<PAGE> 1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             _____________________

                                   FORM 10-Q


       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

                              EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 2000

                                       OR

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

                              EXCHANGE ACT OF 1934

                 For the transition period from _____ to _____

                        Commission File Number 00025683

                                 MARIMBA, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                    Delaware                    77-0422318
           (State of incorporation) (IRS Employer Identification No.)


               440 Clyde Avenue, Mountain View, California 94043
          (Address of principal executive offices, including ZIP code)

                                 (650) 930-5282
              (Registrant's telephone number, including area code)

                                      None
              (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   .
                                             ---   ---
     The number of shares  outstanding  of the  Registrant's  Common Stock as of
October 31, 2000 was 23,528,125.

<PAGE>

                                 MARIMBA, INC.
                                     INDEX

                                                                        Page No.
Part I.  Financial Information

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets as of September 30, 2000
         and December 31, 1999                                             1

         Condensed Consolidated Statements of Operations and
         Comprehensive Loss for the Three and Nine Months Ended
         September 30, 2000 and 1999                                       2

         Condensed Consolidated Statements of Cash Flows for the
         Nine Months Ended September 30, 2000 and 1999                     3

         Notes to Condensed Consolidated Financial Statements              4

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

Item 3.  Qualitative and Quantitative Disclosures About Market Risk       17


Part II. Other Information

Item 1.  Legal Proceedings                                                18

Item 2.  Changes in Securities and Use of Proceeds                        18

Item 3.  Defaults Upon Senior Securities                                  18

Item 4.  Submission of Matters to a Vote of Security Holders              18

Item 5.  Other Information                                                18

Item 6.  Exhibits and Reports on Form 8-K                                 18


Signature                                                                 19


Exhibit Index                                                             20

<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                 MARIMBA, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)



                                                      September 30, December 31,
                                                          2000       1999  (1)
                                                      ------------  ------------
                                                       (unaudited)
ASSETS
Current assets:
   Cash and cash equivalents ...............................$ 36,032  $ 22,263
     Short-term investments ................................  37,043    42,760
     Accounts receivable, net ..............................   7,692     7,399
     Prepaid expenses and other current assets .............   1,273     1,085
                                                              ------    ------
          Total current assets .............................  82,040    73,507
Property and equipment, net ................................   3,387     2,955
Long-term investments ......................................   5,510    13,989
Other assets ...............................................     361        36
                                                              ------    ------
                                                            $ 91,298  $ 90,487

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued liabilities ..............$  5,596  $  3,143
     Accrued compensation ..................................   4,931     3,279
     Current portion of capital lease obligations and
       equipment advances ..................................       4        59
     Deferred revenue ......................................  12,558    11,319
                                                              ------    ------
          Total current liabilities ........................  23,089    17,800
Long-term portion of capital lease obligations and equipment
  advances, and other long-term liabilities ................     116        48

Stockholders' equity:
     Common stock ..........................................       2         2
     Additional paid-in capital ............................  94,750    93,436
     Deferred compensation .................................    (298)   (1,680)
     Cumulative translation adjustment .....................     (43)      (22)
     Unrealized loss on investments ........................     (66)     (239)
     Accumulated deficit ................................... (26,252)  (18,858)
                                                              ------    ------
          Stockholders' equity .............................  62,093    72,639
                                                              ------    ------
                                                            $ 91,298  $ 90,487

                            See accompanying notes.


(1) Derived from audited  financial  statements  contained in the Marimba's Form
10-K.

                                       1

<PAGE>

                                 MARIMBA, INC.

     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                    (in thousands, except per share amounts)
<TABLE>
<S>                                                                    <C>           <C>           <C>             <C>


                                                                    Three Months Ended             Nine Months Ended
                                                                      September 30,                  September 30,
                                                                    ------------------             -----------------
                                                                    2000         1999              2000         1999
                                                                    ----         ----              ----         ----
                                                                       (unaudited)                    (unaudited)

Revenues:
     License ..................................................   $  6,560      $  6,297      $  23,784      $  15,735
     Service ..................................................      3,548         2,032          9,007          5,612
                                                                    ------        ------         ------         ------
Total revenues ................................................     10,108         8,329         32,791         21,347
Cost of revenues:
     License ..................................................        116            28            443            134
     Service ..................................................      1,064           771          2,877          2,180
                                                                    ------        ------         ------         ------
Total cost of revenues ........................................      1,180           799          3,320          2,314
                                                                    ------        ------         ------         ------
Gross profit ..................................................      8,928         7,530         29,471         19,033
Operating expenses:
     Research and development .................................      2,856         2,305          7,874          6,062
     Sales and marketing ......................................      6,987         5,000         20,611         13,635
     General and administrative ...............................      7,691         1,327         10,512          3,517
     Amortization of deferred compensation ....................        585           416          1,127          1,045
                                                                    ------        ------         ------         ------
Total operating expenses ......................................     18,119         9,048         40,124         24,259
                                                                    ------        ------         ------         ------
Loss from operations ..........................................     (9,191)       (1,518)       (10,653)        (5,226)
Interest income, net ..........................................      1,205           938          3,409          1,545
                                                                    ------        ------         ------         ------
Loss before income taxes ......................................     (7,986)         (580)        (7,244)        (3,681)
Provision for income taxes ....................................          -             -            150             30
                                                                    ------        ------         ------         ------
Net loss ......................................................   $ (7,986)     $   (580)     $  (7,394)     $  (3,711)

Other comprehensive loss:
     Translation adjustment ...................................         (4)            3            (21)           (11)
     Unrealized gain (loss) on investments ....................        130            20            172           (164)
                                                                    ------        ------         ------         ------
Comprehensive loss ............................................   $ (7,860)     $   (557)     $  (7,243)     $  (3,886)

Basic and diluted loss per share ..............................   $   (.34)     $   (.03)     $    (.32)     $    (.21)

Shares used in per share calculation - basic and diluted ......     23,255        22,336           23,13        17,817
Pro forma basic and diluted net loss per share ................                                              $    (.18)
Shares used in computing pro forma basic and diluted
  net loss per share ..........................................                                                 20,374

</TABLE>

                            See accompanying notes.

                                       2

<PAGE>

                                 MARIMBA, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<S>                                                                      <C>         <C>

                                                                       Nine Months Ended
                                                                         September 30,
                                                                       -----------------
                                                                       2000         1999
                                                                       ----         ----
                                                                          (unaudited)

OPERATING ACTIVITIES
Net loss ........................................................  $  (7,394)  $  (3,711)
Adjustments to reconcile net loss to net cash used in
  operating activities:
     Depreciation and amortization ..............................      1,184         906
     Amortization of deferred compensation ......................      1,127       1,045
     Other ......................................................        (20)        (11)
     Changes in operating assets and liabilities:
       Accounts receivable, net .................................       (293)     (6,874)
       Unbilled receivables .....................................          -       1,036
       Prepaid expenses and other current assets ................       (188)       (487)
       Other assets .............................................       (258)        298
       Accounts payable and accrued liabilities .................      2,453         170
       Accrued compensation .....................................      1,651       1,381
       Deferred revenue .........................................      1,239       3,996
                                                                      ------      ------
          Net cash used in operating activities .................       (499)     (2,251)
                                                                      ------      ------
INVESTING ACTIVITIES
Capital expenditures ............................................     (1,616)     (1,099)
Purchases of investments ........................................    (21,640)    (54,658)
Sales of investments ............................................     36,010       6,999
                                                                      ------      ------
          Net cash provided (used) in investing activities ......     12,754     (48,758)
                                                                      ------      ------
FINANCING ACTIVITIES
Repayment of note receivable from officer .......................          -         160
Proceeds from sale of common stock in initial public
  offering, net .................................................          -      68,075
Proceeds from issuance of common stock, net of repurchases ......      1,569       1,225
Principal payments on capital lease obligations and
  equipment advances ............................................        (55)       (894)
                                                                      ------      ------
          Net cash provided from financing activities ...........      1,514      68,566
                                                                      ------      ------
Net increase in cash and cash equivalents .......................     13,769      17,557
Cash and cash equivalents at beginning of period ................     22,263       3,700
                                                                      ------      ------
Cash and cash equivalents at end of period ......................  $  36,032   $  21,257

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Non-cash financing activities:
    Conversion of redeemable preferred stock to common
       stock ....................................................          -   $  18,953

</TABLE>

                            See accompanying notes.

