**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





___________________




**FORM
      10-Q**


___________________




**(Mark
      One)**





**[X]**  **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF
      1934**





**For
      the quarterly period ended March 31, 2006**





**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 No.: 0-30849**





**WEBEX
      COMMUNICATIONS, INC.**


**(Exact
      name of registrant as specified in its charter)**





**Delaware**
            **77-0548319****(State
                or other jurisdiction of**
            **(I.R.S.
                Employer****incorporation
                or organization)**
            **Identification
                Number)**





**3979
      Freedom Circle**


**Santa
      Clara, California 95054**


**(Address
      of principal executive offices)**





**Telephone:
      (408) 435-7000**


**(Registrant's
      telephone number, including area code)**





Indicate
      by check mark whether the registrant (l) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      at least the past 90 days. Yes x No  ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of "accelerated
      filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer x  Accelerated
      filer o Non-accelerated
      filer o





Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Excha nge
      Act).
      Yes  ̈ No x





The
      number of shares of WebEx common stock outstanding as of May 1, 2006 was
      47,372,912 shares.











**WEBEX
      COMMUNICATIONS, INC.**


**QUARTERLY
      REPORT ON FORM 10-Q FOR THE PERIOD ENDED**


**MARCH
      31, 2006**





**TABLE
      OF CONTENTS**





**Page
                No.****PART
                I. FINANCIAL INFORMATION****Item
                1**.Financial
                StatementsCondensed
                Consolidated Balance Sheets at March 31,
                2006 (Unaudited) and December 31, 2005 (Audited)
            3Condensed
                Consolidated Statements of Income for
                the three months ended March 31, 2006 and 2005
                (Unaudited)
            4Condensed
                Consolidated Statements of Cash Flows for the three monthsended
                March 31, 2006 and 2005
                (Unaudited)
            5Notes
                to Condensed Consolidated Financial Statements
                (Unaudited)
            6**Item
                2**.Management's
                Discussion and Analysis of Financial Condition
                and Results of Operations
            17**Item
                3**.Quantitative
                and Qualitative Disclosures About Market
                Risk
            30**Item
                4.**Controls
                and Procedures
            30**PART
                II. OTHER INFORMATION****Item
                1**.Legal
                Proceedings
            32**Item
                1A**. 
Risk
                Factors
            32**Item
                2**.Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            48**Item
                6**.Exhibits
            48**Signatures**
            50**Exhibit
                Index**
            51








**PART
      I - FINANCIAL INFORMATION**


**Item
      1.*****Financial
      Statements***


**WEBEX
      COMMUNICATIONS, INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(In
      thousands, except par value)**





ASSETS


**March
                31,**
              **2006**
            
            
            **December
                31,**
              **2005****(Unaudited)**Current
                assets:Cash
                and cash equivalents
            
            $
            93,152
            
            $
            68,416Short-term
                investments
            
            
            138,271
            
            
            128,795Accounts
                receivable, net of allowances of $7,591 and $7,131,
                respectively
            
            
            53,249
            
            
            51,231Prepaid
                expenses and other current assets
            
            
            7,812
            
            
            7,231Deferred
                tax
                assets
            
            
            8,873
            
            
            6,326Total
                current assets
            
            
            301,357
            
            
            261,999Property
                and equipment, net
            
            
            51,031
            
            
            51,592Goodwill
            
            
            26,617
            
            
            28,224Intangible
                assets, net
            
            
            15,570
            
            
            16,453Deferred
                tax assets
            
            
            4,837
            
            
            2,930Other
                non-current assets
            
            
            1,725
            
            
            1,579Total
                assets
            
            $
            401,137
            
            $
            362,777LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable
            
            $
            5,151
            
            $
            9,011Accrued
                liabilities
            
            
            31,163
            
            
            24,737Deferred
                revenue
            
            
            14,591
            
            
            12,652Income
                tax payable
            
            
            670
            
            
            4,348Total
                liabilities
            
            
            51,575
            
            
            50,748Commitments
                and contingenciesStockholders'
                equity:Preferred
                stock, $0.001 par value (5,000 shares authorized; no shares issued
                or
                outstanding)
            
            
            —
            
            
            —Common
                stock, $0.001 par value (250,000 shares authorized; 47,183 and 46,143
                shares issued and outstanding, respectively)
            
            
            47
            
            
            46Additional
                paid-in capital
            
            
            286,374
            
            
            258,002Accumulated
                other comprehensive income
            
            
            2,131
            
            
            2,022Accumulated
                earnings
            
            
            61,010
            
            
            51,959Total
                stockholders' equity
            
            
            349,562
            
            
            312,029Total
                liabilities and stockholders' equity
            
            $
            401,137
            
            $
            362,777





See
      accompanying notes to condensed consolidated financial
      statements.





**WEBEX
      COMMUNICATIONS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME**


**(In
      thousands, except per share data; unaudited** )




**Three
                  months ended**
                **March
                  31,****2006**
              
              
              **2005**Net
                  revenues
              
              $
              88,464
              
              $
              70,855Cost
                  of revenues(1)
              
              
              15,971
              
              
              11,858Gross
                  profit
              
              
              72,493
              
              
              58,997Operating
                  expenses:Sales
                  and marketing(1)
              
              
              34,449
              
              
              24,103Research
                  and development(1)
              
              
              13,506
              
              
              10,067General
                  and administrative(1)
              
              
              9,574
              
              
              5,783Total
                  operating expenses
              
              
              57,529
              
              
              39,953Operating
                  income
              
              
              14,964
              
              
              19,044Interest
                  and other income, net
              
              
              1,735
              
              
              1,737Income
                  before income taxes
              
              
              16,699
              
              
              20,781Provision
                  for income taxes
              
              
              7,648
              
              
              7,931Net
                  income
              
              $
              9,051
              
              $
              12,850Net
                  income per share:Basic
              
              $
              0.19
              
              $
              0.29Diluted
              
              $
              0.19
              
              $
              0.27Weighted
                  average shares used to compute net income per share:Basic
              
              
              46,641
              
              
              44,968Diluted
              
              
              48,129
              
              
              46,848



































(1) Costs
      and
      expenses for the three months ended March 31, 2006 include SFAS 123R stock-based compensation
      expense. See Note 2 to the condensed consolidated financial statements for
      additional information.








See
      accompanying notes to condensed consolidated financial statements.








**WEBEX
      COMMUNICATIONS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH
      FLOWS**


**(In
      thousands; unaudited)**


**Three
                  months ended**
                **March
                  31,****2006**
              
              
              **2005**Cash
                  flows from operating activities:Net
                  income
              
              $
              9,051
              
              $
              12,850Adjustments
                  to reconcile net income to net cash provided by operating
                  activities:Provisions
                  for doubtful accounts and sales reserve
              
              
              4,824
              
              
              2,858Depreciation
                  and amortization
              
              
              5,121
              
              
              3,521Loss
                  from disposal of assets
              
              
              72
              
              
              241Deferred
                  income taxes
              
              
              (2,847
              )
              
              403Tax
                  benefit of stock plans
              
              
              2,677
              
              
              2,667Stock-based
                  compensation
              
              
              6,629
              
              
              1Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (6,842
              )
              
              (4,946
              )Prepaid
                  expenses and other current assets
              
              
              (581
              )
              
              (322
              )Other
                  non-current assets
              
              
              (146
              )
              
              61Accounts
                  payable
              
              
              (3,860
              )
              
              (2,013
              )Accrued
                  liabilities
              
              
              6,426
              
              
              979Income
                  tax payable
              
              
              (3,678
              )
              
              3,421Deferred
                  revenue
              
              
              1,939
              
              
              1,734Other
              
              
              509
              
              
              420Net
                  cash provided by operating activities
              
              
              19,294
              
              
              21,875Cash
                  flows from investing activities:Purchases
                  of property and equipment
              
              
              (3,749
              )
              
              (3,821
              )Purchases
                  of available-for-sale securities
              
              
              (22,448
              )
              
              (35,538
              )Maturities
                  and sales of available-for-sale securities
              
              
              12,572
              
              
              16,734Net
                  cash used in investing activities
              
              
              (13,625
              )
              
              (22,625
              )Cash
                  flows from financing activities:Net
                  proceeds from issuances of common stock
              
              
              17,597
              
              
              7,647Excess
                  tax benefit from stock-based compensation
              
              
              1,470
              
              
              —Repurchase
                  of common stock
              
              
              —
              
              
              (3,590
              )Net
                  cash provided by financing activities
              
              
              19,067
              
              
              4,057Increase
                  in cash and cash equivalents
              
              
              24,736
              
              
              3,307Cash
                  and cash equivalents at beginning of the period
              
              
              68,416
              
              
              110,552Cash
                  and cash equivalents at end of the period
              
              $
              93,152
              
              $
              113,859Supplemental
                  disclosures of non-cash investing and financing
                  activities:Goodwill
                  adjustment recorded in conjunction with Intranets.com, Inc.
                  acquisition
              
              
              (1,607
              )
              
              —Capitalization
                  of lease incentives
              
              
              —
              
              
              2,295Cash
                  paid for:Income
                  taxes
              
              
              9,898
              
              
              1,189





See
      accompanying notes to condensed consolidated financial statements





**WEBEX
      COMMUNICATIONS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**





**Note
      1: Basis of Presentation and Significant Accounting
      Policies**





The
      accompanying condensed consolidated financial statements of WebEx Communications
      (the “Company” or “WebEx”) as of March 31, 2006 and for the three months ended
      March 31, 2006 and 2005 are unaudited and in the opinion of management have
      been
      prepared in accordance with the rules and regulations of the Securities and
      Exchange Commission. Certain information and footnote disclosures normally
      included in consolidated financial statements prepared in accordance with
      generally accepted accounting principles have been condensed or omitted in
      accordance with such rules and regulations. In the opinion of management, the
      accompanying unaudited financial statements reflect all adjustments, consisting
      only of normal recurring adjustments, necessary to present fairly the financial
      position of the Company, and its results of operations and cash flows. These
      financial statements should be read in conjunction with the Company's audited
      consolidated financial statements and notes thereto as of and for the year
      ended
      December 31, 2005, included in the Company's Form 10-K filed with the Securities
      and Exchange Commission on March 15, 2006.




