<PAGE>
--------------------------------------------------------------------------------
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC. 20549


                                   FORM 10-Q



Mark One      Quarterly Report Pursuant to Section 13 or 15(d) of the
   [X]                    Securities Exchange Act of 1934

                 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1999

                                       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 0-19349

                             SOFTWARE SPECTRUM, INC.
             (Exact name of registrant as specified in its charter)

             Texas                                    75-1878002
-------------------------------          --------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification No.)
 incorporation or organization)

                               2140 MERRITT DRIVE
                                 GARLAND, TEXAS
                                      75041
                    (Address of principal executive offices)
                                   (Zip Code)

                                  972-840-6600
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
              (Former name, former address and former fiscal year,
                         if changed since last report)


     Indicate by check mark whether the Registrant (l) 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
                                             -----    -----

     At December 10, 1999, the Registrant had outstanding 3,853,400 shares of
its Common Stock, par value $.01 per share.

--------------------------------------------------------------------------------

<PAGE>

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES


                                      INDEX


<TABLE>
<CAPTION>

                                                                                              PAGE
PART I.           FINANCIAL INFORMATION                                                      NUMBER
<S>               <C>                                                                        <C>

Item 1.           Consolidated Financial Statements

                      Consolidated Balance Sheets at October 31, 1999
                               and April 30, 1999                                               1

                      Consolidated Statements of Income for the
                               Three and Six Months Ended
                               October 31, 1999 and 1998                                        2

                      Consolidated Statements of Cash Flows
                               for the Six Months Ended
                               October 31, 1999 and 1998                                        3

                      Notes to Consolidated Financial Statements                              4-5


Item 2.           Management's Discussion and Analysis of Financial Condition and
                      Results of Operations                                                  6-10

Item 3.           Quantitative and Qualitative Disclosures About Market Risk                   10


PART II.          OTHER INFORMATION

Item 4.           Submission of Matters to Vote of Security Holders                            11

Item 6.           Exhibits and Reports on Form 8-K                                             11

</TABLE>


<PAGE>

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                  October 31,      April 30,
                                                                                     1999             1999
                                                                                  -----------      -----------
                                                                                  (Unaudited)
                                 ASSETS
<S>                                                                               <C>              <C>
Current assets
    Cash and cash equivalents                                                     $     6,342      $    20,084
    Trade accounts receivable, net of allowance for doubtful
      accounts of $3,428 at October 31 and $2,687 at April 30                         150,962          142,714
    Inventories                                                                           490              370
    Prepaid expenses                                                                    1,757            1,753
    Other current assets                                                                1,052              696
                                                                                  -----------      -----------
        Total current assets                                                          160,603          165,617

Furniture, equipment and leasehold improvements, at cost                               52,348           47,448
    Less accumulated depreciation and amortization                                     29,365           25,410
                                                                                  -----------      -----------
                                                                                       22,983           22,038
Other assets, consisting primarily of goodwill, net of accumulated
  amortization of $9,746 at October 31 and $8,431 at April 30                          48,663           48,799
                                                                                  -----------      -----------

                                                                                  $   232,249      $   236,454
                                                                                  ===========      ===========

                  LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
    Current maturities of long-term debt                                          $       422      $       763
    Trade accounts payable                                                            112,057          134,353
    Other current liabilities                                                          16,905           14,550
                                                                                  -----------      -----------
        Total current liabilities                                                     129,384          149,666

Long-term debt, less current maturities                                                24,420            7,863

Shareholders' equity
    Preferred stock, par value $.01; authorized, 1,000,000 shares;
      issued and outstanding, none                                                         --               --
    Common stock, par value $.01; authorized, 20,000,000 shares; issued
      4,534,822 shares at October 31 and 4,491,542 shares at
      April 30                                                                             45               45
    Additional paid-in capital                                                         41,497           40,833
    Retained earnings                                                                  49,027           46,896
    Currency translation adjustments                                                   (3,418)          (3,092)
                                                                                  -----------      -----------
                                                                                       87,151           84,682

    Less treasury stock at cost - 554,901 shares at October 31 and
      384,901 shares at April 30                                                        8,706            5,757
                                                                                  -----------      -----------
        Total shareholders' equity                                                     78,445           78,925
                                                                                  -----------      -----------

                                                                                  $   232,249       $  236,454
                                                                                  ===========      ===========

</TABLE>

                 See notes to consolidated financial statements.