                                       3

<PAGE>

                                 MARIMBA, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared by Marimba and reflect all adjustments,  consisting only of normal
recurring  adjustments,  which in the opinion of  management  are  necessary  to
present  fairly the  financial  position and the results of  operations  for the
interim  periods.  The balance  sheet at December 31, 1999 has been derived from
audited  financial  statements at that date. The financial  statements have been
prepared in  accordance  with the  regulations  of the  Securities  and Exchange
Commission,  but omit certain information and footnote  disclosure  necessary to
present  the  statements  in  accordance  with  generally  accepted   accounting
principles.  For  further  information,  refer  to  the  Consolidated  Financial
Statements  and Notes thereto  included in Marimba's  Annual Report on Form 10-K
for the year ended  December  31, 1999 filed with the  Securities  and  Exchange
Commission  on  March  27,  2000.  Results  for  the  interim  periods  are  not
necessarily  indicative of results for the fiscal year ending  December 31, 2000
or future interim or full-year periods.

Net Loss Per Share

     Basic earnings per share is computed using the  weighted-average  number of
common   shares   outstanding.   Diluted   earnings   per  share   includes  the
weighted-average  number of common  share  equivalents  outstanding  during  the
period if dilutive.  Dilutive common share equivalents consist of employee stock
options and are calculated by using the treasury  stock method.  Pro forma basic
and diluted net loss per share, as presented in the statements of operations for
the periods prior to Marimba's  initial public  offering,  have been computed as
described above and also gives effect,  under Securities and Exchange Commission
guidance, to the conversion of the redeemable convertible preferred stock (using
the if-converted method) from the original date of issuance.

     The following  table presents the  calculation of basic and diluted and pro
forma basic and diluted net loss per share:

<TABLE>
<S>                                                           <C>          <C>       <C>         <C>

                                                          Three Months Ended      Nine Months Ended
                                                             September 30,          September 30,
                                                          ------------------      -----------------
                                                            2000        1999      2000         1999
                                                            ----        ----      ----         ----

(in thousands, except per share data)

Net  loss ............................................   $ (7,986)   $   (580)   $ (7,394)   $ (3,711)

Weighted-average shares - Basic:
Weighted-average shares of common stock outstanding ..     23,353      23,018      23,303      18,772
Less weighted-average shares subject to repurchase ...        (98)       (682)       (173)       (955)
                                                           ------      ------      ------      ------
Weighted-average shares - Basic and diluted ..........     23,255      22,336      23,130      17,817

Net loss per share - Basic and diluted ...............   $   (.34)   $   (.03)   $   (.32)   $   (.21)

Pro forma:
     Shares used above ...............................                                         17,817
     Pro forma adjustment to reflect weighted-average
        effect of the assumed conversion of redeemable
        convertible preferred stock ..................                                          2,557
                                                                                               ------
     Shares used in computing pro forma basic and
        diluted net loss per share ...................                                         20,374
                                                                                               ------
     Pro forma basic and diluted net loss per share ..                                       $   (.18)

</TABLE>

     Marimba has excluded all redeemable  convertible preferred stock, warrants,
outstanding  stock options and shares  subject to repurchase by Marimba from the
calculation  of  diluted  loss  per  share  because  all  such   securities  are
antidilutive  for all periods  presented.  Weighted average options and warrants
outstanding to purchase  5,395,000 and 4,229,000  shares of common stock for the

                                       4
<PAGE>

three and nine months ended September 30, 2000, respectively,  and 3,050,000 and
2,688,000  shares  for the three  and nine  months  ended  September  30,  1999,
respectively, were not included in the computation of diluted net loss per share
because  the  effect  would be  antidilutive.  Such  securities,  had they  been
dilutive,  would have been included in the  computation  of diluted net loss per
share using the treasury stock method.

Revenue Recognition

     License revenues are comprised of perpetual or multiyear license fees which
are primarily  derived from contracts  with  corporate  customers and resellers.
Such revenues are recognized  after execution of a license  agreement or receipt
of a  definitive  purchase  order,  and  delivery  of the  product  to  end-user
customers,   provided  that  there  are  no  uncertainties  surrounding  product
acceptance,  the  license  fees are  fixed or  determinable,  collectibility  is
probable and Marimba has no remaining obligations with regard to installation or
implementation  of the software.  Revenue on arrangements with customers who are
not the ultimate users (primarily resellers) is not recognized until the product
is delivered  to the end user.  If the fee due from the customer is not fixed or
determinable, revenue is recognized as payments become due from the customer. If
collectibility is not considered probable, revenue is recognized when the fee is
collected.  Advance payments are recorded as deferred revenue until the products
are shipped,  services are provided,  or obligations are met. Marimba's products
do not require significant customization.

     Revenue  recognized  from   multiple-element   software   arrangements  are
allocated  to each  element  of the  arrangement  based on the fair value of the
elements,  such as software  products,  maintenance and support,  and consulting
services. The determination of fair value is based on objective evidence,  which
is specific to Marimba.

     Service  revenues are  comprised of revenue  from  maintenance  agreements,
consulting  fees and training  fees.  Software  maintenance  agreements  provide
technical  support  and the  right to  unspecified  upgrades  on an  if-and-when
available basis.

     Service   revenues  from  training  and  consulting  are  recognized   upon
completion of the work to be performed.  Revenue from maintenance  agreements is
deferred and  recognized on a  straight-line  basis over the life of the related
agreement, which is typically one year.

Revenue Concentration

     Two customers accounted for 30% and 10% of revenues in the third quarter of
2000. In the third quarter of 1999,  three customers  accounted for 17%, 16% and
14% of revenues.  In the first nine months of 2000, two customers  accounted for
10%  each of  revenues,  and in the  comparable  period  of 1999,  one  customer
represented 11% of revenues.

2.   Legal Matters

     On March 3, 1997,  Novadigm,  Inc. filed a complaint against us in the U.S.
District Court for the Northern District of California alleging  infringement of
a patent held by Novadigm (U.S. Patent No. 5,581,764, the "Novadigm Patent"). On
July 30, 1999,  Marimba filed a complaint  against Novadigm in the U.S. District
Court for the Northern District of California alleging  infringement by Novadigm
of a patent held by us (U.S. Patent No.  5,919,247,  the "Marimba  Patent").  On
November 10, 2000,  Marimba and Novadigm  executed a memorandum of understanding
(MOU)  settling  both  actions.  Pursuant to the MOU, the parties have agreed to
dismiss  both actions  without  prejudice  and to enter into a final  settlement
agreement  to be  drafted  within a  reasonable  period  of time  following  the
execution date of the MOU. If no final settlement agreement is executed, the MOU
shall  remain  binding on both  parties.  Under the MOU,  the other terms of the
settlement are confidential.

