<PAGE>

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                      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 JULY 31, 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 0-19349

                            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 (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 
                                               ---     ---

     At September 9, 1998, the Registrant had outstanding 4,266,176 shares of 
its Common Stock, par value $.01 per share.

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<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 July 31, 1998 and April 30, 1998            1

               Consolidated Statements of Income for the Three Months Ended 
                 July 31, 1998 and 1997                                                   2

               Consolidated Statements of Cash Flows for the Three Months Ended
                 July 31, 1998 and 1997                                                   3

               Notes to Consolidated Financial Statements                                 4


Item 2.    Management's Discussion and Analysis of Financial Condition and
             Results of Operations                                                        5


PART II.   OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K                                               9
</TABLE>


<PAGE>

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

<TABLE>
<CAPTION>
                                                                  July 31,       April 30,
                                                                    1998           1998
                                                                -----------     ----------
                                                                (Unaudited)
                           ASSETS
<S>                                                             <C>             <C>
Current assets
    Cash and cash equivalents                                   $   6,460       $   7,129
    Trade accounts receivable, net of allowance for
      doubtful accounts of $2,723 at July 31 and $3,050 at        153,321         171,460
      April 30
    Inventories                                                     4,345           4,564
    Prepaid expenses                                                4,171           2,279
    Other current assets                                              831           1,024
                                                                ----------      ----------
        Total current assets                                      169,128         186,456

Furniture, equipment and leasehold improvements, at cost           42,742          37,951
  Less accumulated depreciation and amortization                   19,286          17,538
                                                                ----------      ----------
                                                                   23,456          20,413
Other assets, consisting primarily of goodwill, net of
  accumulated amortization of $6,255 at July 31 and $5,661 
  at April 30                                                      50,603          51,762
                                                                ----------      ----------

                                                                $ 243,187       $ 258,631
                                                                ----------      ----------
                                                                ----------      ----------

            LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
    Current maturities of long-term debt                        $     644       $     393
    Trade accounts payable                                        138,843         160,331
    Other current liabilities                                      13,444          13,824
                                                                ----------      ----------
        Total current liabilities                                 152,931         174,548

Long-term debt, less current maturities                            13,657           7,813

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 4,433,342 shares at July 31 and
      4,397,678 shares at April 30                                     44              44
    Additional paid-in capital                                     40,069          39,496
    Retained earnings                                              42,065          40,765
    Currency translation adjustments                               (2,827)         (2,627)
                                                                ----------      ----------
                                                                   79,351          77,678

    Less treasury stock at cost; 164,611 shares at July 31
      and 92,111 shares at April 30                                 2,752           1,408
                                                                ----------      ----------
        Total shareholders' equity                                 76,599          76,270
                                                                ----------      ----------

                                                                $ 243,187       $ 258,631
                                                                ----------      ----------
                                                                ----------      ----------
</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
                                                                July 31,
                                                       --------------------------
                                                          1998            1997
                                                       ----------      ----------
<S>                                                    <C>              <C>
Net sales                                              $ 224,266       $ 211,958
Cost of sales                                            199,066         188,246
                                                       ----------      ----------
    Gross margin                                          25,200          23,712

Selling, general and administrative expenses              20,055          19,365
Depreciation and amortization                              2,572           2,264
                                                       ----------      ----------
    Operating income                                       2,573           2,083

Interest expense (income)
    Interest expense                                         298             957
    Interest income                                         (100)            (39)
                                                       ----------      ----------
                                                             198             918
                                                       ----------      ----------

    Income before income taxes                             2,375           1,165

Income tax expense                                         1,075             624
                                                       ----------      ----------

    Net income                                         $   1,300       $     541
                                                       ----------      ----------
                                                       ----------      ----------

Earnings per share
    Basic                                              $    0.30       $    0.12
                                                       ----------      ----------
                                                       ----------      ----------
    Diluted                                            $    0.30       $    0.12
                                                       ----------      ----------
                                                       ----------      ----------

Weighted average shares outstanding
    Basic                                                  4,281           4,332
                                                       ----------      ----------
                                                       ----------      ----------
    Diluted                                                4,345           4,341
                                                       ----------      ----------
                                                       ----------      ----------
</TABLE>

                 See notes to consolidated financial statements.