The
      results of operations for the three months ended March 31, 2006 are not
      necessarily indicative of the results that may be expected for the year ending
      December 31, 2006 or any other future period, and the Company makes no
      representations related thereto.




The
      condensed consolidated financial statements include the accounts of WebEx and
      its wholly owned subsidiaries. All significant intercompany accounts and
      transactions have been eliminated in consolidation. Certain amounts reported
      in
      previous periods have been reclassified to conform to the current period
      presentation.





***Revenue
      Recognition***




Revenue
      is derived from the sale of web collaboration services. Web collaboration
      services revenue is generated through a variety of contractual arrangements
      directly with customers and with resellers, who in turn sell the services to
      customers. The Company sells web collaboration services directly to customers
      through service subscriptions or similar agreements and pay-per-use
      arrangements. Under these arrangements, customers typically access the
      application hosted on WebEx servers using a standard web browser. Subscription
      arrangements include monthly subscriber user fees, user set-up fees and
      training. The subscription arrangements are considered service arrangements
      in
      accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-3, *Application
      of AICPA Statement of Position 97-2, Software Revenue Recognition, to
      Arrangements That Include the Right to Use Software Stored on Another Entity’s
      Hardware* ,
      and
      with multiple deliverables under EITF 00-21, *Accounting
      for Revenue Arrangements with Multiple Deliverables.* In
      addition, because the Company provides its applications as a service, the
      Company follows the provisions of Securities and Exchange Commission Staff
      Accounting Bulletin No. 104, *Revenue
      Recognition* .
      Under
      EITF 00-21, all deliverables are considered one unit of accounting. During
      the
      initial term of an agreement, the Company may provide training services,
      web-page design and set-up services. WebEx considers all such deliverables
      to be
      combined with service revenues into one unit of accounting, as individual
      delivered items do not have stand-alone value to the customer; therefore, such
      revenue is recognized ratably (i.e. straight-line) over the initial term of
      the
      contract. Committed and fixed fee subscription service revenue is also
      recognized ratably (i.e. straight-line) over the current term of the
      contract. Some minute-based subscriptions involve a quarterly, semi-annual
      or
      annual rather than monthly commitment by the customer. In these cases, all
      monthly billing is in arrears and monthly revenue is recognized based on actual
      usage during the month. If, following the last month billed, aggregate actual
      usage is less than the subscription amount, then in addition to actual usage
      for
      the final month, revenue is recognized for the remaining amount of the
      contractual commitment not previously billed. In
      addition to committed and flat-rate or subscription service revenue, WebEx
      derives revenue from pay-per-use services, usage in excess of commitments and
      other usage-based charges that are recognized as such services are provided.
      WebEx refers to these forms of revenue as uncommitted revenue.




The
      Company also enters into reselling arrangements with resellers, which purchase
      and resell the Company’s services on a revenue sharing, discounted or
      pay-per-use basis. Revenue under these arrangements is derived from services
      provided to end-users and is recognized over the service period provided that
      evidence of the arrangement exists, the fee is fixed or determinable and
      collectibility is reasonably assured. Initial set up fees received in connection
      with these arrangements are recognized ratably (i.e. straight-line) over the
      initial term of the contract. During the initial term, the Company provides
      training services, web-page design and set-up services. Service fees are
      recognized as the services are provided for pay-per-use service arrangements
      and
      ratably (i.e. straight-line) over the service period for services provided
      on a
      subscription basis through the reseller. The Company’s reseller arrangements may
      require guaranteed minimum revenue commitments that are billed in advance to
      the
      reseller. Advance payments received from resellers are deferred until the
      related services are provided or until otherwise earned by WebEx. When the
      reseller bills the end-user, WebEx sells the services on a discounted basis
      to
      the reseller, which in turn marks up







the
      price
      and sells the services to the end-user. In such cases, WebEx contracts directly
      with the reseller and revenue is recognized based on discounted amounts charged
      to the reseller. A significant majority of the revenue derived from the
      Company’s resellers comes from distribution agreements of this type. In a small
      minority of cases, WebEx bills the end-user directly. In these situations,
      a
      percentage of the proceeds generated from the sale of WebEx services are paid
      to
      the reseller. In these cases revenue is recognized based on amounts charged
      to
      the end-user, and amounts paid to the reseller are recorded as sales and
      marketing expense.




Persuasive
      evidence for each arrangement is represented by a binding contract. The fee
      is
      considered fixed or determinable if it is not subject to refund or adjustment.
      Collectibility is considered reasonably assured if WebEx expects that the
      customer will be able to pay amounts under the arrangement as they become due.
      Collectibility of guaranteed minimum revenue commitments by resellers is not
      reasonably assured; thus, revenue from guaranteed minimum commitments is
      deferred until services are provided to an end-user customer or until collected
      from the reseller and forfeited at the end of the commitment period.




Deferred
      revenue includes amounts billed to customers for which revenue has not been
      recognized and generally results from the following: (1) unearned portion of
      monthly billed subscription service fees; (2) unearned portion of annual or
      other period billed subscription service fees; (3) deferred set-up fees;
      and (4) advances received from resellers under revenue sharing arrangements.
      As
      of March 31, 2006 and December 31, 2005, accounts receivable includes
      receivables of $7.4 million and $6.4 million respectively, for unbilled
      per-minute-based charges that occurred during the final month of the respective
      quarter.





***Stock-Based
      Compensation***





Effective
      January 1, 2006, WebEx adopted the fair value recognition provisions of
      Statement of Financial Accounting Standards ("SFAS") No. 123 (revised
      2004), *Share-Based
      Payment* ("SFAS 123R"), using the modified prospective transition method and
      therefore has not restated results for prior periods. Under this transition
      method, stock-based compensation expense for the first quarter of 2006 includes
      compensation expense for all stock-based compensation awards, including employee
      stock options and employee stock purchases related to the Employee Stock
      Purchase Plan granted prior to, but not yet vested as of January 1, 2006,
      based on the grant date fair value estimated in accordance with the original
      provision of SFAS No. 123, *Accounting
      for Stock-Based Compensation* ("SFAS 123"). Stock-based compensation expense for all stock-based
      compensation awards granted after January 1, 2006 is based on the
      grant-date fair value estimated in accordance with the provisions of
      SFAS 123R.





In
      conjunction with the adoption of SFAS 123R, the Company changed its method
      of
      attributing the value of stock-based compensation to expense from the
      accelerated approach to the straight-line method. Compensation expense for
      all
      share-based payment awards prior to January 1, 2006 will continue to be
      recognized using the accelerated approach while compensation expense for all
      share-based payment awards granted on or subsequent to January 1, 2006 is
      recognized using the straight-line method. As stock-based compensation expense
      recognized in the Condensed Consolidated Statement of Income for the first
      quarter 2006 is based on awards ultimately expected to vest, it has been reduced
      for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at
      the
      time of grant and revised, if necessary, in subsequent periods if actual
      forfeitures differ from those estimates.




Prior
      to
      the adoption of SFAS 123R, WebEx recognized stock-based compensation
      expense in accordance with Accounting Principles Board ("APB") Opinion
      No. 25, *Accounting
      for Stock Issued to Employees* ("APB 25"). In March 2005, the Securities and Exchange Commission (the
      "SEC") issued Staff Accounting Bulletin No. 107 ("SAB 107") regarding
      the SEC's interpretation of SFAS 123R and the valuation of share-based
      payments for public companies. WebEx has applied the provisions of SAB 107
      in its adoption of SFAS 123R. See Note 2 to the Condensed Consolidated
      Financial Statements for a further discussion on stock-based
      compensation.





***Recent
      Accounting Pronouncements***





In
      May
      2005, the FASB issued SFAS 154, *Accounting
      Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB
      Statement No. 3* .
      SFAS
      154 changes the requirements for the accounting for and reporting of a change
      in
      accounting principle, and applies to all voluntary changes in accounting
      principles. It also applies to changes required by an accounting pronouncement
      in the unusual instance that the pronouncement does not include specific
      transition provisions. This statement requires retrospective application to
      prior periods’ financial statements of changes in accounting principles, unless
      it is impracticable to determine either the period-specific effects or the
      cumulative effect of the change. SFAS 154 is effective for accounting changes
      made in fiscal years beginning after December 15, 2005. The adoption of this
      statement did not have a material impact on the Company’s consolidated results
      of operations or financial condition.











**Note
      2: Employee Stock Benefit Plans and Stock-Based
      Compensation**




***Stock
      Plans***




The
      Company has granted stock options to employees, directors and consultants under
      the 1998 Stock Option Plan and the 2000 Stock Incentive Plan. Under the 1998
      Stock Option Plan and the 2000 Stock Incentive Plan, the Company has authorized
      a total of 26,936,769 shares available for grant. Incentive stock options and
      non-qualified stock options granted to employees under these plans generally
      expire after 10 years or earlier in the case of termination or death. Vesting
      terms under these plans are generally over four years. As of March 31, 2006,
      there were a total of 1,242,063 shares available for issuance under the 2000
      Stock Incentive Plan and no shares under the 1998 Stock Option Plan.




WebEx
      also administers the 2000 Employee Stock Purchase Plan, which along with the
      2000 Stock Incentive Plan was approved by the stockholders on June 17, 2000.
      A
      total of 3,137,398 shares of common stock have been reserved for issuance under
      this plan. This plan allows eligible employees to purchase common stock at
      85%
      of the lower of the fair value of common stock on either the first day or last
      day of a defined participation period. In May 2005, WebEx changed the defined
      participation period from 24 months to 6 months. As of March 31, 2006, 580,360
      shares were available for issuance under this plan.