3.   Recent Accounting Pronouncements

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives  Instruments
and Hedging  Activities" ("FAS 133"). In June 1999, the FASB issued Statement of
Financial Accounting  Standards No. 137, "Accounting for Derivative  Instruments
and Hedging  Activities - Deferral of Effective  Date of FASB Statement No. 133"
("FAS 137"),  which amends FAS 133 to be  effective  for fiscal  quarters of all

                                       5
<PAGE>

fiscal years  beginning  after June 15, 2000. FAS 133, as amended by FAS 137 and
FAS 138,  "Accounting  for Certain  Derivative  Instruments  and Certain Hedging
Activities,"  requires Marimba to recognize all derivatives on the balance sheet
at fair  value.  Derivatives  that are not hedges must be adjusted to fair value
through net income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of the derivative are either offset against the
change in fair value of asset, liabilities, or firm commitments through earnings
or recognized in other comprehensive  income until the hedged item is recognized
in earnings. Marimba does not currently hold any derivatives and does not expect
this pronouncement to impact the results of its operations.

     In  April  2000,  FASB  Interpretation  No.  44,  "Accounting  for  Certain
Transactions Involving Stock Compensation - An Interpretation of APB Opinion No.
25" ("FIN 44") was issued.  FIN 44 clarifies the  application  of APB No. 25 for
certain issues, including the definition of an employee for purposes of applying
APB  No.  25,  the  criteria  for  determining  whether  a plan  qualifies  as a
non-compensatory  plan, the accounting  consequences of various modifications to
the terms of a previously fixed stock option or award, and the accounting for an
exchange  of stock  compensation  awards in a  business  combination.  FIN 44 is
effective July 1, 2000, but certain  conclusions  in this  interpretation  cover
specific  events that occur after either  December 15, 1998 or January 12, 2000.
Marimba  believes that upon  implementation,  FIN 44 will not have a significant
effect on its financial condition or results of operations.

4.   Subsequent Event

     On November 10, 2000,  Marimba  settled its pending  patent  disputes  with
Novadigm, Inc.  See Note 2.


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

     The information in this report contains  forward-looking  statements within
the meaning of Section 27A of the  Securities Act of 1933 and Section 21E of the
Securities  Act of 1934,  as amended.  Such  statements  are based upon  current
expectations  that involve risks and  uncertainties.  Any  statements  contained
herein  that  are  not  statements  of  historical  fact  may  be  deemed  to be
forward-looking  statements.  For example, the words "believes,"  "anticipates,"
"plans,"  "expects,"  "intends" and similar expressions are intended to identify
forward-looking  statements.  Marimba's actual results and the timing of certain
events  may   differ   significantly   from  the   results   discussed   in  the
forward-looking statements. Factors that might cause such a discrepancy include,
but are not limited to, those  discussed in "Other Factors  Affecting  Operating
Results,  Liquidity and Capital Resources" below.  Additional  information about
factors  that could affect  future  results and events is included in our fiscal
1999 Form 10-K,  the Form 10-Q for our first and second  quarters  of 2000,  and
other reports or submissions filed with the Securities and Exchange  Commission.
All forward-looking statements in this report are based on information available
to Marimba as of the date  hereof,  and  Marimba  undertakes  no  obligation  to
release   publicly  any  updates  or  revisions  to  any  such   forward-looking
statements.

Overview

     Marimba  is  a  leading  provider  of  Internet-based  software  management
solutions  that  enable  companies  to expand  their  market  reach,  streamline
business  processes  and  strengthen  relationships  with  customers,   business
partners and employees.

                                       6
<PAGE>

     In January  1997,  we released our first version of Castanet and since that
time have continued to develop and market the Castanet  product line and enhance
the core Castanet infrastructure with additional Castanet products. In the first
half of 2000,  Marimba  released  two  products  in a new  product  line  called
Timbale.  The  Timbale  products  are  designed  to  address  many of the server
management  challenges  inherent  in  thin-client  and  Web  commerce  computing
environments  today. The first Timbale product,  Timbale for Server  Management,
was released for sale in March 2000.  The second  Timbale  product,  Timbale for
Windows Terminal Services, was released for sale in June 2000. In the second and
third quarters of 2000, revenues from the Timbale products accounted for 21% and
9%,  respectively,  of total license  revenues.  There can be no assurance  that
revenues  from the  Timbale  product  line will  grow in the  future or that the
Timbale products will gain widespread market acceptance.

     Revenues  to date have  been  derived  primarily  from the  license  of our
Castanet  and  Timbale  products  and to a lesser  extent from  maintenance  and
support,  consulting and training  services.  Customers who license our products
generally purchase maintenance contracts,  typically covering a 12-month period.
Additionally,  customers may purchase consulting, which is customarily billed by
us at a fixed daily rate plus  out-of-pocket  expenses.  We also offer  training
services that are billed on a per student or per class session basis.

     License revenues are comprised of perpetual or multiyear license fees which
are primarily derived from contracts with corporate customers and resellers.  We
recognize  license revenues after execution of a license agreement or receipt of
a definitive  purchase order and delivery of the product to end-user  customers,
provided that there are no uncertainties  surrounding  product  acceptance,  the
license fees are fixed or determinable,  collectibility is probable, and we have
no remaining  obligations with regard to installation or  implementation  of the
software.  Revenues on  arrangements  with  customers  who are not the  ultimate
users,  primarily  resellers,  are not  recognized  until the  software  is sold
through  to the end  user.  If the fee due from  the  customer  is not  fixed or
determinable,  revenues are recognized as payments become due from the customer.
If collectibility is not considered  probable,  revenues are recognized when the
fee is collected.  Advanced  payments are recorded as deferred revenue until the
products are delivered,  services are provided or obligations  are met.  Service
revenues are comprised of revenues from maintenance  agreements,  consulting and
training  fees.  Revenues  from  maintenance  agreements  are  recognized  on  a
straight-line  basis over the life of the related agreement,  which is typically
one year. We recognize  service  revenues  from training and  consulting as such
services are delivered.

     Since  inception,  Marimba  has  made  substantial  investments  in  sales,
marketing and research and  development  to expand and enhance our product lines
and increase the market awareness of Marimba and its products.  We have incurred
significant   losses  since   inception  and  had  an  accumulated   deficit  of
approximately  $26.3  million at September 30, 2000. We believe that our success
depends on further  increasing  our customer  base and on growth in the Internet
services management market. Accordingly, we intend to continue to invest heavily
in sales, marketing and research and development.

     In view of the  rapidly  changing  nature of our  business  and our limited
operating history, we believe that period-to-period  comparisons of revenues and
operating  results are not necessarily  meaningful and should not be relied upon
as indications of future performance, growth or financial results. Additionally,
we do not believe that historical  growth rates or profitability are necessarily
sustainable, nor indicative of future growth or financial results.

Results of Operations

     The following  table sets forth certain  statements of operations data as a
percentage  of total  revenues  for the  three  and  nine  month  periods  ended
September  30,  2000 and 1999.  This data has been  derived  from the  unaudited
condensed  consolidated  financial statements contained in this Form 10-Q which,
in the opinion of management includes all adjustments, consisting only of normal
recurring  adjustments,  necessary to present fairly the financial  position and
results of operations  for the interim  periods.  The operating  results for any
quarter  should not be considered  indicative  of results of any future  period.
This information  should be read in conjunction with the consolidated  financial
statements  and notes thereto  included in Marimba's  Annual Report on Form 10-K
for the year ended December 31, 1999.

