,356 shares;
     Saverio Merlo,  229,499 shares;  Paul E. Newton,  1,246,876 shares; and all
     executive officers and directors as a group, 2,511,457 shares.

(8)  Includes shares described in notes (3) and (7).
</FN>
</TABLE>

                                       16

<PAGE>

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Transactions

        The Company entered into a loan agreement on October 15, 1997 with James
E.C. Black, Senior Vice President, Engineering, under which Mr. Black received a
loan of  $85,000,  to be repaid with  interest at a rate of 8.5% per annum.  The
loan and interest were paid in full on December 2, 1997.

        The Company has entered into indemnity  agreements with certain officers
and directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein,  for expenses,  damages,  judgments,  fines and  settlements  he may be
required to pay in actions or proceedings  which he is or may be made a party by
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent  permitted  under  Delaware  law and the  Company's
By-laws.

                                       17

<PAGE>

                                     PART IV



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

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

       1.   Financial   Statements.   The   following   Consolidated   Financial
            Statements  of Boole &  Babbage,  Inc.  and  Report  of  Independent
            Auditors are  incorporated by reference to Registrant's  1998 Annual
            Report to Stockholders:




                                                                         Page in
                                                                    Exhibit 13.1

            Consolidated Statements of Income-Years Ended
            September 30, 1998, 1997 and 1996...............................  12

            Consolidated Balance Sheets-September 30, 1998, 1997
            and 1996........................................................  13

            Consolidated Statements of Cash Flows-Years Ended
            September 30, 1998, 1997 and 1996...............................  14

            Consolidated Statements of Stockholders' Equity-
            Years Ended September 30, 1998, 1997 and 1996...................  15

            Notes to Consolidated Financial Statements......................  16

            Report of Ernst & Young LLP, Independent Auditors...............  30

       2.   Financial  Statement  Schedule.  The following  financial  statement
       schedule  of Boole & Babbage,  Inc.  is filed as part of this  Report and
       should be read in conjunction with the Consolidated  Financial Statements
       of Boole & Babbage, Inc.:

            Schedule for the fiscal  years ended  September  30, 1998,  1997 and
            1996:

            Schedule                                                        Page
            --------                                                        ----

            II-Valuation and Qualifying Accounts............................  14

       All other  schedules  are omitted since the required  information  is not
       present or is not present in amounts  sufficient to require submission of
       the  schedules,  or because the  information  required is included in the
       Consolidated  Financial Statements and notes thereto included in the 1998
       Annual Report to Stockholders, filed as Exhibit 13.1.

       3. Exhibits.  The exhibits listed in Item 14(c) are filed as part of this
       Annual Report.

(b) The Company  did not file any  reports on Form 8-K during the quarter  ended
September 30, 1998.

                                       18

<PAGE>
<TABLE>
<CAPTION>
(c)    Exhibit
       Number                         Description
       ------                         -----------
<S>     <C>                           <C>
         3.1                          Restated Certificate of Incorporation of Registrant.  (1)

         3.2                          Bylaws of Registrant.  (2)

         4.1                          Reference is made to Exhibits 3.1 and 3.2.

        10.1                          1986 Incentive Stock Option Plan, as
                                               amended, and related grant forms.  (3)

        10.2                          1986 Supplemental Stock Option Plan, as
                                               amended, and related grant forms.  (3)

        10.3                          Employee Stock Purchase Plan.  (4)

        10.4                          Form of Indemnity Agreement between
                                               Registrant and its officers and directors.  (1)

        10.5                          1993 Nonemployee Directors' Stock Option Plan, as
                                               amended, and related grant forms.  (5)

        10.6                          1995 Stock Option Plan, as amended, and related grant forms.  (6)

        10.7                          1997 Non-Officer Stock Option Plan, as amended, and related grant
                                      forms.  (7)

        13.1                          1998 Annual Report to Stockholders.  (8)

        21.1                          Subsidiaries of Registrant.  (8)

        23.1                          Consent of Ernst & Young LLP, Independent Accountants.  (8)

        23.2                          Consent of PricewaterhouseCoopers LLP, Independent Accountants.  (8)

        27.1                          Financial Data Schedule.  (8)

                                       19

<PAGE>

<FN>
(1)    Previously  filed as an exhibit to the  definitive  Proxy  Statement  for
       January 20, 1987 Annual Meeting of Stockholders and  incorporated  herein
       by reference.