A
      summary
      of the option activity under the 1998 and 2000 stock plans for the period ended
      March 31, 2006 was as follows:




**Shares**
              
              
              **Weighted-Average
                  Exercise Price**
              
              
              **Weighted
                  Average Remaining Contractual Term (In years)**
              
              
              **Aggregate
                  Intrinsic Value**
                **(In
                  thousands)**Outstanding
                  at December 31, 2005
              
              
              10,462,575
              
              $
              20.72Granted
              
              
              437,701
              
              $
              27.66Exercised
              
              
              (1,056,307
              )
              $
              17.01Forfeited/cancelled/expired
              
              
              (311,721
              )
              $
              23.50Outstanding
                  at March 31, 2006
              
              
              9,532,248
              
              $
              21.36
              
              
              7.85
              
              $
              118,670Exercisable
                  at March 31, 2006
              
              
              3,691,131
              
              $
              19.92
              
              
              6.29
              
              $
              52,054


The
      aggregate intrinsic value in the table above represents the total pretax
      intrinsic value (the difference between WebEx's closing stock price on the
      last
      trading day of the first quarter of 2006 and the exercise price, multiplied
      by
      the number of in-the-money options) that would have been received by the option
      holders had all option holders exercised their options on March 31, 2006.
      This amount changes based on the fair market value of WebEx's stock. Total
      intrinsic value of options exercised for the first quarter of 2006 was
      $17.6 million. The Company issues new shares of common stock upon the
      exercise of stock options.








***Stock-Based
      Compensation Assumptions***





On
      January 1, 2006, the Company adopted SFAS 123R using the modified
      prospective transition method. SFAS 123R requires the measurement and
      recognition of compensation expense for all stock-based awards including
      employee stock options and employee stock purchase plans based on estimated
      fair
      values. WebEx selected the Black-Scholes option pricing model as the most
      appropriate model for determining the estimated fair value for stock-based
      awards. The fair value of share-based payment awards was calculated with the
      following assumptions and weighted average fair values as follows:





**Stock
                Options**
            **Employee
                stock purchase plan****Three
                months ended March 31,**
            **Three
                months ended March 31,****2006**
            **2005**
            **2006**
            **2005**Weighted
                average fair value of grants
            $14.62
            $12.34
            $5.53
            $6.65Expected
                life (in years)
            4.5
            3.5
            0.5
            0.5-2.0Volatility
            60%
            76%
            30%
            85%Risk-free
                interest rate
            4.5%
            3.7%
            4.2%
            1.9%Dividend
                yield
            —
            —
            —
            —








In
      light
      of new accounting guidance under SFAS 123R, beginning in the fourth quarter
      of
      2005, WebEx reevaluated its assumptions used in estimating the fair value of
      employee options granted. Based on this assessment, management determined that
      a
      combination of implied volatility and historical volatility is a better
      indicator of expected volatility than historical volatility alone. In
      addition, as part of the Company’s SFAS 123R adoption, WebEx examined its
      historical pattern of option exercises and post-vesting termination behavior
      to
      determine the expected life assumption. The risk-free interest rate assumption
      is based upon observed interest rates appropriate for the term of the Company’s
      employee stock plans. The dividend yield assumption is based on the Company’s
      history and expectation of dividend payouts.




As
      stock-based compensation expense recognized in the Condensed Consolidated
      Statement of Income for the first quarter of 2006 is based on awards ultimately
      expected to vest, it has been reduced for estimated forfeitures. SFAS 123R
      requires forfeitures to be estimated at the time of grant and revised, if
      necessary, in subsequent periods if actual forfeitures differ from those
      estimates. Forfeitures were estimated based on historical experience.





***Stock-Based
      Compensation under SFAS 123R***





The
      following table summarizes the impact of the adoption of SFAS 123R on our
      Condensed Consolidated Statement of Income for the three months ended March
      31,
      2006:




**Three
                  months ended**
                **March
                  31, 2006**Cost
                  of revenues
              
              $
              778Sales
                  and marketing
              
              $
              2,702Research
                  and development
              
              $
              1,545General
                  and administrative
              
              $
              1,604Stock-based
                  compensation expense before income taxes
              
              $
              6,629Income
                  tax benefit
              
              
              —Stock-based
                  compensation expense after income taxes
              
              $
              6,629Effect
                  on:Net
                  income per share - Basic
              
              $
              (0.14
              )Net
                  income per share - Diluted
              
              $
              (0.14
              )


As
      of
      March 31, 2006, total unamortized stock-based compensation cost related to
      non-vested stock options was $37.8 million which is expected to be recognized
      over the remaining vesting period of each grant, up to the next 48 months (or
      a
      weighted average period of 1.7 years). Total unrecognized compensation costs
      related to employee stock purchase plans as of March 31, 2006 was $218,000
      and
      is expected to be recognized over a weighted average period of 0.1 years.





Prior
      to
      the Company’s adoption of SFAS 123R, benefits of tax deductions in excess of
      recognized compensation costs were reported as operating cash flows. SFAS 123R
      requires that they be recorded as a financing cash inflow rather than as a
      reduction of taxes paid. For the first quarter of 2006, the Company recorded
      $1.5 million of excess tax benefits from stock-based compensation as a financing
      cash inflow.





***Stock-Based
      Compensation under Fair Value Method of SFAS 123***





The
      table
      below sets out the proforma amounts of net income and net income per share
      that
      would have resulted for the three months ended March 31, 2005, if WebEx
      accounted for its employee stock plans under the fair value recognition
      provisions of SFAS123.










**Three
                  months ended**
                **March
                  31, 2005**Net
                  income as reported
              
              $
              12,850Add:
                  Stock-based employee compensation expense included in determination
                  of net
                  income, net of tax
              
              
              (1
              )Deduct:
                  Stock-based employee compensation expense determined under the
                  fair-value
                  based method, net of tax
              
              
              (7,338
              )Pro-forma
                  net income
              
              $
              5,511Net
                  income per share:
                Basic:
                As
                  reported
              
              $
              0.29Pro
                  forma
              
              $
              0.12Diluted:
                As
                  reported
              
              $
              0.27Pro
                  forma
              
              $
              0.12





**Note
      3: Net Income per Share**




Basic
      net
      income per share is calculated using net income and the weighted-average number
      of shares outstanding during the reporting period. Diluted net income per share
      includes the effect from potential issuance of common stock, such as common
      stock issuable pursuant to the exercise of stock options.




The
      reconciliation of the numerators and denominators of the basic and diluted
      net
      income per share calculations was as follows:





**Three
                months ended**
              **March
                31,****2006**
            
            
            **2005****(In
                thousands, except per share data)**Numerator:Net
                income
            
            $
            9,051
            
            $
            12,850Denominator:Weighted
                average shares used to compute basic net income per share
            
            
            46,641
            
            
            44,968Effect
                of dilutive securities:Dilutive
                potential common shares
            
            
            1,488
            
            
            1,880Weighted
                average shares used to compute diluted net income per
                share
            
            
            48,129
            
            
            46,848Net
                income per share:
              Basic
            
            $
            0.19
            
            $
            0.29Diluted
            
            $
            0.19
            
            $
            0.27




The
      following
      potential common shares have been excluded from the computation of diluted
      net
      income per share because their inclusion would have been
      anti-dilutive:




**Three
                months ended**
              **March
                31,****2006**
            
            
            **2005****(In
                thousands, except price range)**Outstanding
                common stock options
            
            
            701
            
            
            4,105Price
                range
            
            
            $27.91-$55.38
            
            
            $21.80-$55.38







Stock
      options are antidilutive when the exercise price of the options is greater
      than
      the average market price of the common shares for the period.








**Note
      4: Sales Reserve and Allowance for Doubtful Accounts**





WebEx
      records an estimate of sales reserve for losses on receivables resulting from
      customer credits, cancellations or terminations as a reduction in revenue at
      the
      time of sale. The sales reserve is estimated based primarily on an analysis
      of
      the historical rate of credits, cancellations or terminations. The accuracy
      of
      the estimate is dependent on the rate of future credits, cancellations or
      terminations being consistent with the historical rate .




WebEx
      records an allowance for doubtful accounts to provide for losses on receivables
      due to customer credit risk. Increases to the allowance for doubtful accounts
      are charged to general and administrative expense as bad debt expense. Losses
      on
      accounts receivable resulting from customers’ financial distress or failure are
      charged to the allowance for doubtful accounts. The allowance is estimated
      based
      primarily on an analysis of the historical rate of credit losses. The accuracy
      of the estimate is dependent on the future rate of credit losses being
      consistent with the historical rate .