                                       7
<PAGE>


                                          Three Months Ended  Nine Months Ended
                                             September 30,      September 30,
                                          ------------------  -----------------
                                            2000       1999     2000      1999
                                            ----       ----     ----      ----


Consolidated Statement of Operations Data:
Revenues:
  License .............................      64.9%     75.6%     72.5%    73.7%
  Service .............................      35.1      24.4      27.5     26.3
                                            -----     -----     -----    -----
Total revenues ........................     100.0     100.0     100.0    100.0
Cost of revenues:
  License .............................       1.1       0.3       1.3      0.6
  Service .............................      10.6       9.3       8.8     10.2
                                            -----     -----     -----    -----
Total cost of revenues ................      11.7       9.6      10.1     10.8
                                            -----     -----     -----    -----
Gross profit ..........................      88.3      90.4      89.9     89.2
Operating expenses:
  Research and development ............      28.3      27.7      24.0     28.4
  Sales and marketing .................      69.1      60.0      62.9     63.9
  General and administrative ..........      76.1      15.9      32.1     16.5
  Amortization of deferred compensation       5.7       5.0       3.4      4.9
                                            -----     -----     -----    -----
Total operating expenses ..............     179.2     108.6     122.4    113.7
                                            -----     -----     -----    -----
Loss from operations ..................     (90.9)    (18.2)    (32.5)   (24.5)
Interest income, net ..................      11.9      11.2      10.4      7.3
                                            -----     -----     -----    -----
Loss before income taxes ..............     (79.0)     (7.0)    (22.1)   (17.2)
Provision for income taxes ............      (0.0)     (0.0)      0.5     (0.1)
                                            -----     -----     -----    -----
Net Loss ..............................     (79.0)%    (7.0)%   (22.6)%  (17.4)%


Revenues

     Total revenues for the third quarter of 2000 increased 21% to $10.1 million
from $8.3  million  in the third  quarter  of 1999.  For the nine  months  ended
September  30, 2000,  total  revenues  increased 54% to $32.8 million from $21.3
million in the comparable period of 1999.

     License  Revenues.  License  revenues  increased  4% to $6.6 million in the
third  quarter  of 2000 from $6.3  million in the third  quarter of 1999.  Total
license  revenues in the nine months ended  September 30, 2000  increased 51% to
$23.8  million from $15.7  million in the  comparable  period of 1999.  Prior to
March 31, 2000,  substantially  all license  revenues were derived from sales of
our Castanet products.  In the third quarter of 2000, revenues from sales of our
Timbale  products  accounted  for 9% of total  license  revenues.  The growth of
license revenues for the nine month period in 2000 was due to increased  product
licenses sold,  reflecting  higher customer demand for our Castanet products and
the introduction of the Timbale products and growth in our sales organization.

     Service  Revenues.   Service  revenues  include  maintenance  and  support,
consulting and training.  Service revenues  increased 75% to $3.5 million in the
third  quarter  of 2000 from $2.0  million in the third  quarter  of 1999.  As a
percentage of total revenues,  service revenues increased to 35% and 27% for the
three and nine month periods ended  September 30, 2000,  respectively,  from 24%
and 26% in the comparable  periods of 1999. The increases in service revenues in
absolute  amount were due  primarily to increased  maintenance  revenues  from a
larger  installed  base of  customers  and  increased  revenue  from  consulting
services.

Costs of Revenues

     Cost of License Revenues.  Cost of license revenues  consists  primarily of
the fees for third-party software products integrated into our Castanet products
and was less than 2% of total revenues in the three and nine month periods ended
September 30, 2000 and 1999.

     Cost of  Service  Revenues.  Cost of  service  revenues  increased  to $1.1
million in the third quarter of 2000 from $771,000 in the third quarter of 1999,
representing  30% and 38% of service  revenue,  respectively.  In the first nine
months of 2000,  cost of service  revenues  increased  to $2.9 million from $2.2

                                       8
<PAGE>

million for the comparable  period in 1999,  representing 32% and 39% of service
revenues,  respectively.  The increases in cost of service  revenues in absolute
dollars for the three and nine month periods  ended  September 30, 2000 from the
comparable  periods of 1999 were due primarily to growth in our customer support
organization and an increase in consulting costs  commensurate with the increase
in  consulting  revenues.  The  decreases  in  cost  of  service  revenues  as a
percentage of service  revenues were  primarily due to the economies of scale in
our customer  support  organization,  with costs spread over a larger  number of
maintenance customers.

Operating Expenses

     Research and Development.  Research and development  expenses increased 24%
to $2.9  million  in the third  quarter  of 2000 from $2.3  million in the third
quarter of 1999.  For the first nine months of 2000,  research  and  development
expenses  increased  30% to $7.9  million  from $6.1  million in the  comparable
period of 1999. The increases in research and  development  expenses were due to
increases  in  engineering  personnel  and related  employee  costs,  as well as
increases in third-party consulting costs.

     Sales and  Marketing.  Sales and marketing  expenses  increased 40% to $7.0
million in the third  quarter of 2000 from $5.0 million in the third  quarter of
1999. For the first nine months of 2000, sales and marketing  expenses increased
51% to $20.6 million from $13.6 million in the  comparable  period of 1999.  The
increases in sales and  marketing  expenses  were due primarily to growth in our
sales and marketing  organizations,  an increase in sales commissions  resulting
from increased sales and expansion of our marketing programs and advertising.

     General and Administrative.  General and administrative  expenses increased
480% to $7.7 million in the third quarter of 2000 from $1.3 million in the third
quarter of 1999. For the first nine months of 2000,  general and  administrative
expenses  increased  199% to $10.5  million from $3.5 million in the  comparable
period in 1999. The primary  reasons for the increase in both the three and nine
month periods were the settlement of our pending patent  disputes with Novadigm,
Inc.,  a $2.1 million  reserve  established  in the third  quarter of 2000 for a
potential  credit  loss from a  customer,  and the growth of our  administrative
organization  in support of the  overall  growth of  Marimba.  Additionally,  we
incurred  significant  outside legal costs in connection with our pending patent
disputes with Novadigm (see Part II, Item 1 - Legal Proceedings herein).

     Deferred  Compensation.  We recorded deferred compensation of approximately
$1.4 million in 1998, representing the difference between the exercise prices of
options  granted to acquire  940,500  shares of common stock during 1998 and the
deemed fair value for  financial  reporting  purposes of our common stock on the
grant dates.  In addition,  we granted options to purchase common stock in April
1999 for which we recorded  additional  deferred  compensation of  approximately
$2.0  million.  Due to cancelled  shares,  the  remaining  unamortized  deferred
compensation  amount  was  reduced  by  $257,000  in the first  quarter of 2000.
Deferred compensation is being amortized over the vesting periods of the options
using a graded  vesting  method.  We  amortized  deferred  compensation  of $1.4
million during fiscal 1999 and $251,000  during fiscal l998.  This  compensation
expense relates to individuals in all operating expense categories. Amortization
of deferred  compensation  was  $585,000 and $1.1 million for the three and nine
months ended September 30, 2000, respectively.

     In  connection  with a  restricted  stock bonus  granted in July 2000 to an
officer, Marimba recorded additional deferred compensation of approximately $2.1
million,  representing  the aggregate fair market value of the 100,000 shares of
Marimba  common  stock on the date of  grant.  Marimba  plans to  amortize  this
deferred  compensation amount over the 24-month vesting period of the restricted
stock bonus grant using a graded vesting method.

     The   amortization   of  deferred   compensation   is   anticipated  to  be
approximately  $1,687,000 for 2000,  $1,474,000 for 2001,  $379,000 for 2002 and
$4,000 for 2003.