                                       1

<PAGE>

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                          Three Months Ended                  Six Months Ended
                                                          ------------------                  ----------------
                                                 October 31,        October 31,         October 31,         October 31,
                                                    1999               1998                1999                1998
                                                 -----------        -----------         -----------         -----------
<S>                                              <C>                <C>                 <C>                 <C>
Net sales
    Software                                    $ 210,611           $ 173,450           $ 425,609           $ 379,125
    Technology services                            28,629              26,525              55,454              45,116
                                                ---------           ---------           ---------           ---------
                                                  239,240             199,975             481,063             424,241
                                                ---------           ---------           ---------           ---------
Cost of sales
    Software                                      191,496             156,703             385,171             343,842
    Technology services                            20,510              15,827              39,588              27,754
                                                ---------           ---------           ---------           ---------
                                                  212,006             172,530             424,759             371,596
                                                ---------           ---------           ---------           ---------

    Gross margin                                   27,234              27,445              56,304              52,645


Selling, general and administrative expenses       23,040              22,013              46,786              42,068
Depreciation and amortization                       2,949               2,753               5,715               5,325
                                                ---------           ---------           ---------           ---------
    Operating income                                1,245               2,679               3,803               5,252


Interest expense (income)
    Interest expense                                  262                 461                 513                 759
    Interest income                                  (195)               (112)               (384)               (212)
                                                ---------           ---------            ---------           ---------
                                                       67                 349                 129                 547
                                                ---------           ---------            ---------           ---------

    Income before income taxes                      1,178               2,330               3,674               4,705


Income tax expense                                    494               1,042               1,543               2,117
                                                ---------           ---------           ---------           ---------

    Net income                                  $     684           $   1,288           $   2,131           $   2,588
                                                =========           =========           =========           =========

Earnings per share
    Basic                                       $    0.17           $    0.30           $    0.52           $    0.60
                                                =========           =========           =========           =========
    Diluted                                     $    0.17           $    0.30           $    0.52           $    0.60
                                                =========           =========           =========           =========

Weighted average shares outstanding
    Basic                                           4,029               4,267               4,068               4,279
                                                =========           =========           =========           =========
    Diluted                                         4,054               4,288               4,089               4,321
                                                =========           =========           =========           =========

</TABLE>





               See notes to consolidated financial statements.

                                       2

<PAGE>



                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                        Six Months Ended
                                                                                           October 31,
                                                                                   ----------------------------
                                                                                      1999             1998
                                                                                   -----------      -----------
<S>                                                                                <C>              <C>
Operating activities
    Net income                                                                     $    2,131       $    2,588
    Adjustments to reconcile net income to net cash used in
      operating activities
        Provision for bad debts                                                           918              450
        Depreciation and amortization                                                   5,715            5,325
        Deferred income taxes                                                            (150)             241
        Changes in operating assets and liabilities
           Trade accounts receivable                                                   (9,214)          26,223
           Inventories                                                                   (106)           1,473
           Prepaid expenses and other assets                                              469             (583)
           Trade accounts payable and other current liabilities                       (19,870)         (48,586)
                                                                                   -----------      -----------
    Net cash used in operating activities                                             (20,107)         (12,869)
                                                                                   -----------      -----------

Investing activities
    Purchase of subsidiary, net of cash acquired                                       (1,916)              --
    Purchase of furniture, equipment and leasehold
       improvements                                                                    (5,247)          (7,255)
                                                                                   -----------      -----------
    Net cash used in investing activities                                              (7,163)          (7,255)
                                                                                   -----------      -----------

Financing activities
    Borrowings on long-term debt                                                       53,875          128,727
    Repayments of long-term debt                                                      (37,774)        (109,869)
    Proceeds from stock issuance including tax benefit related
        to stock options exercised                                                        364              930
    Purchase of treasury stock                                                         (2,949)          (2,300)
    Other                                                                                   1                4
                                                                                   -----------      -----------
    Net cash provided by financing activities                                          13,517           17,492
                                                                                   -----------      -----------

Effect of exchange rate changes on cash                                                    11             (552)
                                                                                   -----------      -----------

Decrease in cash and cash equivalents                                                 (13,742)          (3,184)
Cash and cash equivalents at beginning of period                                       20,084            7,129
                                                                                   ===========      ===========
Cash and cash equivalents at end of period                                              6,342       $    3,945
                                                                                   ===========      ===========

Supplemental disclosure of cash paid during the period
    Income taxes                                                                   $    1,846       $    3,268
    Interest                                                                              359              558

</TABLE>


               See notes to consolidated financial statements.