(2)    Previously  filed as an exhibit to the Annual Report on Form 10-K for the
       year ended September 30, 1989, and incorporated herein by reference.

(3)    Previously filed as an exhibit to the Registration  Statement on Form S-8
       (Registration No. 33-65145) and incorporated herein by reference.

(4)    Previously filed as an exhibit to the Registration  Statement on Form S-8
       (Registration No. 333-32341) and incorporated herein by reference.

(5)    Previously  filed as an exhibit to the Registration Statement on Form S-8
       (Registration No. 33-79782) and incorporated herein by reference.

(6)    Previously  filed as an exhibit to the Registration Statement on Form S-8
       (Registration No. 333-02723) and incorporated herein by reference.

(7)    Previously  filed as an exhibit to the Registration Statement on Form S-8
       (Registration No. 333-66373) and incorporated herein by reference.

(8)    Filed as an exhibit to this Annual Report on Form 10-K.
</FN>
</TABLE>

        Insofar as indemnification  for liabilities arising under the Securities
Act of 1933 may be permitted to directors,  officers and controlling  persons of
the  registrant  pursuant  to  the  foregoing  provisions,   or  otherwise,  the
registrant  has been advised that in the opinion of the  Securities and Exchange
Commission  such  indemnification  is  against  public  policy as express in the
Securities  Act of 1933 and is,  therefore,  unenforceable.  In the event that a
claim for  indemnification  against such liabilities  (other than the payment by
the  registrant  of  expenses  incurred  or  paid  by  a  director,  officer  or
controlling  person of the registrant in the  successful  defense of any action,
suit or proceeding) is asserted by such director,  officer or controlling person
in connection with the securities being registered,  the registrant will, unless
in the  opinion  of its  counsel  the matter  has been  settled  by  controlling
precedent,  submit to a court of appropriate  jurisdiction  the question whether
such  indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

                                       20

<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 report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 28th of December
1998.

                                   BOOLE & BABBAGE, INC.


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


                                POWER OF ATTORNEY

       KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature appears
on the  following  page  constitutes  and appoints  Paul E. Newton and Arthur F.
Knapp, Jr. his attorneys-in-fact for him in any and all capacities,  to sign any
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  the  said
attorney-in-fact,  or his substitute or substitutes,  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 and in the capacities indicated on the 28th of December 1998.



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



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



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

                                       21

<PAGE>

<TABLE>
                                                         SCHEDULE II

                                                    BOOLE & BABBAGE, INC.

                                              VALUATION AND QUALIFYING ACCOUNTS

                                               Allowance for Doubtful Accounts
<CAPTION>

                                                                       Additions
                                                        ----------------------------------------

                                                        Charged           Charged
                                        Balance at      to Costs          to Other                           Balance
                                        Beginning       and               Accounts       Deductions          at End
                                        of Period       Expenses          Describe       Describe            of Period
                                        ---------       --------          --------       --------            ----------
<S>                                     <C>              <C>                             <C>                 <C>       
Year ended September 30, 1998           $1,995,000       $363,000             --         $(343,000)*         $2,015,000

Year ended September 30, 1997           $2,277,000       $ 40,000             --         $(322,000)**        $1,995,000

Year ended September 30, 1996           $2,103,000       $390,000             --         $(216,000)***       $2,277,000

<FN>
*      Amount includes $338,000 of account write-offs and $5,000 due to currency
       changes.

**     Amount  includes  $280,000 of account  write-offs,  net of $42,000 due to
       currency changes.

***    Amount  includes  $206,000 of account  write-offs,  net of $10,000 due to
       currency changes.
</FN>
</TABLE>

                                       22