                                      2
<PAGE>

                                       
                   SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                (in thousands)
<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                                            July 31,
                                                                   -------------------------
                                                                      1998            1997
                                                                   -----------     ---------
<S>                                                                <C>             <C>
Operating activities
    Net income                                                     $   1,300       $    541
    Adjustments to reconcile net income to net cash
      used in operating activities
        Provision for bad debts                                          207            430
        Depreciation and amortization                                  2,572          2,264
        Deferred income taxes                                            388            375
        Changes in operating assets and liabilities
           Trade accounts receivable                                  17,165         (8,646)
           Inventories                                                   213          1,536
           Prepaid expenses and other assets                          (1,582)            (5)
           Trade accounts payable and other current
             liabilities                                             (21,240)          (820)
                                                                   ----------      ---------
    Net cash used in operating activities                               (977)        (4,325)
                                                                   ----------      ---------

Investing activities
    Purchase of furniture, equipment and leasehold
      improvements                                                    (4,955)        (3,800)
                                                                   ----------      ---------
    Net cash used in investing activities                             (4,955)        (3,800)
                                                                   ----------      ---------

Financing activities
    Borrowings on long-term debt                                      45,758         99,239
    Repayments of long-term debt                                     (39,695)       (89,640)
    Proceeds from stock issuance including tax
      benefit related to stock options exercised                         574             72
    Purchase of treasury stock                                        (1,344)            --
    Other                                                                 26             71
                                                                   ----------      ---------
    Net cash provided by financing activities                          5,319          9,742
                                                                   ----------      ---------

Effect of exchange rate changes on cash                                  (56)          (374)
                                                                   ----------      ---------

Increase (decrease) in cash and cash equivalents                        (669)         1,243
Cash and cash equivalents at beginning of period                       7,129          7,440
                                                                   ----------      ---------
Cash and cash equivalents at end of period                         $   6,460       $  8,683
                                                                   ----------      ---------
                                                                   ----------      ---------

Supplemental disclosure of cash paid during the period
    Income taxes                                                   $   1,838       $     42
    Interest                                                             159            298
</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 July 31, 
1998, and the consolidated results of operations and cash flows for the three 
months ended July 31, 1998 and 1997 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, 1998, included in the Company's 1998 Annual Report on Form 10-K.

NOTE B -- OTHER COMPREHENSIVE INCOME

Effective May 1, 1998, the Company adopted the provisions of Statement of 
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", 
which addresses the manner in which certain adjustments to shareholders' 
equity are displayed in the financial statements. Adoption of this statement 
had no effect on the Company's financial position or operating results. For 
the quarters ended July 31, 1998 and 1997, non-owner changes in stockholders' 
equity, comprised solely of currency translation adjustments, were $200,000 
and $271,000, respectively, resulting in comprehensive income of $1,100,000 
and $270,000, respectively.

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 options' exercise price was greater than the average market price of the 
common shares totaled approximately 227,000 and 256,000 shares for the three 
months ended July 31, 1998 and 1997, respectively.

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       July 31,
                                                                ----------------------
                                                                  1998          1997
                                                                --------      --------
<S>                                                             <C>           <C>
    Net income                                                  $ 1,300       $   541
                                                                --------      --------

    Weighted average shares outstanding (basic)                   4,281         4,332
    Effect of dilutive employee and director stock options           64             9
                                                                --------      --------
    Weighted average shares outstanding (diluted)                 4,345         4,341
                                                                --------      --------
    Earnings per share
       Basic                                                    $  0.30       $  0.12
                                                                --------      --------
                                                                --------      --------
       Diluted                                                  $  0.30       $  0.12
                                                                --------      --------
                                                                --------      --------
</TABLE>
                                      4
<PAGE>

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

OVERVIEW

The Company's revenues are derived primarily from the sale of personal computer
("PC") software products and technology services in North America, Europe and
Asia/Pacific.