The
      following presents the detail of the changes in the sales reserve and allowance
      for doubtful accounts for the three months ended March 31, 2006 and
      2005:


**Three
                    months ended**
                  **March
                    31,****2006**
                
                
                **2005****(In
                    thousands)**Sales
                    reserve:Beginning
                    balance
                
                $
                6,077
                
                $
                4,631Amounts
                    deducted from revenue
                
                
                4,672
                
                
                2,621Amounts
                    written off
                
                
                (4,221
                )
                
                (2,865
                )Ending
                    balance
                
                $
                6,528
                
                $
                4,387Allowance
                    for doubtful accounts:Beginning
                    balance
                
                $
                1,054
                
                $
                1,003Amounts
                    charged to bad debt expense
                
                
                152
                
                
                237Amounts
                    written off
                
                
                (143
                )
                
                (395
                )Ending
                    balance
                
                $
                1,063
                
                $
                845Total
                    sales reserve and allowance for doubtful accounts:Beginning
                    balance
                
                $
                7,131
                
                $
                5,634Amounts
                    deducted from revenue / charged to bad debt expense
                
                
                4,824
                
                
                2,858Amounts
                    written off
                
                
                (4,364
                )
                
                (3,260
                )Ending
                    balance
                
                $
                7,591
                
                $
                5,232





**Note
      5: Comprehensive Income**





The
      changes in the components of other comprehensive income, net of taxes, were
      as
      follows:




**Three
                  months ended**
                **March
                  31,****2006**
              
              
              **2005****(In
                  thousands)**Net
                  income
              
              $
              9,051
              
              $
              12,850Other
                  comprehensive income, net of tax:Foreign
                  currency translation adjustments
              
              
              159
              
              
              388Unrealized
                  (loss) on investments
              
              
              (50
              )
              
              (127
              )109
              
              
              261Comprehensive
                  income
              
              $
              9,160
              
              $
              13,111











**Note
      6:**  **Cash
      Equivalents and Short-term Investments**





The
      following is a summary of available-for-sale investments as of March 31, 2006
      and December 31, 2005:





**March
                31, 2006**
            **December
                31, 2005****Cost**
            
            
            **Gross
                Unrealized Gains**
            
            
            **Gross
                Unrealized Losses**
            
            
            **Estimated
                Fair Value**
            
            
            **Cost**
            
            
            **Gross
                Unrealized Gains**
            
            
            **Gross
                Unrealized Losses**
            
            
            **Estimated
                Fair Value**Available-for-Sale
                Securities:
            
            **(In
                thousands)**Corporate
                notes and bonds
            
            $
            32,046
            
            $
            2
            
            $
            (193
            )
            $
            31,855
            
            $
            37,550
            
            $
            2
            
            $
            (212
            )
            $
            37,340Municipal
                notes and bonds
            
            
            126,190
            
            
            —
            
            
            (236
            )
            
            125,954
            
            
            96,009
            
            
            —
            
            
            (193
            )
            
            95,816Government
                agencies
            
            
            44,330
            
            
            —
            
            
            (397
            )
            
            43,933
            
            
            46,326
            
            
            —
            
            
            (371
            )
            
            45,955Money
                market funds
            
            
            10,466
            
            
            —
            
            
            —
            
            
            10,466
            
            
            1,537
            
            
            —
            
            
            —
            
            
            1,537Total
            
            $
            213,032
            
            $
            2
            
            $
            (826
            )
            $
            212,208
            
            $
            181,422
            
            $
            2
            
            $
            (776
            )
            $
            180,648Reported
                as:Cash
                and cash equivalents
            
            
            
            
            
            
            
            
            
            
            $
            73,937
            
            
            
            
            
            
            
            
            
            
            $
            51,853Short-term
                investments
            
            
            
            
            
            
            
            
            
            
            
            138,271
            
            
            
            
            
            
            
            
            
            
            
            128,795Total
            
            
            
            
            
            
            
            
            
            
            $
            212,208
            
            
            
            
            
            
            
            
            
            
            $
            180,648





The
      fair
      value of the Company’s investment in available-for-sale securities, by
      contractual maturity, was as follows:




**March
                31, 2006**
            
            
            **December
                31, 2005****(In
                thousands)**Due
                in less than one year
            
            $
            126,529
            
            $
            88,150Due
                in 1-5 years
            
            
            85,679
            
            
            92,498Total
            
            $
            212,208
            
            $
            180,648





Realized
      gains and losses from sales of available securities were not material in the
      first quarter of 2006 or 2005, respectively.








**Note
      7: Goodwill and Intangibles, Net**


***Goodwill***
            
            
            **Amount****(In
                thousands)**Balance,
                December 31, 2005
            
            $
            28,224Goodwill
                acquired during the period
            
            
            —Goodwill
                adjustment related to Intranets.com, Inc. acquisition
            
            
            (1,607
            )Balance,
                March 31, 2006
            
            $
            26,617





The
      goodwill adjustment during the first quarter of 2006 shown in the table above
      corresponds to the Company’s evaluation of the deferred
      tax assets and valuation allowance related to the utilization of the Company’s
      net operating loss carryforwards. The evaluation resulted in the
      realization of the tax benefit of these deferred assets, of which $1.6 million
      reduced goodwill related to net operating loss carryforwards acquired from
      Intranets.com, Inc. (“Intranets”).





In
      accordance with SFAS No. 142, the Company does not amortize goodwill but
      evaluates it at least on an annual basis for impairment. The Company completed
      annual goodwill impairment tests during the fourth quarter of 2005 and 2004
      and
      determined that the carrying amount of goodwill was not impaired. However,
      future goodwill impairment tests could result in a charge to earnings. WebEx
      will continue to evaluate goodwill on an annual basis during the fourth quarter
      and whenever changes in circumstances indicate there may be a potential
      impairment.










***Purchased
      Intangible Assets***





Intangible
      assets, net as of March 31, 2006 and December 31, 2005 consisted of the
      following:








**March
                31, 2006**
            **December
                31, 2005****Gross**
            
            
            **Accumulated**
              **Amortization**
            
            
            **Net**
            
            
            **Gross**
            
            
            **Accumulated**
              **Amortization**
            
            
            **Net****(In
                thousands)**Developed
                technology
            
            $
            9,120
            
            $
            (1,249
            )
            $
            7,871
            
            $
            9,120
            
            $
            (780
            )
            $
            8,340Intellectual
                property rights
            
            
            4,326
            
            
            (2,071
            )
            
            2,255
            
            
            4,326
            
            
            (1,987
            )
            
            2,339Trade
                names and domain names
            
            
            1,556
            
            
            (349
            )
            
            1,207
            
            
            1,556
            
            
            (271
            )
            
            1,285Customer
                contracts and relationships
            
            
            5,123
            
            
            (886
            )
            
            4,237
            
            
            5,123
            
            
            (634
            )
            
            4,489Total
                purchased intangible assets
            
            $
            20,125
            
            
            (4,555
            )
            $
            15,570
            
            $
            20,125
            
            $
            (3,672
            )
            $
            16,453





Amortization
      is recorded using the straight-line method over the estimated useful lives
      of
      these assets, which range from 3-10 years.





Estimated
      future amortization expense of existing intangibles is as follows:





**Year:**
            
            
            **Amortization**
              **Expense****(In
                thousands)**2006
                (remaining 9 months)
            
            $
            2,5962007
            
            
            3,3592008
            
            
            3,2692009
            
            
            3,1742010
            
            
            2,240Thereafter
            
            
            932Total
            
            $
            15,570







**Note
      8:**  **Commitments
      and Contingencies**




***Contractual
      Commitments***




WebEx
      leases certain equipment and facilities under non-cancelable operating leases
      expiring through 2014. Future minimum lease payments and purchase commitments
      by
      year and in the aggregate, as of March 31, 2006, were as follows:








**Remaining
                9 months of 2006**
            
            
            **2007**
            
            
            **2008**
            
            
            **2009**
            
            
            **2010**
            
            
            **2011
                and after**
            
            
            **Total****(In
                thousands)**Operating
                leases commitments
            
            $
            4,897
            
            $
            6,002
            
            $
            6,519
            
            $
            5,919
            
            $
            5,484
            
            $
            13,568
            
            $
            42,389Purchase
                commitments
            
            
            21,141
            
            
            954
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            22,095Other
                commitments
            
            
            110
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            110Total
            
            $
            26,148
            
            $
            6,956
            
            $
            6,519
            
            $
            5,919
            
            $
            5,484
            
            $
            13,568
            
            $
            64,594





***Lease
        Commitments***





Leases
      are accounted for under the provisions of SFAS No. 13, *Accounting
      for Leases* ,
      which
      requires that leases be evaluated and classified as operating or capital for
      financial reporting purposes. All rented office space that the Company currently
      occupies is classified as an operating lease. Rent expense is recognized based
      on an effective rate of rent per square foot, which takes into account scheduled
      rent increases, the amount of space occupied at any time and certain incentives
      provided by the lessor. This results in the same amount of rent expense per
      square foot occupied in all periods during the lease term.





During
      the fourth quarter of 2005, WebEx began occupancy of new facilities located
      in
      Amsterdam, the Netherlands and Laguna Hills, California. The lease terms for
      these facilities are 60 and 64 months, respectively and each commenced in
      October 2005. Aggregate lease payments under the lives of both of theses lease
      total $2.5 million.





With
      the
      acquisition of Intranets in September 2005, WebEx assumed a lease obligation
      for
      office space in Burlington, Massachusetts. The lease term is for approximately
      66 months which commenced in January 2005. Future minimum lease payments under
      the life of the lease total $2.5 million. The lease requires a letter of credit
      of $260,000, which is collateralized by cash on deposit at a commercial bank.
      The cash on deposit and related interest is treated as restricted cash and
      is
      included in other non-current assets in the consolidated balance sheets.





In
      April
      2004, WebEx signed a lease to occupy space in a building located in Santa Clara,
      California, that serves as WebEx’s corporate headquarters. The lease term is for
      approximately ten years, and initial occupancy commenced in the third quarter
      of
      2004. The Company took possession of additional space in January 2005 and is
      committed to occupy additional space in February 2008. The rent for all of
      this
      space is included in the future minimum rental payments. Minimum lease payments
      under this lease began in January 2005 and total an aggregate of $23.8 million
      for the life of the lease. Under the lease agreement, the landlord provided
      incentives of $2.3 million including the construction of leasehold improvements
      for no additional payments by the Company, and payment of certain operating
      expenses for the initial 20 months covered by the lease valued at $786,000.
      Lease incentives received have been accounted for as capitalized assets and
      are
      amortized over the lease term. The lease currently requires a security deposit
      of $3.2 million, which WebEx satisfied through a letter of credit issued under
      WebEx’s credit line.





***Purchase
      Commitments***





At
      March
      31, 2006, WebEx had purchase commitments totaling approximately $22.1 million
      for the usage of telecommunication lines and data services, equipment and
      software purchases and the construction of leasehold improvements at new leased
      facilities. The majority of the purchase commitments are expected to be settled
      in cash within 12 months.