                                       3

<PAGE>

                   SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


NOTE A -- BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The accompanying financial statements include the accounts of Software Spectrum,
Inc. (the "Company") and its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation. Certain prior
period amounts have been reclassified to conform to the current period
presentation.

The consolidated financial statements contained herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments necessary for a fair
presentation of the consolidated financial position as of October 31, 1999, the
consolidated results of operations for the three and six months ended October
31, 1999 and 1998 and the consolidated cash flows for the six months ended
October 31, 1999 and 1998 have been made. In addition, all such adjustments
made, in the opinion of management, are of a normal recurring nature. The
results of operations for the periods presented are not necessarily indicative
of the results to be expected for the full fiscal year.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the interim reporting rules of the
Securities and Exchange Commission. The interim consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and related notes for the year ended April 30, 1999, included in the
Company's 1999 Annual Report on Form 10-K.

NOTE B -- OTHER COMPREHENSIVE INCOME

The components of comprehensive income are as follows (in thousands):

<TABLE>
<CAPTION>

                                                    Three Months Ended               Six Months Ended
                                                       October 31,                     October 31,
                                                ---------------------------     ---------------------------
                                                   1999            1998            1999            1998
                                                -----------     -----------     -----------     -----------
<S>                                             <C>             <C>             <C>             <C>
Net income                                      $      684      $    1,288      $    2,131      $    2,588
Currency translation adjustments                      (196)             46            (326)           (154)
                                                ===========     ===========     ===========     ===========
    Comprehensive income                        $      488      $    1,334      $    1,805      $    2,434
                                                ===========     ===========     ===========     ===========

</TABLE>


NOTE C -- EARNINGS PER SHARE

The following table (in thousands, except per share amounts) sets forth the
computation of basic and diluted earnings per share. Outstanding options that
were not included in the computation of diluted earnings per share because the
exercise price of the options was greater than the average market price of the
common shares totaled approximately 215,000 and 303,000 shares for the three and
six months ended October 31, 1999 and 304,000 and 266,000 shares for the three
and six months ended October 31, 1998, respectively.

<TABLE>
<CAPTION>

                                                     Three Months Ended               Six Months Ended
                                                        October 31,                     October 31,
                                                 ---------------------------     ---------------------------
                                                    1999            1998            1999            1998
                                                 ------------    -----------     -----------     -----------
<S>                                              <C>             <C>             <C>             <C>
Net income                                       $       684     $    1,288      $    2,131      $    2,588
                                                 ------------    -----------     -----------     -----------

Weighted average shares outstanding - basic            4,029          4,267           4,068           4,279
Effect of dilutive employee and director stock
  options                                                 25             21              21               42
                                                 ------------    -----------     -----------     -----------


                                       4

<PAGE>


Weighted average shares outstanding - diluted          4,054          4,288           4,089           4,321
                                                 ------------    -----------     -----------     -----------

Earnings per share - basic and diluted           $      0.17     $     0.30     $      0.52     $      0.60
                                                 ============    ===========     ===========     ===========

</TABLE>

NOTE D -- BUSINESS SEGMENTS

Information for the Company's  reportable  segments for the three and six
months ended October 31, 1999 and 1998 is presented below (in thousands):

<TABLE>
<CAPTION>

                                                    Three Months Ended               Six Months Ended
                                                       October 31,                     October 31,
                                                ---------------------------     ---------------------------
                                                   1999            1998            1999            1998
                                                -----------     -----------     -----------     -----------
<S>                                             <C>             <C>             <C>             <C>
Net sales
    Software                                    $  210,611      $  173,450      $  425,609      $  379,125
    Professional services                           12,906          10,426          26,326          19,754
    Support services                                15,723          16,099          29,128          25,362
                                                -----------     -----------     -----------     -----------
                                                $  239,240      $  199,975      $  481,063      $  424,241
                                                ===========     ===========     ===========     ===========