     Interest Income,  Net. Interest income,  net,  increased to $1.2 million in
the third quarter of 2000 from  $938,000 in the third  quarter of 1999.  For the
first nine months of 2000,  interest income, net, increased to $3.4 million from
$1.5 million in the  comparable  period of 1999. The increases are due to higher
interest  income  resulting  from the  invested  cash  from our  initial  public
offering completed in May 1999.

                                       9
<PAGE>

Liquidity and Capital Resources

     As of  September  30, 2000,  our  principal  sources of liquidity  included
approximately  $36.0 million of cash and cash  equivalents  and $42.6 million of
investments in marketable securities.  Net cash used by operating activities was
$0.5 million and $2.3 million for the nine month  periods  ended  September  30,
2000 and September 30, 1999, respectively. Net cash used in operating activities
for the nine months ended  September 30, 2000  reflects  primarily the effect of
our net loss for the period,  adjusted for  non-cash  expenses and a decrease in
accounts payable and accrued liabilities, and offset partially by an increase in
deferred revenue and accrued compensation.

     We  currently  anticipate  that our existing  cash,  cash  equivalents  and
investments  will be sufficient to meet our  anticipated  cash needs for working
capital and capital  expenditures  for at least the next 12 months.  Thereafter,
cash  generated  from  operations,  if any, may not be sufficient to satisfy our
liquidity requirements. We may therefore need to sell additional equity or raise
funds by other  means.  Any  additional  financings,  if  needed,  might  not be
available on  reasonable  terms or at all.  Failure to raise capital when needed
could seriously harm our business and operating results. If additional funds are
raised through the issuance of equity securities, the percentage of ownership of
our stockholders  would be reduced.  Furthermore,  these equity securities might
have rights, preferences or privileges senior to our common stock.

Other Factors Affecting Operating Results, Liquidity and Capital Resources

Our  Limited  Operating  History May  Prevent Us From  Achieving  Success in Our
Business

     We were founded in February 1996 and have a limited  operating history that
may prevent us from achieving  success in our business.  The revenues and income
potential of our business and market are unproven.  We will encounter challenges
and  difficulties  frequently  encountered by  early-stage  companies in new and
rapidly  evolving  markets.  We  may  not  successfully  address  any  of  these
challenges  and the  failure  to do so would  seriously  harm our  business  and
operating results.  In addition,  because of our limited operating  history,  we
have limited insight into trends that may emerge and affect our business.

We Have Incurred Losses and May Incur Future Losses

     Our failure to significantly increase our revenues would seriously harm our
business and  operating  results.  With the  exception of the second  quarter of
2000, we have experienced  operating losses in each quarter since our inception.
Although  Marimba recorded net income in the second quarter of 2000, there is no
assurance that we will again reach  profitability.  As of September 30, 2000, we
had an accumulated deficit of $26.3 million. We expect to significantly increase
our research and development, sales and marketing and general and administrative
expenses.  As a result,  we will need to  significantly  increase our  quarterly
revenues to offset these increasing expenses and return to profitability. We may
not be able to sustain our recent revenue growth rates. In fact, we may not have
any revenue growth, and our revenues could decline.

Fluctuations in Quarterly Operating Results and Absence of Significant Backlog

     Our quarterly  operating results have varied  significantly in the past and
will  likely vary  significantly  in the future.  As a result,  we believe  that
period-to-period  comparisons  of our operating  results are not  meaningful and
should  not be relied  upon as  indicators  of our  future  performance.  In the
future,  our  operating  results  may be below the  expectations  of  securities
analysts  and  investors.  Our failure to meet these  expectations  would likely
seriously  harm the market  price of our common  stock.  Operating  results vary
depending on a number of factors, many of which are outside our control.

     A substantial  portion of our revenues for most quarters has been booked in
the last month of the quarter and the  magnitude  of quarterly  fluctuations  in
operating  results may not become  evident until late in or even at the end of a
particular quarter. In addition,  we anticipate that the size of customer orders
may increase as we focus on larger business  accounts.  As a result,  a delay in
recognizing  revenue,  even  from just one  account,  could  have a  significant
negative impact on our operating results.  In the past, a significant portion of
our  sales  have  been  realized  near  the  end of a  quarter.  A  delay  in an
anticipated sale past the end of a particular  quarter could  negatively  impact
our operating results.

                                       10
<PAGE>

     Despite  our  sequential  revenue  growth  from the fourth  quarter of 1999
through the first  quarter of 2000,  we  generally  expect that  revenues in the
first quarter of each year will be lower than revenues in the fourth  quarter of
the  preceding  year due to the  annual  nature  of  companies'  purchasing  and
budgeting cycles and the year-to-date structure of our sales incentive program.

     Our expense  levels are relatively  fixed for a particular  quarter and are
based, in part, on expectations as to future revenues.  As a result,  if revenue
levels fall below our  expectations  for a  particular  quarter,  our  operating
results will be adversely  affected because only a small portion of our expenses
vary with our  revenues.  We have  historically  operated  with  little  product
backlog, because our products are generally delivered as orders are received. As
a result,  revenue in any quarter will depend on the volume and timing,  and the
ability to fill, orders received in that quarter.

We Expect Significant Increases in Our Operating Expenses

     We intend to substantially increase our operating expenses as we:

     -    Increase our sales and marketing  activities,  including expanding our
          direct sales force;

     -    Increase our research and development activities;

     -    Expand our customer support and professional  services  organizations;
          and

     -    Expand our distribution channels.

     With these additional expenses, we must significantly increase our revenues
in order to return to  profitability.  These expenses will be incurred before we
generate any revenues  associated  with this  increased  spending.  If we do not
significantly  increase revenues from these efforts,  our business and operating
results would be adversely affected.

Our Success Depends on Our Castanet Product Family

     We expect to  continue to derive  substantial  revenues  from our  Castanet
product  line and  related  services.  A decline in the price of Castanet or our
inability to increase  sales of Castanet  would  seriously harm our business and
operating results.  We cannot predict Castanet's success. We periodically update
Castanet to make improvements and provide additional enhancements.  New versions
of  Castanet  may not  provide  the  benefits  we expect  and could fail to meet
customers'  requirements or achieve widespread market  acceptance.  Furthermore,
new products such as our recently  released  Timbale  product line could fail to
meet customer expectations or achieve widespread market acceptance.

     Our strategy requires Castanet to be highly scalable - in other words, able
to rapidly increase deployment size from a limited number of end-users to a very
large  number  of  end-users.  If  we  are  unable  to  achieve  this  level  of
scalability,   the   attractiveness  of  our  products  and  services  would  be
diminished.

We Need to Grow Our Timbale  Product  Revenues  and Develop  and  Introduce  New
Products and Services

     During the third quarter of 2000,  revenues  from our Timbale  product line
accounted  for 9% of  total  license  revenues  compared  to  21% in the  second
quarter.  There can be no assurance  that the revenues from our Timbale  product
line will grow, in absolute amount or as a percentage of total license revenues,
or that our Timbale products will meet customer  expectations or gain widespread
market acceptance. To provide a comprehensive Internet infrastructure management
solution, we will need to develop and introduce new products and services, which
offer  functionality  that we do not  currently  provide.  We may not be able to
develop  these  technologies  and  therefore  we may  not be  able  to  offer  a
comprehensive Internet  infrastructure  management solution. In addition, in the
past we have experienced  delays in new product releases,  and we may experience
similar  delays in the future.  If we fail to deploy new  product  releases on a
timely basis, our business and operating results could be seriously harmed.