***Other
      Commitments***





In
      December 2004, the Company entered into an agreement with the government of
      Hong
      Kong and Hong Kong University of Science and Technology (HKUST) pursuant to
      which WebEx and the government of Hong Kong were each to pay equal amounts
      to
      fund certain research and development projects to be managed jointly by WebEx
      and HKUST. In December 2004 and April 2005, WebEx paid $500,000 and $318,000,
      respectively, in cash pursuant to the agreement, which was fully expensed to
      research and development. WebEx will obtain sole ownership of any intellectual
      property resulting from the projects, provided, however that WebEx and HKUST
      may
      agree that some of the proceeds of products and services arising from the
      projects will be paid to HKUST. Under this arrangement, WebEx will provide
      one
      final payment of approximately $110,000 due in April 2006. This future payment
      obligation is included in “Other commitments” in the table above.





WebEx
      has
      a revolving credit line with a bank that provides available borrowings up to
      $7.0 million. Amounts borrowed under the revolving credit line bear interest
      at
      the prime rate and may be repaid and reborrowed at any time prior to the
      maturity date. The credit agreement expires June 15, 2006. The credit agreement
      is unsecured and is subject to compliance with covenants, including a minimum
      quick ratio and minimum profitability, with which the Company is currently
      in
      compliance. As of March 31, 2006, the Company had no outstanding borrowings
      under the credit line, but did have a $3.2 million letter of credit issued
      under
      the line as security for the headquarters lease.





***Indemnity
      and Warranty Obligations***




In
        WebEx’s agreements with customers and resellers, WebEx agrees to indemnify the
        customers and resellers in the event a third party asserts an intellectual
        property infringement claim against the customer or reseller based on WebEx
        services. Certain restrictions are placed on the indemnity obligations,
        including geographical limitations and limitations on the type of claims
        covered. In addition, WebEx has provided certain warranties and committed
        to
        maintain certain service levels in some of its agreements with customers
        and
        resellers. These warranty and service level provisions specify limited remedies
        available to the customer or reseller in the event of a breach of the warranty
        or a failure to maintain the specified service level. In addition, WebEx’s
        agreements contain limitation of liability provisions, which disclaim
        responsibility for consequential, special or indirect damages and which
        generally limit WebEx’s liability under the agreements to the amount of fees
        paid to WebEx. However, any failure in a customer’s business interaction or
        other communications activity that is caused or allegedly caused by our
        services, could result in a claim for damages against us, regardless of our
        responsibility for the failure, and cause us to incur unexpected costs which
        could unfavorably impact our revenue. As of March 31, 2006, WebEx had incurred
        no liability with respect to its indemnification obligations and had not
        incurred any material liability with respect to its warranty and service
        level
        obligations.


**** *Other*
 WebEx
            does
            not currently collect sales tax from customers in the United States except
            in
            Massachusetts and believes the services it provides are exempt from sales
            tax,
            except in Massachusetts.  However, two states and one city have indicated
            that they intend to audit the Company in connection with potential sales
            and use
            tax liability. Moreover, in the future, federal tax authorities or tax
            authorities in one or more states could assert that WebEx is obligated
            to
            collect such taxes from its customers and remit those taxes to those
            authorities.  The collection and remittance of such taxes is not expected
            to have a material impact on WebEx's financial statements.  It is also
            possible, however, that such authorities could seek to collect sales
            taxes for
            sales of services by WebEx in the past.  If such a claim were to be
            asserted against WebEx and WebEx was found liable for such back taxes
            and WebEx
            was unable to collect such taxes from its customers, WebEx could incur
            an
            expense equal to the amount of such taxes and any associated interest
            and
            penalties.
 
 The
            Company
            concluded during the fourth quarter of 2005 that such audits as mentioned
            above
            were likely to be conducted and that the authorities in question were
            likely to
            assert a claim or claims as a result of those audits. While the Company
            may
            contest any such claim(s), it believes that it was probable that a liability
            had
            been incurred as of December 31, 2005 and made an accrual in accordance
            with
            paragraph 8 of SFAS No. 5, *Accounting for Contingencies*. During the
            first quarter of 2006, the Company received an assessment from the one
            city
            related to use tax. The Company believes this assessment may be offset
            in part
            by a recovery from another state and has made an accrual of $85,000.
            The Company
            has not received any formal assessment from any state concerning sales
            or use
            tax.
 Note
              9:
              Litigation
 In
                  accordance with SFAS No. 5, the Company records a provision for
                  a liability when
                  management believes that it is both probable that a liability has
                  been incurred
                  and WebEx can reasonably estimate the amount of the loss. The Company
                  reviews
                  any provisions at least quarterly and adjusts these provisions
                  to reflect the
                  impact of negotiations, settlements, rulings, advice of legal counsel
                  and other
                  information and events pertaining to a particular case. The Company
                  believes it
                  has adequate provisions for any such matters.
  On
                  September 27, 2005, WebEx sued Raindance Communications, Inc. (“Raindance”), a
                  competitor, for patent infringement. The complaint was filed in
                  the U.S.
                  District Court for the Northern District of California. There were
                  no other
                  parties to the action. In the action, WebEx alleged that Raindance
                  was
                  infringing nine of WebEx’s U.S. patents, and WebEx sought both monetary damages
                  from Raindance and an injunction against Raindance enjoining further
                  acts WebEx
                  claimed to be infringing the Company’s patents. On October 14, 2005, Raindance
                  filed a complaint against WebEx for patent infringement. The complaint
                  was filed
                  in the U.S. District Court for the Eastern District of Texas. There
                  were no
                  other parties to the action. In the action, Raindance alleged that
                  WebEx was
                  infringing two of Raindance’s patents, and Raindance sought both monetary
                  damages from WebEx and an injunction against WebEx enjoining further
                  acts
                  Raindance claims to be infringing its patents. On March 31, 2006,
                  the parties
                  entered into agreements resulting in dismissal of both actions,
                  releases of
                  claims for past infringement, payments associated with those releases,
                  and
                  cross-licenses to each other’s patents. The terms of the agreements resulted in
                  the Company receiving a net $1.0 million amount from Raindance,
                  which is
                  included in the first quarter of 2006 as a reduction of general
                  and
                  administrative expense.
 
 On
                  March
                  27, 2006, a lawsuit was filed in the United States District Court
                  for the
                  Southern District of Texas by Automated Business Companies against
                  a number of
                  companies, including WebEx, alleging that the defendants’ services which “enable
                  individuals to remotely control their personal computers” infringe three of the
                  plaintiff’s patents.  WebEx believes that the claims being asserted in the
                  lawsuit are without merit and that it has meritorious defenses
                  against such
                  claims. Accordingly, WebEx intends to vigorously defend itself
                  against these
                  claims.
  
 **Note
                    10: Segment Information**
  SFAS
                    No.
                    131, *Disclosure
                    about Segments of an Enterprise and Related Information,* establishes
                    standards for the reporting by business enterprises of information
                    about
                    operating segments, products and services, geographic areas,
                    and major
                    customers. The standard for determining what information to report
                    is based on
                    operating segments within WebEx that are regularly reviewed and
                    used by the
                    chief operating decision maker in evaluating financial performance
                    and resource
                    allocation.
  WebEx’s
                    chief operating decision-maker is considered to be the chief
                    executive officer
                    (“CEO”). Based on the financial information reviewed by the CEO, the
                    Company has
                    determined that it operates in a single operating segment, specifically,
                    web
                    collaboration services.
  
  
  **Item
                    2.** ***Management’s
                    Discussion and Analysis of Financial Condition and Results of
                    Operations*** ****
  **When
                    used in this Report, the words “anticipates,” “expects,” “intends,” “plans,”
“believes,” “seeks,” “estimates” and similar expressions are intended to
                    identify forward-looking statements. These are statements that
                    relate to future
                    periods and include, but are not limited to, statements regarding
                    our business
                    focus, statements about the features, benefits and performance
                    of our current
                    service offerings and technology including our belief that use
                    of our services
                    allows users to be more productive and efficient, sources of
                    revenue, expected
                    expenses including those related to sales and marketing, research
                    and
                    development and general and administrative, our use of net operating
                    loss
                    carryforwards, our beliefs regarding the health and growth of
                    the market for our
                    web collaboration services and reasons for growth, our anticipation
                    that cash
                    flow from operations will be sufficient to fund our current operations
                    as well
                    as fund future expansion, our expectation that existing cash
                    resources and cash
                    generated from operations will be sufficient to fund our anticipated
                    working
                    capital needs and capital expenditures for at least the next
                    twelve months and
                    that we will continue to generate cash from operations for at
                    least the next
                    twelve months, our investments and potential interest rate exposure,
                    our intent
                    to license technologies from third parties that are integrated
                    into our
                    services, our plans to increase headcount, relocate certain operations
                    and the
                    related costs, our plans to upgrade our applications, statements
                    regarding our
                    internal controls, the effect of recent accounting pronouncements
                    and our legal
                    proceedings. Forward-looking statements are subject to risks
                    and uncertainties
                    that could cause actual results to differ materially from those
                    projected. These
                    risks and uncertainties include, but are not limited to, our
                    dependence on key
                    products and/or services, demand for our products and services,
                    our ability to
                    attract and retain customers and resellers for existing and new
                    services, the
                    impact of reseller practices on our business, our ability to
                    expand and manage
                    our operations internationally, our ability to expand and manage
                    our
                    infrastructure to meet both our internal corporate needs as well
                    as the demand
                    for our services, our ability to control our expenses, our ability
                    to integrate
                    and manage acquisitions, our ability to recruit and retain employees
                    particularly in the areas of sales, engineering, support and
                    hosting services,
                    the ability of resellers to successfully resell our services,
                    the economy,
                    political tensions or conflict, the strength of competitive offerings,
                    the
                    prices being charged by those competitors, the risks discussed
                    below and the
                    risks discussed in Item 1A “Risk Factors” below. These forward-looking
                    statements speak only as of the date hereof. We expressly disclaim
                    any
                    obligation or undertaking to release publicly any updates or
                    revisions to any
                    forward-looking statements contained herein to reflect any change
                    in our
                    expectations with regard thereto or any change in events, conditions
                    or
                    circumstances on which any such statement is based.**
 ***Business,
                      Principal Products, Locations***
 