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

<TABLE>
<CAPTION>
                                                        Percentage of Net Sales
                                                                  For
                                                          Three Months Ended
                                                                July 31,
                                                        ----------------------
                                                         1998            1997
                                                        ------          ------
<S>                                                     <C>             <C>
Net sales                                               100.0%          100.0%
Cost of sales                                            88.8            88.8
                                                        ------          ------
    Gross margin                                         11.2            11.2
Selling, general and administrative expenses              8.9             9.1
Depreciation and amortization                             1.1             1.1
                                                        ------          ------
    Operating income                                      1.2             1.0
Interest expense, net                                     0.1             0.4
                                                        ------          ------
    Income before income taxes                            1.1             0.6
Income tax expense                                        0.5             0.3
                                                        ------          ------
    Net income                                            0.6%            0.3%
                                                        ------          ------
                                                        ------          ------
</TABLE>

NET SALES

The Company sells PC software applications through volume licensing and 
maintenance ("VLM") agreements, or right to copy arrangements, and 
full-packaged PC software products either from its distribution centers or 
through third-party distributors. In addition, the Company provides fee-based 
services, including consulting and technical support, through its Technology 
Services Group ("TSG").

For the quarter ended July 31, 1998, software sales increased 2% over sales 
for the quarter ended July 31, 1997. The Company serves as a designated 
service provider for VLM agreements which are frequently used by customers 
seeking to standardize desktop software applications and, consequently, may 
involve significant quantities of unit sales for each customer at lower 
per-unit prices than full-packaged software products. The increased 
popularity of VLM agreements has contributed to the increase in unit volume 
sales, as well as the reduction in average unit prices of desktop software, 
in recent years. Sales of software through VLM agreements represented 
approximately 75% and 68% of sales for the quarters ended July 31, 1998 and 
1997, respectively.

                                      5
<PAGE>

For the quarter ended July 31, 1998, revenue from technology services 
increased by 64% as compared to the quarter ended July 31, 1997. As of July 
31, 1998, the Company had 23 TSG offices worldwide. The Company plans to open 
additional international sites during fiscal 1999. Fee-based services 
represented approximately 8% and 5% of the Company's overall sales for the 
quarters ended July 31, 1998 and 1997, respectively; however, such revenue 
generated approximately 27% and 20%, respectively, of the Company's gross 
margin dollars. The Company expects that the percentage of gross margin 
dollars provided by fee-based services will increase as the Company continues 
to develop and expand its technology services business.

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

INTERNATIONAL OPERATIONS

For the three months ended July 31, 1998, sales outside of the United States 
increased 25% to $37 million, as compared to $30 million for the quarter 
ended July 31, 1997.

Sales in Europe increased 22% to $12.8 million for the quarter ended July 31, 
1998, primarily due to increased sales of software under VLM agreements.

Sales in Asia/Pacific were $14.4 million for the quarter ended July 31, 1998, 
a 17% increase over sales of $12.3 million in the quarter ended July 31, 
1997. The increase in sales is primarily due to increased sales of software 
under VLM agreements. For the quarter ended July 31, 1998, the Company 
realized nominal operating income, prior to allocation of corporate overhead, 
in Asia/Pacific, due in part to seasonally high sales in that region of the 
world.

For the three months ended July 31, 1998, 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 11.2% for each of the 
quarters ended July 31, 1998 and 1997. The consistency in overall gross 
margin as a percentage of net sales is comprised of a decline in gross margin 
on the sale of PC software, discussed below, offset by an increase in gross 
margin provided by fee-based services.

For the quarter ended July 31, 1998, gross margin on the sale of PC software 
declined to 9.0%, as compared to 9.3% for the quarter ended July 31, 1997, 
reflecting the increasing percentage of sales of software through VLM 
agreements and lower levels of financial incentives from suppliers. 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. The decline in software margins as a 
percentage of net sales for the quarter ended July 31, 1998 was offset by 
growth in revenue from fee-based services, which have higher gross margins as 
a percentage of net sales than sales of software.

The Company believes that gross margin percentages on sales of software may 
continue to decline if the volume of software product sales by the Company 
through VLM 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 partially offset by 
anticipated increases in gross margin dollars generated by technology 
services.

                                      6
<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include the costs of the 
Company's sales and marketing organization as well as purchasing, 
distribution and administration costs. For the quarter ended July 31, 1998, 
selling, general and administrative expenses, as a percentage of net sales, 
decreased to 8.9%, compared to 9.1% for the quarter ended July 31, 1997, 
primarily due to the Company's ongoing focus on controlling its operating 
costs.