                                       11
<PAGE>

We Depend on the Growth of Our Customer  Base and  Increased  Business  from Our
Current Customers

     Our  success is  substantially  dependent  on the  continued  growth of our
customer  base.  If we fail to increase  our  customer  base,  our  business and
operating  results  would be  seriously  harmed.  Our  ability  to  attract  new
customers  will  depend on a variety  of  factors,  including  the  reliability,
security,  scalability  and  cost-effectiveness  of our products and services as
well as our ability to effectively market our products and services.

     If we fail to  generate  repeat  and  expanded  business  from our  current
customers, our business and operating results would be seriously harmed. Many of
our customers initially make a limited purchase of our products and services for
pilot programs.  These customers may not choose to purchase  additional licenses
to expand their use of our products.  In addition,  as we deploy new versions of
our products or introduce  new products,  our current  customers may not require
the  functionality  of our new products  and may not  ultimately  license  these
products.

     Because the total amount of maintenance  and support fees we receive in any
period  depends in large part on the size and  number of  licenses  that we have
previously  sold, any downturn in our software license revenues would negatively
impact our future service revenues. In addition, if customers elect not to renew
their  maintenance  agreements,  our  service  revenues  could be  significantly
adversely affected.

Implementation  of our products by large  customers may be complex and customers
could become  dissatisfied if  implementation  of our products proves difficult,
costly or time consuming

     Our  products  must  integrate  with many  existing  computer  systems  and
software  programs used by our customers.  Integrating  with many other computer
systems and software  programs can be complex,  time consuming and expensive and
cause delays in the  deployment  of our products for such  customers.  Customers
could  become  dissatisfied  with our  products if  implementations  prove to be
difficult, costly or time consuming and this could negatively impact our ability
to sell our products.

We Must Retain and Attract Key Personnel

     Our success  depends  largely on the skills,  experience and performance of
the members of our senior  management  and other key  personnel,  including  our
President  and Chief  Executive  Officer,  John Olsen,  our  Chairman  and Chief
Strategy Officer, Kim Polese, and our Chief Technology Officer, Arthur van Hoff.
We have in the past lost senior management  personnel.  For example,  in October
2000,  Bob Maynard  resigned his position as Vice  President,  Worldwide  Sales.
Several members of our senior management are relatively new to Marimba,  and our
success will depend in part on the successful  assimilation  and  performance of
these individuals.

     We  may  not  be  successful  in  attracting  qualified  senior  management
personnel or be able to attract,  assimilate  and retain other key  personnel in
the future.  None of our senior management or other key personnel is bound by an
employment  agreement.  If we lose  additional  key  employees and are unable to
replace them with  qualified  individuals,  our business and  operating  results
could be seriously harmed.  In addition,  our future success will depend largely
on our ability to continue  attracting and retaining  highly skilled  personnel.
Like other  companies  based  primarily in the San  Francisco  Bay Area, we face
intense competition for qualified personnel.

We Have a Long Sales Cycle that Depends upon Factors Outside Our Control

     A  customer's  decision  to  license  our  products  typically  involves  a
significant  commitment of resources and is influenced by the customer's  budget
cycles.  In  addition,  selling our  products  requires us to educate  potential
customers on their use and benefits. As a result, our products have a long sales
cycle which can take over six months. We face difficulty  predicting the quarter
in which sales to expected customers may occur. The sale of our products is also
subject  to  delays  from  the  lengthy  budgeting,   approval  and  competitive
evaluation  processes of our  customers  that  typically  accompany  significant
capital expenditures.  For example, customers frequently begin by evaluating our
products on a limited  basis and devote time and  resources to test our products
before they decide whether to purchase a license for  deployment.  Customers may
also  defer  orders as a result  of  anticipated  releases  of new  products  or
enhancements by us or our competitors.

                                       12
<PAGE>

Our Markets Are Highly Competitive

     Our markets are new, rapidly evolving and highly competitive, and we expect
this competition to persist and intensify in the future. Our failure to maintain
and enhance our  competitive  position  could  seriously  harm our  business and
operating results. We encounter competition from a number of sources, including:

     -    Sellers  of   enterprise-wide   management   systems,   which  include
          electronic software distribution;

     -    Companies  that  market  products  that  support the  distribution  of
          software applications and content; and

     -    Desktop software management suites.

     In addition,  we compete with various  methods of application  distribution
and  management,  including  thin client  systems and the web browser,  and with
application server vendors and others that have introduced software distribution
capabilities into their products.

     Potential  competitors may bundle their products or incorporate an Internet
infrastructure  management  component  into  existing  products in a manner that
discourages  users from  purchasing  our products.  For example,  we expect that
future  releases of  Microsoft's  Windows  operating  systems,  which manage the
programs  on  a  computer,   will   include   components   addressing   Internet
infrastructure management functions.  Furthermore,  new competitors or alliances
among competitors may emerge and rapidly acquire  significant  market share. Our
competitors may be able to respond more quickly to new or emerging  technologies
and changes in customer requirements than we can.

     Some of our competitors have longer operating  histories and  significantly
greater financial,  technical, marketing and other resources than we do. Many of
these  companies  have  more  extensive  customer  bases  and  broader  customer
relationships that they could leverage, including relationships with many of our
current and potential  customers.  These companies also have  significantly more
established customer support and professional service  organizations than we do.
In addition,  these companies may adopt aggressive pricing policies which we are
unable to match.  In the past, we have lost  potential  customers to competitors
for various reasons, including lower prices.

Protection of Our Intellectual Property Is Limited

     We rely on a combination of patent,  trademark,  trade secret and copyright
law and  contractual  restrictions  to protect  the  proprietary  aspects of our
technology. These legal protections afford only limited protection.  Despite our
efforts to protect our proprietary rights,  unauthorized  parties may attempt to
copy aspects of our products or to obtain and use our  proprietary  information.
Litigation  may be necessary to enforce our  intellectual  property  rights,  to
protect  our  trade  secrets  and to  determine  the  validity  and scope of the
proprietary rights of others.  Such litigation could result in substantial costs
and  diversion  of  resources  and could  significantly  harm our  business  and
operating results. In addition,  we sell our products  internationally,  and the
laws of many countries do not protect our proprietary rights as well as the laws
of the United States.

We May Be Found to Infringe Proprietary Rights of Others

     Other  companies,  including our  competitors,  may obtain patents or other
proprietary rights that would prevent, or limit or interfere with our ability to
make, use or sell our products.  As a result, we may be found to infringe on the
proprietary rights of others. Furthermore,  companies in the software market are
increasingly  bringing suits alleging  infringement of their proprietary rights,
particularly  patent  rights.  We could  incur  substantial  costs to defend any
litigation,  and  intellectual  property  litigation could force us to do one or
more of the following:

     -    Cease  selling,  incorporating  or using  products  or  services  that
          incorporate the challenged intellectual property;

     -    Obtain  a  license  from  the  holder  of the  infringed  intellectual
          property right; and

     -    Redesign products or services.

                                       13
<PAGE>

     In the  event of a  successful  claim of  infringement  against  us and our
failure or  inability  to license the  infringed  technology,  our  business and
operating results would be significantly harmed.

We Depend upon Third-Party  Distribution  Relationships  and Need to Develop New
Relationships

     We have a limited number of  distribution  relationships  and we may not be
able to  increase  our number of  distribution  relationships  or  maintain  our
existing  relationships.  For  example,  Netscape,  a  former  reseller  of  our
products,  accounted for a significant  amount of our revenues in 1998 and 1997,
but is no longer a reseller of our products. In addition, our original equipment
manufacturer  arrangement  with Tivoli has recently  accounted  for a decreasing
percentage of our  revenues.  During the first nine months of 2000 and in fiscal
1999, Tivoli accounted for less than 10% of our revenues,  as compared to 18% of
our revenues in fiscal 1998.