 We
                      offer
                      several on-demand web collaboration services. “On-demand” is a software industry
                      term meaning that the software is hosted at the vendor’s facilities and
                      furnished to customers as a service—sometimes also called “software as a
                      service” (SaaS) or a “hosted” service—rather than the software being furnished
                      in tangible disc or downloaded-file form for physical installation
                      on a computer
                      server at the customer’s location. By web collaboration services, we mean
                      services that allow end-users to conduct online meetings, share
                      software
                      applications, documents, presentations and other content online,
                      participate in
                      large-scale events or programs over the Internet using a standard
                      web browser,
                      and coordinate projects, activities and tasks. Our web collaboration
                      services
                      enable users to engage in rich-media, interactive, real-time
                      communications
                      without the need to be in the same physical location, which
                      we believe allows
                      users to be more productive and efficient.
  Originally,
                      our principal product offering consisted of a basic real-time
                      collaboration
                      service—the web meeting. Since then we have expanded our offerings
                      to include
                      more advanced web collaboration services that complement our
                      basic web meeting
                      service. We sometimes also refer to such enhanced web collaboration
                      services,
                      which are designed for specific uses such as training, events,
                      support and
                      sales, as web applications. During 2005 we added to our service
                      offerings a new
                      set of asynchronous collaboration services acquired in connection
                      with our
                      Intranets.com, Inc. (“Intranets”) acquisition. The term “asynchronous
                      collaboration” means collaboration not occurring at the same time and includes
                      capabilities such as shared document folders, shared calendars,
                      task management,
                      shared database applications, discussion forums and contact
                      directories. Our
                      current business focus is to continue to enhance and market
                      our various web
                      collaboration services including web meetings and web applications,
                      to develop
                      and deploy new services such as our new asynchronous collaboration
                      services, to
                      expand our sales and marketing organizations, and to expand
                      our WebEx MediaTone
                      Network.
 Our
                        web
                        collaboration services run on our underlying WebEx MediaTone
                        Network. The WebEx
                        MediaTone Network is a private, switched, web-based network
                        that is designed to
                        deliver scalable, secure and managed real-time web collaboration
                        services. The
                        WebEx MediaTone Network is based on MediaTone, our proprietary
                        information
                        switching technology. Our MediaTone technology allows the
                        WebEx MediaTone
                        Network to handle high-speed data, voice and video communications,
                        manage
                        complex media types, and
  
   deliver—whether
                        over traditional hard-wired or wireless fidelity (Wi-Fi)
                        networks—advanced
                        communications capabilities to hundreds or even thousands
                        of computers
                        simultaneously regardless of location across a wide variety
                        of platforms,
                        computer operating systems, devices and browsers.
  Our
                        corporate headquarters is located in Santa Clara, California,
                        and we have a
                        network operations center located in Mountain View, California.
                        We also lease
                        facilities in various U.S. cities and in several non-U.S.
                        countries for
                        sales-related activities and, in some cases, to house equipment
                        used in the
                        operation of our MediaTone network. In the case of our China
                        subsidiary, our
                        largest subsidiary, our employees perform activities including
                        quality assurance
                        testing and software development activities, creation of
                        technical
                        documentation, background research for our sales personnel,
                        preparation of
                        marketing materials and the provisioning of customer web
                        sites.
  ***Revenue
                        and Cash-Generation Models***
 
 We
                        sell
                        our services directly to customers, which in the first quarter
                        of 2006 accounted
                        for approximately 85% of our revenue, or $75.0 million. We
                        also sell our
                        services indirectly through our resellers that buy and resell
                        our services.
                        These sales in the first quarter of 2006 represented approximately
                        15% of our
                        revenue, or $13.5 million. With our resellers, we sell our
                        services to and
                        contract directly with the reseller, and revenue is recognized
                        based on net
                        amounts charged to the reseller. We also have another type
                        of distribution
                        arrangement--known as a referral arrangement--in which a
                        third party refers a
                        potential customer to our direct sales force, which in turn
                        seeks to enter into
                        a contract directly with the potential customer. When a sale
                        is made from us to
                        a customer through a lead provided by a referral agent, the
                        referral agent
                        receives from us a percentage of the proceeds from the sale
                        of WebEx services to
                        the customer, and we categorize such revenue as revenue received
                        from services
                        sold directly to customers.
  The
                        majority of our revenue is currently generated based on a
                        committed-subscription
                        pricing model. A customer may subscribe to a certain number
                        of concurrent-user
                        ports per month, which enables the customer to have that
                        set number of users
                        connected to WebEx meetings at any one time, or to a minimum
                        minutes or dollars
                        commitment, which in the typical case enables the customer
                        to have up to a set
                        number of total minutes to utilize our services during a
                        specified time period.
                        For minutes-based subscriptions, we have expanded our customer
                        offerings from
                        the monthly minutes-based commitment offering to include
                        quarterly, semi-annual
                        and annual minutes-based commitment offerings. With any of
                        these committed
                        subscription offerings, the customer sometimes also pays
                        overage fees, in
                        addition to the committed subscription price. Overage fees
                        are charged when (i)
                        a customer subscribing to a set number of ports uses more
                        than the subscribed
                        number of ports in one or more web conference sessions, or
                        (ii) when a customer
                        on a minutes-based subscription pricing model uses more than
                        its
                        commitment.
 
 We
                        also
                        offer “flat-rate” priced services, meaning that the customer pays a set price
                        per month that is not influenced by usage or subject to overage
                        fees. One of our
                        flat-rate offerings is the named host offering, in which
                        a certain named
                        individual may host meetings at which up to a certain number
                        of attendees may
                        participate. The named host service differs from the concurrent-user
                        port
                        offering in several respects: (i) with the concurrent user
                        offering, any
                        employee of the customer may host a meeting, whereas with
                        the named host service
                        only employees who are designated as named hosts may host
                        a meeting, (ii) the
                        price charged for a named host subscription is appreciably
                        lower than the price
                        charged for a concurrent user subscription, in part because
                        the named host model
                        is less flexible with respect to who can host a meeting,
                        and (iii) unlike the
                        concurrent user offering, with the named host offering there
                        are effectively no
                        overage fees. Our flat-rate offering is another of our committed
                        subscription
                        offerings.
 
 During
                        the fourth quarter of 2005 we introduced two new flat-rate
                        offerings, targeted
                        at individuals and small businesses. The first offering,
                        available for purchase
                        online and called MeetMeNow, is a monthly subscription to
                        a web conferencing
                        service. The second flat-rate offering is our new WebEx WebOffice
                        line of
                        collaboration services, which we offer for purchase through
                        a variety of monthly
                        subscription plans. We refer to the revenue associated with
                        our various
                        flat-rate subscription arrangements, together with the revenue
                        from our ports
                        subscription and minimum minutes or dollars subscription
                        arrangements, as
                        committed revenue.
  In
                        addition to our committed subscription offerings, there are
                        several situations
                        in which customers are charged per minute or usage-based
                        pricing. These include
                        certain reseller arrangements, customer overage fees for
                        above-the-contract-limit use of ports or minutes, most types
                        of telephony
                        charges, and individual pay-per-use services purchased directly
                        from our
                        website, and a limited number of customers who do not have
                        a minimum commitment
                        obligation of any kind. A majority of revenue received from
                        our
                        telecommunications partner arrangements is usage based. As
                        previously discussed,
                        overage fees are charged when a customer subscribing to a
                        set number of ports
                        uses more than the subscribed number of ports, or when a
                        customer on a minutes
                        pricing model uses more than its commitment. We get per-minute
                        telephony revenue
                        when we provide the audio conferencing component of a web
                        conferencing session.
                        Finally, we have per-minute web conferencing services available
                        through our
                        website and payable by credit card. We refer to the revenue
                        derived from this
                        per minute or usage-based pricing model, measured as of the
                        end of any month, as
                        uncommitted revenue.




We
      typically bill our customers monthly and on open account. For each of our
      concurrent-user, named-host and monthly minutes-based commitment subscription
      customers, the customer is billed monthly in advance based on the monthly
      subscription amount stated in the customer agreement. For these customers,
      additional usage beyond the monthly subscription quantity, or overage, is billed
      in arrears based on the actual amount of such overage. For quarterly,
      semi-annual and annual minutes-based subscription customers, all monthly billing
      is in arrears and based on actual usage during the month. If, following the
      last
      month billed, aggregate actual usage is less than the subscription amount,
      then
      in addition to actual usage for the final month, the customer is billed for
      the
      remaining amount of the contractual commitment not previously
      billed.




***Market
      Opportunities, Related Challenges and Our Responses*** ****





We
      believe the market for on-demand web collaboration services to be healthy and
      growing. Various published articles have cited several trends underlying this
      projected market increase. One trend is the desire of many companies to achieve
      cost savings in the areas of information technology, or IT, spending and
      employee travel. In light of increased IT budget constraints reportedly faced
      by
      many companies and particularly small companies or self-employed individuals,
      we
      believe a cost-saving decision is to hire an on-demand web collaboration
      services vendor to meet a company’s needs, rather than undertaking the capital
      and personnel spending necessary to construct and maintain an internal company
      or home office network. Additionally, as a result of increasing fuel prices
      and
      travel costs, we believe companies may decide that online collaboration—that is,
      web conferencing and web applications—usage can reduce costs and obviate the
      need to travel to conduct business, perform training, provide support or
      participate in large-attendee events. However, it is possible that growth in
      the
      market for web collaboration services may slow down or be less than currently
      projected.