DEPRECIATION AND AMORTIZATION

The increase in depreciation and amortization for the quarter ended July 31, 
1998, as compared to the July 1997 quarter, reflects additional depreciation 
on the higher level of fixed assets in 1998.

INCOME TAX EXPENSE

The Company's effective tax rate for the quarter ended July 31, 1998 was 
approximately 45%, as compared to approximately 54% in the July 1997 quarter. 
This decrease in the Company's effective tax rate primarily reflects the 
impact of its improved operations in foreign countries.

LIQUIDITY AND FINANCIAL CONDITION

At July 31, 1998, the Company had approximately $6.5 million in cash and cash 
equivalents and had $12.7 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 July 31, 1998, the Company had 
approximately $48 million of additional borrowing availability under its 
credit facility. The facility expires in March 2001.

The decrease in trade accounts receivable and trade accounts payable from 
April 30, 1998 to July 31, 1998 is due to collection of the receivables 
associated with large sales at the end of fiscal 1998 and payment of the 
related liabilities. At July 31, 1998 and April 30, 1998, accounts receivable 
represented approximately 63 and 61 days of historical sales, respectively.

For the quarter ended July 31, 1998, the Company used $1 million of cash in 
its operations compared to $4 million of cash used in operations in the July 
31, 1997 quarter. The decrease in cash used in operations reflects the 
Company's improved profitability and increased collections of accounts 
receivable.

The increase in furniture, equipment and leasehold improvements at July 31, 
1998 reflects approximately $5 million of capital expenditures related to the 
ongoing upgrade of the Company's computer systems and expansion of its 
technical support centers in Garland, Texas and Spokane, Washington.

The Company expects that its cash requirements for fiscal 1999 will be 
satisfied from cash flow from operations and borrowings under its credit 
facility.

In 1997, the Company implemented a stock repurchase program which, upon 
amendment in July 1998, allowed the Company to purchase up to $5 million 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 September 9, 1998, 
the Company had repurchased 140,300 shares of common stock, for a total of 
$2.4 million, under the Stock Repurchase Plan.

                                      7
<PAGE>

YEAR 2000

Over the last three years, the Company has replaced or upgraded most of the 
core management information systems used in the Company's business. The 
Company is currently conducting a review of these systems to verify their 
compliance with Year 2000 date codes. In addition, the Company is conducting 
an inventory, review and assessment of its desktop computers, networks and 
servers, software applications and packages, and products and services 
provided by third parties for internal operations to determine whether or not 
they support Year 2000 date codes. The Company is also developing an overall 
plan outlining the tasks, resources and target dates necessary to ensure the 
ongoing operation of the Company's systems through the turn of the century 
and beyond. The Company plans to complete remediation of the systems that are 
not currently in compliance and to begin testing all of its systems in 
calendar 1999. While the Company's inventory, review and assessment is still 
in process, the Company expects that the required modifications will be made 
on a timely basis and that the cost of such modifications will not have a 
material effect on the Company's operating results.

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

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 
forward-looking statements of the Company, including future market trends, 
estimates regarding the economy and the software industry in general and key 
performance indicators that impact the Company. 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, which 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 technology consulting practice, 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, 
1998 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.

                                      8
<PAGE>

PART II.  OTHER INFORMATION


ITEM 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

              Exhibit 10.15 - Amended and Restated Limited Waiver Agreement,
                      dated as of July 7, 1998, by and between Software 
                      Spectrum, Inc. and Private Capital Management, Inc.

              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 July 31, 1998.





                                      9
<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:  September 11, 1998         By: /s/ James W. Brown
                                      --------------------------------------
                                          James W. Brown
                                          Vice President and Chief Financial
                                          Officer (Principal Financial 
                                          Officer and Principal Accounting 
                                          Officer)




<PAGE>


                                  EXHIBIT INDEX



Exhibit 10.15     Amended and Restated Limited Waiver Agreement, dated as
                  of July 7, 1998, by and between Software Spectrum, Inc. and
                  Private Capital Management, Inc.


Exhibit 27        Financial Data Schedule