Operating income (loss)
    Software                                    $   12,093      $    8,642      $   25,041      $   18,764
    Professional services                             (703)           (372)           (386)         (1,063)
    Support services                                   276           3,805             118           5,069
    Unallocated corporate overhead                 (10,421)         (9,396)        (20,970)        (17,518)
                                                -----------     -----------     -----------     -----------
                                                $    1,245      $    2,679      $    3,803      $    5,252
                                                ===========     ===========     ===========     ===========

</TABLE>

NOTE E -- BUSINESS ACQUISITION

On September 2, 1999, the Company acquired all of the outstanding shares of
common stock of Comptroller Technology, Inc., d/b/a/ Quinn, Reeder and
Associates, a privately-held technology company which specializes in providing
customer relationship management solutions. The purchase price was $2.3 million,
including cash of $2 million and the issuance of 16,904 shares of the Company's
Common Stock. In addition, the purchase agreement provides for the payment of
additional cash consideration during the two years following the closing date if
certain earnings targets are met. The acquisition has been accounted for using
the purchase method of accounting. The estimated fair values of the assets
acquired, liabilities assumed and stock issued in connection with the purchase
were $2.9 million, $631,000 and $300,000, respectively. Goodwill is $2.2 million
and is being amortized using the straight-line method over 10 years. The
operating results of the acquired business have been included in the
consolidated statements of income from the date of acquisition. Pro forma
operating results, giving effect to the acquisition as though it had occurred at
the beginning of fiscal 1999, are not presented because they are not materially
different than the Company's actual results.




                                       5

<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

OVERVIEW

The Company is a global business-to-business software licensing and
services provider that delivers comprehensive information technology solutions
to organizations throughout North America, Europe and Asia/Pacific. The Company
sells personal computer ("PC") software through volume licensing and maintenance
("VLM") agreements or right-to-copy arrangements, and full-packaged PC software
products, primarily through third-party distributors. In addition, the Company
provides infrastructure design, enterprise software management, application
development and technical support services to help organizations maximize
business value from information technology.

The following table sets forth certain items from the Company's Consolidated
Statements of Income expressed as a percentage of net sales.

<TABLE>
<CAPTION>

                                                    Three Months Ended               Six Months Ended
                                                       October 31,                     October 31,
                                                ---------------------------     ---------------------------
                                                   1999            1998            1999            1998
                                                -----------     -----------     -----------     -----------
<S>                                             <C>             <C>             <C>             <C>
Net sales                                         100.0%          100.0%          100.0%          100.0%
Cost of sales                                      88.6            86.3            88.3            87.6
                                                -----------     -----------     -----------     -----------
    Gross margin                                   11.4            13.7            11.7            12.4
Selling, general and administrative expenses        9.6            11.0             9.7             9.9
Depreciation and amortization                       1.2             1.4             1.2             1.3
                                                -----------     -----------     -----------     -----------
    Operating income                                0.6             1.3             0.8             1.2
Interest expense, net                               0.1             0.2             0.1             0.1
                                                -----------     -----------     -----------     -----------
    Income before income taxes                      0.5             1.1             0.7             1.1
Income tax expense                                  0.2             0.5             0.3             0.5
                                                -----------     -----------     -----------     -----------
    Net income                                      0.3%            0.6%            0.4%            0.6%
                                                ===========     ===========     ===========     ===========

</TABLE>

NET SALES

Software sales for the three and six months ended October 31, 1999 increased
approximately 21% and 12% over those for the three and six months ended October
31, 1998, primarily due to higher software sales in North America. Sales of
software through VLM agreements represented approximately 85% of software sales
for both the three and six months ended October 31, 1999 compared to
approximately 79% and 81% for the three and six months ended October 31, 1998.

For the three and six months ended October 31, 1999, service revenues
increased by 8% and 23% as compared to the three and six months ended October
31, 1998. Sales of support services increased 15% for the six months ended
October 31, 1999 primarily due to a large ongoing technical support contract
that began late in the July 1998 quarter. Sales of support services decreased
2% for the three months ended October 31, 1999. Professional services
revenues grew by 24% and 33% for the three and six months ended October 31,
1999, respectively, despite the closure of six smaller sites in late fiscal
1999. As of October 31, 1999, the Company had 18 professional services sites
worldwide compared to 26 offices at October 31, 1998. Professional and
support services represented approximately 12% of the Company's overall sales
for both the three and six months ended October 31, 1999 as compared to 13%
and 11% for the three and six months ended October 31, 1998. Such revenue
generated approximately 30% and 28%, respectively, of the Company's gross
margin dollars during the three and six months ended October 31, 1999. The
Company expects that the percentage of gross margin dollars provided by
professional and support services will increase as the Company continues to
develop and expand this aspect of its business.