There
      exist a number of challenges to the projected market growth scenario for
      on-demand web collaboration services, including a concern—actual or
      perceived—about security. As the universe of corporate activities that can be
      conducted in a web conference or with a web application expands, more and more
      of these activities will embrace sensitive corporate or government financial
      data, plans, projects or other proprietary information. If on-demand web
      collaboration technologies do not have embedded within them adequate security
      protections so that the contents of, for example, web conference or application
      will remain private among the participants, usage may not grow as projected.
      Moreover, to the extent that there occur publicized incidents of security
      breaches associated with usage of a web collaboration technology, regardless
      of
      which vendor is involved, the security-related concerns of would-be users of
      the
      technology likely will be increased and this could dampen market growth. We
      have
      assigned a high priority, in the design and implementation of our WebEx
      MediaTone Network, to these security issues.




Another
      challenge to broad adoption of on-demand web collaboration services is general
      acceptance of this mode of communication as a normal part of business activity.
      Individuals may not feel comfortable using the technology, or they may prefer
      traditional means of communicating such as the telephone or face-to-face
      meetings. Broad adoption of web collaboration will occur only if large numbers
      of users incorporate the use of this technology as part of their normal business
      activity.




***Industry-Wide
      Factors Relevant to Us***





The
      collaboration software and services market is intensely competitive, subject
      to
      rapid change and is significantly affected by new product and service
      introductions and other market activities of industry participants. Although
      we
      do not currently compete against any one entity with respect to all aspects
      of
      our services, we do compete with various companies in regards to specific
      elements of our on-demand web collaboration services. For example, we compete
      with providers of traditional communications technologies such as
      teleconferencing and videoconferencing, applications software and tools
      companies including online application services providers, and web conferencing
      products and services such as Adobe Systems, Cisco Systems, Citrix Systems,
      Genesys, IBM, Microsoft,
      Netviewer, NTR, Oracle, PC Visit, Saba, and Salesforce.com.





In
      addition to the above competitors, certain of our resellers offer competitive
      web conferencing, web application and other collaborative web communications
      services. One of our key resellers, Intercall, is a subsidiary of West
      Corporation in April 2006 acquired our competitor Raindance. As a result of
      its
      acquisition of Raindance, Intercall could choose to increase its emphasis on
      offerings competitive with ours, or cease to offer some or all of our offerings,
      or both.




Competition
      from Microsoft for the collaboration software and services markets may adversely
      affect us. ** Microsoft
      since 2003 has had a product offering which is competitive with ours and which
      is called Microsoft Office Live Meeting. In mid-2005, Microsoft announced the
      acquisition of collaboration software provider Groove Networks. In November
      2005,





Microsoft
      previewed by press announcement its new Microsoft Office Live offering, which
      it
      described as a set of Internet-based software services. Microsoft is currently
      offering a free “beta”, or pre-commercial release, version of Office Live.
      Microsoft’s investment of development and marketing resources in products or
      services that compete directly with us and Microsoft’s integration of
      competitive technologies from other companies, including Groove Networks and
      Placeware, may have an adverse impact on our business. More generally, Microsoft
      may attempt to leverage its dominant market position in the operating system,
      productivity application or browser markets, through technical integration
      or
      bundled offerings, to expand further its presence in these web communications
      markets. This expanded Microsoft presence in web collaboration markets could
      make it difficult for other vendors of web communications products and services,
      such as WebEx, to compete.





In
      addition, some competitors offer web communications products and services
      targeted at customers who are more price-conscious and are less concerned about
      functionality, scalability, integration and security features. Such offerings
      may make it more difficult for us to compete in that segment of the market
      and
      may cause some of our existing customers to switch to these competitors. In
      2005, we introduced new services with lower entry prices that enable us to
      compete more effectively with such offerings. If our industry were to experience
      a general decline in prices and there were not a sufficient increase in volume
      to compensate for the price reductions, we might be forced to change the extent
      and type of resources we deploy in the selling of our services in an effort
      to
      maintain operating margins, such as switching to different sales practices.
      Finally, some of our competitors offer software products or products that are
      a
      combination of software and hardware that include web collaborations
      functionality, and which allow customers to purchase such products, install
      them
      at their own facilities, and manage the products by themselves. If significant
      numbers of existing or potential customers determine that they would prefer
      to
      have their web conferencing or more advanced web collaboration needs met with
      these types of products, demand for WebEx services may decrease.








**Critical
      Accounting Policies and Estimates**








***General***




Our
      discussion and analysis of our financial condition and results of operations
      are
      based on our condensed consolidated financial statements, which have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America. The preparation of these financial statements requires
      us to make estimates and assumptions that affect the reported amounts of assets,
      liabilities, revenue and expenses. We base our estimates on historical
      experience and on various other assumptions that we believe to be reasonable
      under the circumstances, the results of which form the basis for making
      judgments about the carrying values of assets and liabilities that are not
      readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.





An
      accounting policy is deemed to be critical if it requires an accounting estimate
      to be made based on assumptions about matters that are highly uncertain at
      the
      time the estimate is made, and if different estimates that reasonably could
      have
      been used or if changes in the accounting estimate that are reasonably likely
      to
      occur, could materially change the financial statements. We believe that there
      are a number of accounting policies that are critical to understanding our
      historical and future performance. These significant accounting policies relate
      to revenue recognition, sales reserves, allowance for doubtful accounts, income
      taxes, goodwill and intangible assets and stock-based compensation. The
      policies, and our procedures related to these policies, are described in detail
      below.





***Revenue
      Recognition***





Revenue
      is derived from the sale of web collaboration services. Web collaboration
      services revenue is generated through a variety of contractual arrangements
      directly with customers and with resellers, who in turn sell the services to
      customers. We sell web collaboration services directly to customers through
      service subscriptions and pay-per-use arrangements. Under these arrangements,
      customers access the application hosted on our servers using a standard web
      browser. Subscription arrangements include monthly subscriber user fees and
      user
      set-up fees. The subscription arrangements are considered service arrangements
      in accordance with EITF Issue No. 00-3, *Application
      of AICPA Statement of Position 97-2, Software Revenue Recognition, to
      Arrangements That Include the Right to Use Software Stored on Another Entity’s
      Hardware* ,
      and
      with multiple deliverables under EITF 00-21, *Accounting
      for Revenue Arrangements with Multiple Deliverables* . In
      addition, because we provide our applications as a service, we follow the
      provisions of Securities and Exchange Commission Staff Accounting Bulletin
      No.
      104, *Revenue
      Recognition* . Under
      EITF 00-21, all deliverables are considered one unit of accounting; therefore,
      committed revenue is recognized ratably (straight-line) over the current term
      of
      the contract and variable usage-based fees are recognized as usage occurs.
      During the initial







term,
      we
      provide training services, web-page design and set-up services. Some
      minute based subscriptions involve a quarterly, semi-annual or annual rather
      than monthly commitment by the customer. In these cases, all
      monthly billing is in arrears and monthly revenue is recognized based on actual
      usage during the month. If, following the last month billed, aggregate actual
      usage is less than the subscription amount, then in addition to actual usage
      for
      the final month the customer is billed and revenue is recognized for the
      remaining amount of the contractual commitment not previously billed. In
      addition to subscription services revenue, we derive revenue from pay-per-use
      services and telephony charges that are recognized as the related services
      are
      provided.




We
      also
      enter into reselling arrangements with certain resellers, which purchase and
      resell our services on a revenue sharing, discounted or pay-per-use basis.
      Revenue under these arrangements is derived from our services provided to
      end-users and is recognized over the service period provided that evidence
      of
      the arrangement exists, the fee is fixed or determinable and collectibility
      is
      reasonably assured. Initial set up fees received in connection with these
      arrangements are recognized ratably over the initial term of the contract.
      During the initial term, we provide training services, web-page design and
      set-up services. Service fees are recognized as the services are provided for
      pay-per-use service arrangements and ratably over the service period for
      services provided on a subscription basis through the reseller. Our reseller
      arrangements may require guaranteed minimum revenue commitments that are billed
      in advance to the reseller. Advance payments received from resellers are
      deferred until the related services are provided or until otherwise earned
      by
      us. We contract directly with resellers, and revenue is recognized based on
      net
      amounts charged to the reseller.




Persuasive
      evidence for all of our arrangements is represented by binding contracts. The
      fee is considered fixed or determinable if it is not subject to refund or
      adjustment. Collectibility of guaranteed minimum revenue commitments by
      resellers is not reasonably assured; thus revenue from guaranteed minimum
      commitments is deferred until services are provided to an end-user customer
      or
      until collected from the reseller and the reseller forfeits commitment fees
      at
      the end of the commitment period.





***Sales
      Reserves***





The
      sales
      reserve is an estimate for losses on receivables resulting from customer
      credits, cancellations and terminations and is recorded as a reduction in
      revenue at the time of the sale. Increases to the sales reserve are charged
      to
      revenue, reducing the revenue otherwise reportable. The sales reserve estimate
      is based primarily on an analysis of the historical rate of credits,
      cancellations and terminations. The accuracy of the estimate is dependent on
      the
      rate of future credits, cancellations and terminations being consistent with
      the
      historical rate. If the rate of actual credits, cancellations and terminations
      is different than the historical rate, revenue would be different from what
      was
      reported.