     Our  current  agreements  with our channel  partners  do not prevent  these
companies from selling products of other companies,  including products that may
compete with our  products,  and do not  generally  require  these  companies to
purchase  minimum  quantities of our  products.  These  distributors  could give
higher  priority to the products of other  companies  or to their own  products,
than they give to our  products.  In  addition,  sales  through  these  channels
generally result in lower fees to Marimba than direct sales. As a result,  while
the loss of, or  significant  reduction in sales volume to any of our current or
future  distribution  partners  could  seriously harm our revenues and operating
results,  a  significant  increase in sales through  these  channels  could also
negatively impact our gross margins.

We Need to Develop and Expand Our Sales, Marketing and Distribution Capabilities

     We need to expand our  marketing  and direct sales  operations  in order to
increase  market  awareness  of our  products,  market our products to a greater
number of enterprises and generate increased revenues.  We have historically not
been able to hire employees as quickly as planned.  In  particular,  competition
for qualified  sales  personnel is intense and we may not be able to hire enough
qualified  sales  personnel in the future.  Our products and services  require a
sophisticated  sales effort  targeted at senior  management  of our  prospective
customers.  New hires require extensive training and typically take at least six
months to achieve full  productivity.  In addition,  we have limited  experience
marketing our products broadly to a large number of potential customers, both in
the United States and elsewhere.

We Need to Expand Our Professional Services

     We may not be able to  attract,  train  or  retain  the  number  of  highly
qualified  services personnel that our business needs. We believe that growth in
our  product  sales  depends  on our  ability  to  provide  our  customers  with
professional  services and to educate  third-party  resellers and consultants on
how to provide similar services.  As a result, we plan to increase the number of
our services personnel to meet these needs.  However,  competition for qualified
services personnel is intense.

     We expect our total service  revenues to increase as we continue to provide
support,  consulting and training  services that  complement our products and as
our installed customer base grows. This could negatively impact our gross margin
because margins on revenues derived from services are generally lower than gross
margins on revenues derived from the license of our products.

Expanding  Internationally  Is  Expensive,  We May  Receive No Benefit  from Our
Expansion  and  Our   International   Operations  Are  Subject  to  Governmental
Regulation

     We plan to increase our international sales force and operations.  However,
we may not be successful in increasing our international sales. In addition, our
international  business activities are subject to a variety of risks,  including
the  adoption  of or changes in laws,  currency  fluctuations,  actions by third
parties and political and economic  conditions  that could restrict or eliminate
our  ability to do  business  in  foreign  jurisdictions.  To date,  we have not
adopted a hedging  program  to protect us from  risks  associated  with  foreign
currency fluctuations.

                                       14
<PAGE>

     Export  clearances,  and in some cases,  import clearances must be obtained
before  our  products  can  be  distributed  internationally.   Current  or  new
government  laws  and  regulations,  or the  application  of  existing  laws and
regulations, could expose us to significant liabilities,  significantly slow our
growth and seriously harm our business and operating results.

We Must Manage Our Growth and Expansion

     Our  historical  growth has  placed,  and any  further  growth is likely to
continue to place, a significant strain on our resources.  Any failure to manage
growth effectively could seriously harm our business and operating  results.  To
be  successful,  we will need to  implement  additional  management  information
systems, improve our operating, administrative, financial and accounting systems
and  controls,  train new employees and maintain  close  coordination  among our
executive,   engineering,   finance,  legal,  marketing,  sales  and  operations
organizations.  In addition, our growth has resulted, and any future growth will
result, in increased responsibilities for management personnel.

We Rely on Third-Party Software and Applications

     We  integrate  third-party  security  and  encryption  software and digital
certificates as a component of our software.  There are inherent  limitations in
the use and  capabilities  of much of the technology  that we license from third
parties.  As a  result,  we face a number of  challenges  in  integrating  these
technologies  into our products.  We would be seriously  harmed if the providers
from whom we license software ceased to deliver and support  reliable  products,
enhance their current  products or respond to emerging  industry  standards.  In
addition,  the  third-party  software  may not continue to be available to us on
commercially  reasonable  terms or at all. The loss of, or inability to maintain
or obtain  this  software,  could  result  in  shipment  delays  or  reductions.
Furthermore,  we might be forced to limit the features  available in our current
or  future  product  offerings.  Either  alternative  could  seriously  harm our
business and operating results.

     Almost all of our  products  are written in Java and require a Java virtual
machine made available by Sun  Microsystems,  Inc. in order to operate.  Sun may
not  continue  to  make  these  implementations  of the  Java  virtual  machines
available at commercially  reasonable terms or at all. Furthermore,  if Sun were
to make  significant  changes to the Java  language or its Java virtual  machine
implementations,  or fail to correct  defects and limitations in these products,
our ability to continue to improve and ship our products  could be impaired.  In
the future, our customers may also require the ability to deploy our products on
platforms for which technically  acceptable Java  implementations  either do not
exist or are not available on commercially  reasonable  terms. Our customers may
also use particular  implementations of the Java virtual machine that may not be
technically or commercially acceptable for integration into our products.

Software Defects in Our Products Would Harm Our Business

     Complex  software  products  like ours  often  contain  errors or  defects,
including  errors relating to security,  particularly  when first  introduced or
when new versions or enhancements are released. Our products extensively utilize
digital  certificates and other complex  technology.  Our use of this technology
has in the past and may in the future result in product behavior  problems which
may not be  anticipated by us or our  customers.  For example,  most versions of
Castanet  shipped before  Castanet 4.0 contain digital  certificates  that cause
Castanet and any applications being delivered with Castanet to stop running when
the  certificate  used  expires.  We have  developed an update which avoids this
problem and have distributed the update to customers. It is possible that we may
not have  identified all affected  customers.  Customers that do not install the
update will experience this problem with respect to any  applications  they have
deployed with  Castanet and signed with a certificate  on the date of expiration
of the certificate  they elected to use.  Defects or errors in current or future
products  could result in lost revenues or a delay in market  acceptance,  which
would seriously harm our business and operating results.

     Since  many  of  our  customers  use  our  products  for  business-critical
applications,  errors,  defects or other  performance  problems  could result in
financial or other damage to our customers and could significantly  impair their
operations.  Our customers could seek damages for losses related to any of these
issues. For example,  we could be subject to claims for losses by customers that
we are unable to identify and notify and, as a result, do not install our update
that avoids the digital  certificate  problem. A product liability claim brought
against us, even if not successful, would likely be time consuming and costly to
defend and could adversely affect our marketing efforts.

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Volatility of Stock Price

     The market  price of our common stock has been and is likely to continue to
be highly  volatile.  The market price of our common stock may be  significantly
affected by factors such as actual or anticipated  fluctuations in our operating
results,  announcements  of  technological  innovations,  new  products  or  new
contracts  by us or our  competitors,  developments  with  respect to patents or
proprietary rights and related litigation,  adoption of new accounting standards
affecting the software industry, general market conditions and other factors. In
addition,  the stock market has from time to time experienced  significant price
and volume fluctuations that have particularly affected the market price for the
common stock of technology  companies.  These types of broad market fluctuations
may  adversely  affect  the  market  price of our  common  stock.  In the  past,
following  periods of volatility in the market price of a company's  securities,
securities  class  action  litigation  has often been  initiated  against such a
company. Such litigation against Marimba could result in substantial costs and a
diversion of our attention  and  resources  and seriously  harm our business and
operating results.