                                       6

<PAGE>

The Company believes future increases in sales will depend upon its ability to
maintain and increase its customer base, to develop and expand its professional
and support services and to capitalize on continued growth in desktop technology
markets around the world.

INTERNATIONAL OPERATIONS

For the three and six months ended October 31, 1999, sales outside of the United
States were $33 million and $82 million, respectively, as compared to $35
million and $72 million for the three and six months ended October 31, 1998.
Sales in Europe decreased 8% to $13 million for the three months ended October
31, 1999, while sales in Asia/Pacific decreased 15% to $12 million during the
same period. The decreases were primarily due to decreased sales of software
under VLM agreements, including enterprise-wide licensing arrangements. For the
six months ended October 31, 1999, sales in Europe increased 5% to $28 million,
while sales in Asia/Pacific increased 22% to $34 million, primarily due to
increased sales of software under VLM agreements during the first quarter.

For the three and six months ended October 31, 1999, fluctuations in foreign
currencies against the U.S. dollar did not have a material effect on the
Company's financial results.

GROSS MARGIN

Overall gross margin as a percentage of net sales was 11.4% and 11.7% for the
three and six months ended October 31, 1999, as compared to 13.7% and 12.4%
for the comparable periods of the prior year. The decline in overall gross
margin as a percentage of net sales for the three months ended October 31,
1999 reflects declines in gross margins in all three of the Company's
operating segments. For the three months ended October 31, 1999, gross margin
on the sale of PC software decreased to 9.1%, as compared to 9.7% for the
three months ended October 31, 1998, primarily due to the increasing
percentage of sales of software through VLM agreements. Gross margins in
professional services for the three months ended October 31, 1999 were
negatively impacted by costs of closing the Company's professional services
site in Germany. In addition, in July 1998, the Company began providing
support services under a large contract involving the introduction of a new
product. Initial high call volumes and customer incentives related to the
implementation of this contract caused gross margins on support services to
be high during the October 1998 quarter.

The Company generally realizes lower gross margins as a percentage of net sales
on sales of software through VLM agreements, as compared to sales of
full-packaged software products. Therefore, the Company believes that gross
margin percentages on sales of software may decline if the current volume of
software product sales by the Company through VLM agreements, particularly
enterprise-wide agreements, continues or if publishers respond to continued
market pressures by reducing financial incentives to resellers. This potential
decrease in product gross margin percentages may be offset by anticipated
increases in gross margin dollars generated by technology services.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative ("SG&A") expenses include the costs of the
Company's sales and marketing activities as well as purchasing, distribution and
administration costs. For the three and six months ended October 31, 1999, SG&A
expenses, as a percentage of net sales, decreased to 9.6% and 9.7%, as compared
to 11.0% and 9.9% for the three and six months ended October 31, 1998. The
decrease is due to operating efficiencies realized in the product services area
due to increased sales and the Company's ongoing focus on controlling operating
costs in both the services and product businesses.

                                       7

<PAGE>

DEPRECIATION AND AMORTIZATION

The increase in depreciation and amortization for the three and six months ended
October 31, 1999, as compared to the three and six months ended October 31,
1998, reflects additional depreciation on the higher level of fixed assets
utilized in the Company's technology services business in fiscal 2000.

INCOME TAX EXPENSE

The Company's effective tax rate for both the three and six months ended October
31, 1999 was approximately 42% as compared to approximately 45% for both the
three and six months ended October 31, 1998. The decrease in the Company's
effective tax rate primarily reflects the impact of its international
operations.

LIQUIDITY AND CAPITAL RESOURCES

At October 31, 1999, the Company had approximately $6.3 million in cash and cash
equivalents and had $24.4 million outstanding under its $100 million revolving
credit facility. The credit facility, which is secured by accounts receivable,
inventory and a pledge of the stock of certain of the Company's subsidiaries,
permits the Company to borrow up to $100 million, subject to availability under
its borrowing base. As of October 31, 1999, the Company had approximately $55
million of additional borrowing availability under its credit facility. The
facility expires in March 2002.

The increase in trade accounts receivable from April 30, 1999 to October 31,
1999 is due to the accelerated collection of a few large receivables in April
1999. At October 31, 1999 and April 30, 1999, accounts receivable represented
approximately 53 and 55 days of historical sales, respectively.

For the six months ended October 31, 1999, the Company's operating activities
used $20.1 million of cash compared to $12.9 million of cash used in
operations during the six months ended October 31, 1998. The increase in cash
used in operations is primarily due to the timing of certain payments to the
Company's vendors and the timing of the collection of a few large receivables.

On September 2, 1999, the Company acquired all of the outstanding shares of
common stock of Comptroller Technology, Inc., d/b/a/ Quinn, Reeder and
Associates, a privately-held technology company which specializes in providing
customer relationship management solutions. The purchase price was $2.3 million,
including cash of $2 million and the issuance of 16,904 shares of the Company's
Common Stock.

The increase in furniture, equipment and leasehold improvements from April 30,
1999 to October 31, 1999 reflects approximately $5.2 million of capital
expenditures related primarily to the ongoing upgrade of the Company's computer
systems and expansion of its technical support center in Tampa, Florida.

The Company expects that its cash requirements for fiscal 2000 will be satisfied
from cash flow from operations and borrowings under its credit facility.

The Company has a stock repurchase program which allows for the purchase of the
Company's Common Stock from time to time in the open market or through privately
negotiated transactions. The Company funds such purchases with cash or
borrowings under the Company's credit facility. As of December 10, 1999 the
Company had repurchased 645,400 shares of Common Stock, for a total of $9.8
million, under the stock repurchase program and has been authorized by its Board
of Directors to repurchase up to an additional $179,000 of its Common Stock.

                                       8

<PAGE>

YEAR 2000

The Company has developed an overall plan outlining the tasks, resources and
target dates necessary to ensure the ongoing operation of the Company's
business through the turn of the century and beyond. Over the last three
years, the Company has replaced substantially all of the core management
information systems used in the Company's business, and the platforms upon
which these systems were developed are designed to process dates accurately
beyond the Year 2000. The Company has completed the update of its third-party
software tools, database engines and applications to a Year 2000 compliant or
ready release. The Company has also completed testing and remediation of its
networks and servers. Based on the Company's testing of these core systems
and the information and representations received to date from vendors and
other third parties, the Company believes that its Year 2000 remediation of
these systems is complete and that these systems are Year 2000 ready.

In addition, the Company has conducted an inventory, review and assessment of
its personal computers, desktop software applications and non-IT embedded
systems to determine whether they support Year 2000 date codes. The Company has
completed testing and remediation of these systems with the exception of certain
isolated remote user desktop personal computers and software applications. The
Company believes that a date-related failure with respect to these isolated
remote computers and applications is unlikely, and that such a failure, if it
were to occur, would not have a material impact on the Company's operations. In
the event of an unexpected failure in one of the Company's systems, the
Company's employees should be able to continue operations on a manual basis
until such systems have been restored to full operating capacity.

As part of its overall readiness plan, the Company constructed a systems test
lab which simulated a replica of the Company's production environment. The lab
allowed the Company to perform integrated system tests of the Company's critical
applications in a production environment. The Company has completed testing of
its critical applications and this testing uncovered no material date-related
issues.

The Company's Year 2000 initiative also provides for contacting key software
vendors and other business partners to determine whether they have effective
plans to address their Year 2000 issues. In the event that the Company's key
vendors cannot provide the Company with software products and services that meet
Year 2000 requirements on a timely basis, or if customers delay, forego or
return software purchases, or delay professional services contracts, based upon
Year 2000 related issues, the Company's operating results could be materially
adversely affected.

The Company believes that its most reasonably-likely worst case scenario
involves a temporary business disruption caused by the failure of a supplier to
provide needed products or services. The most significant potential disruption
would be a telecommunications failure at one of the Company's facilities, which
could render the Company unable to accept sales orders or to perform under its
technical support contracts. In the event of such a failure, the Company's
contingency plans include rerouting calls to alternate operations centers,
identifying substitute or second-source suppliers and implementing revised
business processes designed to permit continued operations until normal
communications are restored.

The Company estimates that the total cost of its Year 2000 project will not
exceed $1 million. The majority of the costs have involved reallocation of
existing resources rather than incremental costs. This reallocation of resources
has not had a material impact on the implementation of any significant internal
systems projects.