Our Future Capital Needs Are Uncertain

     We expect that our current cash, cash  equivalents and investments  will be
sufficient  to meet our working  capital and  capital  expenditure  needs for at
least twelve  months.  After that, we may need to raise  additional  funds,  and
additional  financing may not be available on favorable  terms,  if at all. This
could  seriously  harm our business and operating  results.  Furthermore,  if we
issue additional equity securities,  stockholders may experience  dilution,  and
the new equity  securities could have rights senior to those of existing holders
of our common stock. If we cannot raise funds, if needed,  on acceptable  terms,
we may not be able to develop or enhance our products,  take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements.

We Face Challenges Stemming from Our Emerging Markets

     The  market  for  Internet  infrastructure  management  software  has  only
recently  begun  to  develop,  is  rapidly  evolving  and  will  likely  have an
increasing number of competitors.  We cannot be certain that a viable market for
our  products  will emerge or be  sustainable.  If the  Internet  infrastructure
management market fails to develop,  or develops more slowly than expected,  our
business and operating results would be seriously harmed.

     Furthermore,  in order to be successful in this emerging market, we must be
able to  differentiate  Marimba  from our  competitors  through  our product and
service  offerings  and brand  name  recognition.  We may not be  successful  in
differentiating  Marimba  or  achieving  widespread  market  acceptance  of  our
products and  services.  Furthermore,  enterprises  that have  already  invested
substantial   resources  in  other  methods  of  deploying  and  managing  their
applications  and services may be reluctant or slow to adopt a new approach that
may replace, limit or compete with their existing systems.

We Depend on Continued Use of the Internet and Growth of Electronic Business

     Rapid growth in the use of and  interest in the Internet has occurred  only
recently.  As a  result,  acceptance  and use may not  continue  to  develop  at
historical rates, and a sufficiently  broad base of consumers may not adopt, and
continue to use, the Internet and other online services as a medium of commerce.
Demand and market acceptance for recently  introduced services and products over
the  Internet  are subject to a high level of  uncertainty,  and there exist few
proven services and products.

     In addition,  the  Internet  may not be accepted as a long-term  commercial
marketplace  for  a  number  of  reasons,   including   potentially   inadequate
development of the necessary network  infrastructure  or delayed  development of
enabling technologies and performance improvements.  Our success will depend, in
large part,  upon third  parties  maintaining  the  Internet  infrastructure  to
provide a reliable  network  backbone with the necessary  speed,  data capacity,
security and hardware necessary for reliable Internet access and services.

We Must Respond to Rapid Technological Change and Evolving Industry Standards

     The markets for our Internet infrastructure management solutions are marked
by  rapid  technological   change,   frequent  new  product   introductions  and
enhancements,  uncertain  product life cycles,  changes in customer  demands and

                                       16
<PAGE>

evolving  industry  standards.  New solutions  based on new  technologies or new
industry   standards  can  quickly  render  existing   solutions   obsolete  and
unmarketable.  Any delays in our ability to develop and release  enhanced or new
solutions  could  seriously  harm  our  business  and  operating  results.   Our
technology is complex,  and new products,  enhancements and services can require
long  development  and testing  periods.  Our  failure to conform to  prevailing
standards could have a negative effect on our business and operating results.

We Face Risks Associated with Potential Acquisitions

     We may make acquisitions in the future. Acquisitions of companies, products
or technologies  entail  numerous risks,  including an inability to successfully
assimilate   acquired   operations  and  products,   diversion  of  management's
attention,   loss  of  key  employees  of  acquired  companies  and  substantial
transaction  costs.  Some  of the  products  acquired  may  require  significant
additional  development before they can be marketed and may not generate revenue
at  anticipated  levels.  Moreover,  future  acquisitions  by us may  result  in
dilutive  issuances of equity  securities,  the  incurrence of additional  debt,
large  one-time  write-offs  and the  creation of  goodwill or other  intangible
assets  that could  result in  significant  amortization  expense.  Any of these
problems or factors could seriously harm our business,  financial  condition and
operating results.

ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     We develop  products in the United States and sell in North  America,  Asia
and Europe.  As a result,  our  financial  results  could be affected by various
factors,  including  changes in foreign currency exchange rates or weak economic
conditions in foreign markets.  As all sales are currently made in U.S. dollars,
strengthening  of the dollar could make our products less competitive in foreign
markets.

     Our interest  income is  sensitive to changes in the general  level of U.S.
interest  rates,  particularly  since the  majority of our funds are invested in
instruments with maturities less than two years. Our policy is to limit the risk
of principal loss and ensure the safety of invested funds by limiting market and
credit risk. Funds in excess of current  operating  requirements are invested in
obligations  of the  U.S.  government  and its  agencies  and  investment  grade
obligations of state and local  governments and large  corporations.  Due to the
nature of our  investments,  we have concluded that there is no material  market
risk exposure. Therefore, no quantitative tabular disclosures are required.

                                       17
<PAGE>

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     On March 3, 1997,  Novadigm,  Inc. filed a complaint against us in the U.S.
District Court for the Northern District of California alleging  infringement of
a patent held by Novadigm (U.S. Patent No. 5,581,764, the "Novadigm Patent"). On
July 30, 1999,  Marimba filed a complaint  against Novadigm in the U.S. District
Court for the Northern District of California alleging  infringement by Novadigm
of a patent held by us (U.S. Patent No.  5,919,247,  the "Marimba  Patent").  On
November 10, 2000,  Marimba and Novadigm  executed a memorandum of understanding
(MOU)  settling  both  actions.  Pursuant to the MOU, the parties have agreed to
dismiss  both actions  without  prejudice  and to enter into a final  settlement
agreement  to be  drafted  within a  reasonable  period  of time  following  the
execution date of the MOU. If no final settlement agreement is executed, the MOU
shall  remain  binding on both  parties.  Under the MOU,  the other terms of the
settlement are confidential.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

    None.


ITEM 5.  OTHER INFORMATION.

     On July 21, 2000, John F. Olsen was appointed President and Chief Executive
Officer  of  Marimba  and Kim K.  Polese  became  Marimba's  Chairman  and Chief
Strategy  Officer.  Mr.  Olsen  also  was  appointed  a member  of the  Board of
Directors on such date.  Concurrent  with Mr.  Olsen's  addition to the Board of
Directors,  Arthur A. van Hoff  resigned  as a Board  member.  Mr. van Hoff will
continue in his current role as Chief Technology Officer of Marimba.

     On September 14, 2000,  Steven P. Williams resigned from Marimba's Board of
Directors.

     On October 19, 2000, Kenneth W. Owyang was appointed as the Chief Financial
Officer of Marimba.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits.

         Exhibit No.       Description
         ----------        -----------
         27.1              Financial Data Schedule for the period ended
                           September 30, 2000.

(b)      Reports on Form 8-K.

     On July 25, 2000, Marimba filed a report on Form 8-K to report under Item 5
the appointment of John F. Olsen as President and Chief Executive  Officer and a
Board member, as well as the material  compensatory terms of his employment with
Marimba.

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<PAGE>


                                   SIGNATURE

     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.

                                    MARIMBA, INC.


Date:    November 14, 2000      By: /s/ Kenneth W. Owyang
                                    -------------------------------------------
                                    Kenneth W. Owyang
                                    Vice President, Finance and Chief Financial
                                     Officer
                                    (Principal Financial and Accounting Officer)


                                       19

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                                 EXHIBIT INDEX

Exhibit No.     Description
      27.1      Financial Data Schedule for the period ended September 30, 2000.


                                       20

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