In general, as a reseller of software products, the Company only passes through
to its customers the applicable vendors' warranties. The Company's operating
results could be materially adversely affected, however, if it were held liable
for the failure of software products resold by the Company to be Year 2000
compliant despite its disclaimer of software product warranties. With respect to
the Company's consulting services, the failure of client systems or processes
could subject the Company to claims. Such claims, or the defense thereof, could
have a material adverse effect on the Company's operating results.


                                       9

<PAGE>

EURO CURRENCY ISSUES

On January 1, 1999, eleven of the fifteen member countries of the European Union
introduced a common legal currency called the Euro, which is intended to replace
the currently existing currencies of the participating countries by January
2002. The initial introduction of the Euro did not have a significant effect on
the Company's operations or financial results. The Company believes that its
internal systems are Euro capable and does not expect increased use of the Euro
to materially impact its financial condition, operating results or use of
derivative instruments.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Other than statements of historical fact, this Management's Discussion and
Analysis of Financial Condition and Results of Operations includes certain
statements of the Company that may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements include future market trends, expectations concerning the
Company's growth, estimates regarding the economy and the software industry in
general, key performance indicators that impact the Company, statements
regarding market risk and statements included in the Year 2000 and Euro Currency
discussions above. In developing any forward-looking statements, the Company
makes a number of assumptions, including expectations for continued market
growth, anticipated revenue and gross margin levels, and cost savings and
efficiencies that include the ability of the Company to develop electronic
strategies. Although the Company believes these assumptions are reasonable, no
assurance can be given that they will prove correct. The Company's ability to
continue to grow product sales and develop its professional and support services
practices, improve its operating results in international markets and improve
operational efficiencies will be key to its success in the future. If the
industry's or the Company's performance differs materially from these
assumptions or estimates, Software Spectrum's actual results could vary
significantly from the estimated performance reflected in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon as
a prediction of actual results. The Company's Form 10-K for its fiscal year
ended April 30, 1999 contains certain cautionary statements under
"Forward-Looking Information" that identify factors that could cause the
Company's actual results to differ materially from those in the forward-looking
statements in this discussion. All forward-looking statements in this discussion
are expressly qualified in their entirety by the cautionary statements in this
paragraph and under "Forward-Looking Information" in the Company's Form 10-K.

INFLATION

The Company believes that inflation has not had a material impact on its
operations or liquidity to date.


ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about market risks for the three and six months ended October 31,
1999 does not differ materially from that discussed in Item 7 of the Company's
Annual Report on Form 10-K for its fiscal year ended April 30, 1999.


                                       10

<PAGE>

PART II.  OTHER INFORMATION



ITEM 4.       SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

On September 23, 1999, the Company held its Annual Meeting of Shareholders (the
"Meeting"). At the Meeting, Carl S. Ledbetter and Brian N. Dickie were elected
as directors to serve three-year terms expiring at the Company's Annual Meeting
of Shareholders to be held in the Year 2002. In addition, Amendment No. 1 to the
Company's 1998 Long-Term Incentive Plan, which increased the number of shares of
Common Stock reserved for issuance under the Plan by 200,000, was approved.

The following table sets forth the number of shares of Common Stock that were
voted for or against or abstained from each matter:

<TABLE>
<CAPTION>

                                                                 For             Against           Abstained
                                                                 ---             -------           ---------
<S>                                                           <C>                <C>               <C>

Election of Carl S. Ledbetter to the Board of Directors       3,551,100               --           109,548

Election of Brian N. Dickie to the Board of Directors         3,549,361               --           111,287

Adoption of Amendment No. 1 to the Company's
   1998 Long-Term Incentive Plan                              3,414,017          220,983            25,648

</TABLE>

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits

              Exhibit 27 - Financial Data Schedule

         (b)  Reports on Form 8-K

              No reports on Form 8-K were filed during the three month period
ended October 31, 1999.




                                       11

<PAGE>

                                   SIGNATURES



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



                           SOFTWARE SPECTRUM, INC.



Date:  December 15, 1999   By: /s/ James W. Brown
                               ----------------------------------------------
                                   James W. Brown
                                   Vice President and Chief Financial Officer
                                   (Principal Financial Officer and Principal
                                   Accounting Officer)





                                       12

<PAGE>

                                  EXHIBIT INDEX





Exhibit 27        Financial Data Schedule