***Allowance
      for Doubtful Accounts***





We
      record
      an allowance for doubtful accounts to provide for losses on accounts receivable
      due to customer credit risk. Increases to the allowance for doubtful accounts
      are charged to general and administrative expense as bad debt expense. Losses
      on
      accounts receivable due to insolvency of the customer are charged to the
      allowance for doubtful accounts. The allowance estimate is based primarily
      on an
      analysis of the historical rate of credit losses. The accuracy of the estimate
      is dependent on the future rate of credit losses being consistent with the
      historical rate. If the rate of future credit losses is greater than the
      historical rate, then the allowance for doubtful accounts may not be sufficient
      to provide for actual credit losses. If we are uncertain whether a loss is
      appropriately charged to the sales reserve or the allowance for doubtful
      accounts, we charge the loss to the sales reserve.




We
      assess, on a quarterly basis, the adequacy of the sales reserve account balance
      and the allowance for doubtful accounts account balance based primarily on
      historical experience. Any adjustments to these accounts are reflected in the
      income statement for the current period, as an adjustment to revenue in the
      case
      of the sales reserve and as a general and administrative expense in the case
      of
      the allowance for doubtful accounts .







The
      following presents the detail of the changes in the sales reserve and allowance
      for doubtful accounts for the eight quarters ended March 31, 2006:





**March**
              **31,
                2006**
            
            
            **December
                31, 2005**
            
            
            **September**
              
              **30,
                2005**
            
            
            **June**
              
              **30,
                2005**
            
            
            **March**
              
              **31,
                2005**
            
            
            **December
                31, 2004**
            
            
            **September
                30, 2004**
            
            
            **June**
              
              **30,
                2004**Sales
                reserve:
            
            **(Dollars
                in thousands)**Beginning
                balance
            
            $
            6,077
            
            $
            5,479
            
            $
            4,748
            
            $
            4,387
            
            $
            4,631
            
            $
            4,447
            
            $
            4,995
            
            $
            4,682Amounts
                deducted from revenue
            
            
            4,672
            
            
            3,816
            
            
            4,022
            
            
            3,179
            
            
            2,621
            
            
            2,518
            
            
            1,331
            
            
            2,309Amounts
                written off
            
            
            (4,221
            )
            
            (3,218
            )
            
            (3,291
            )
            
            (2,818
            )
            
            (2,865
            )
            
            (2,334
            )
            
            (1,879
            )
            
            (1,996
            )Ending
                balance
            
            
            6,528
            
            $
            6,077
            
            $
            5,479
            
            $
            4,748
            
            $
            4,387
            
            $
            4,631
            
            $
            4,447
            
            $
            4,995Allowance
                for doubtful accounts:Beginning
                balance
            
            $
            1,054
            
            $
            880
            
            $
            562
            
            $
            845
            
            $
            1,003
            
            $
            916
            
            $
            1,266
            
            $
            1,649Amounts
                charged (credited) to bad debt expense
            
            
            152
            
            
            242
            
            
            454
            
            
            (34
            )
            
            237
            
            
            231
            
            
            (258
            )
            
            (135
            )Amounts
                written off
            
            
            (143
            )
            
            (68
            )
            
            (136
            )
            
            (249
            )
            
            (395
            )
            
            (144
            )
            
            (92
            )
            
            (248
            )Ending
                balance
            
            $
            1,063
            
            $
            1,054
            
            $
            880
            
            $
            562
            
            $
            845
            
            $
            1,003
            
            $
            916
            
            $
            1,266Total
                sales reserve and allowance for doubtful accounts:Beginning
                balance
            
            $
            7,131
            
            $
            6,359
            
            $
            5,310
            
            $
            5,232
            
            $
            5,634
            
            $
            5,363
            
            $
            6,261
            
            $
            6,331Amounts
                deducted from revenue / charged (credited) to bad debt expense
            
            
            4,824
            
            
            4,058
            
            
            4,476
            
            
            3,145
            
            
            2,858
            
            
            2,749
            
            
            1,073
            
            
            2,174Amounts
                written off
            
            
            (4,364
            )
            
            (3,286
            )
            
            (3,427
            )
            
            (3,067
            )
            
            (3,260
            )
            
            (2,478
            )
            
            (1,971
            )
            
            (2,244
            )Ending
                balance
            
            $
            7,591
            
            $
            7,131
            
            $
            6,359
            
            $
            5,310
            
            $
            5,232
            
            $
            5,634
            
            $
            5,363
            
            $
            6,261Gross
                accounts receivable
            
            $
            60,840
            
            $
            58,362
            
            $
            49,894
            
            $
            46,296
            
            $
            39,757
            
            $
            38,072
            
            $
            34,694
            
            $
            32,918Sales
                reserve as a percentage of gross accounts receivable
            
            
            10.7
            %
            
            10.4
            %
            
            11.0
            %
            
            10.3
            %
            
            11.0
            %
            
            12.2
            %
            
            12.8
            %
            
            15.2
            %Allowance
                for doubtful accounts
              as
                a percentage of gross accounts receivable
            
            
            1.8
            %
            
            1.8
            %
            
            1.8
            %
            
            1.2
            %
            
            2.1
            %
            
            2.6
            %
            
            2.6
            %
            
            3.8
            %Total
                receivable reserves as a percentage of gross accounts
                receivable
            
            
            12.5
            %
            
            12.2
            %
            
            12.8
            %
            
            11.5
            %
            
            13.1
            %
            
            14.8
            %
            
            15.4
            %
            
            19.0
            %





***Income
      Taxes***





We
      determine deferred tax assets and liabilities at the end of each year based
      on
      the future tax consequences that can be attributed to net operating loss and
      credit carryovers.  Deferred tax assets and liabilities are also determined
      based on the differences between the financial statement carrying amounts of
      existing assets and liabilities and their respective tax bases, using the tax
      rate expected to be in effect when the taxes are actually paid or
      recovered.  The recognition of deferred tax assets is reduced by a
      valuation allowance if it is more likely than not that the tax benefits will
      not
      be realized.  The ultimate realization of deferred tax assets depends upon
      the generation of future taxable income during the periods in which those
      temporary differences become deductible.  We consider past performance,
      expected future taxable income and prudent and feasible tax planning strategies
      in assessing the amount of the valuation allowance.  Our forecast of
      expected future taxable income is based over such future periods that we believe
      can be reasonably estimated.  Changes in market conditions that differ
      materially from our current expectations and changes in future tax laws in
      the
      U.S. and in international jurisdictions may cause us to change our judgments
      of
      future taxable income.  These changes, if any, may require us to adjust our
      existing tax valuation allowance higher or lower than the amount we have
      recorded.  For the three months ended March 31, 2006, we evaluated our
      deferred tax assets and valuation allowance related to the utilization of our
      net operating loss carryforwards.  The evaluation resulted in the
      realization of the tax benefit of these deferred assets of $1.8 million for
      the
      balance of the year, of which $1.6 million reduced goodwill related to the
      acquisition of Intranets.








In
      addition, the calculation of tax liabilities involves significant judgment
      in
      estimating the impact of uncertainties in the application of complex tax
      laws.  Resolution of these uncertainties in a manner inconsistent with our
      expectations could have a material impact on our results of operations.  We
      account for income tax contingencies in accordance with Statement of Financial
      Accounting Standards No. 5, *Accounting for Contingencies* .





***Impairment
      of Goodwill and Intangible Assets***





We
      assess
      the impairment of intangible and other long-lived assets whenever events or
      changes in circumstances indicate that their carrying value may not be
      recoverable from the estimated future cash flows expected to result from their
      use and eventual disposition. Amortizable intangible assets subject to this
      evaluation include acquired developed technology, intellectual property rights,
      trade names and domain names and customer contracts and relationships. We assess
      the impairment of goodwill annually during our fourth quarter and whenever
      events or changes in circumstances indicate that it is more likely than not
      that
      an impairment loss has been incurred. We are required to make judgments and
      assumptions in identifying those events or changes in circumstances that may
      trigger impairment. Some of the factors we consider include:





-  Significant
      decrease in the market value of an asset;





-  Significant
      changes in the extent or manner for which the asset is being used or in its
      physical condition;





-  A
      significant change, delay or departure in our business strategy related to
      the
      asset;





-  Significant
      negative changes in the business climate, industry or economic conditions;
      and





- Current
      period operating losses or negative cash flow combined with a history of similar
      losses or a forecast that indicates continuing losses associated with the use
      of


an
      asset.





Our
      impairment evaluation of long-lived assets includes an analysis of estimated
      future undiscounted net cash flows expected to be generated by the assets over
      their remaining estimated useful lives. If the estimated future undiscounted
      net
      cash flows are insufficient to recover the carrying value of the assets over
      the
      remaining estimated useful lives, we will record an impairment loss in the
      amount by which the carrying value of the assets exceeds the fair value. We
      determine fair value based on discounted cash flows using a discount rate
      commensurate with the risk inherent in our current business model. If, as a
      result of our analysis, we determine that our amortizable intangible assets
      or
      other long-lived assets have been impaired, we will recognize an impairment
      loss
      in the period in which the impairment is determined. Any such impairment charge
      could be significant and could have a material adverse effect on our financial
      position and results of operations. Major factors that influence our cash flow
      analysis are our estimates for future revenue and expenses associated with
      the
      use of the asset. Different estimates could have a significant impact on the
      results of our evaluation.




Our
      impairment evaluation of goodwill is based on comparing the fair value to the
      carrying value of our reporting unit with goodwill. If our revenue and cost
      forecasts are not achieved, we may incur a charge for goodwill impairment,
      which
      could have a material adverse effect on our income statement.





***Stock-Based
      Compensation***





Effective
      January 1, 2006, we adopted the fair value recognition provisions of Statement
      of Financial Accounting Standards ("SFAS") No. 123 (revised 2004),
      Share-Based Payment ("SFAS 123R"), using the modified prospective
      transition method and therefore have not restated results for prior periods.
      Under this method we recognize compensation expense for all share-based
      payments, including employee stock options and employee stock purchases related
      to the Employee Stock Purchase Plan granted after January 1, 2006 and prior
      to but not yet vested as of January 1, 2006, in accordance with
      SFAS 123R. Under the fair value recognition provisions of SFAS 123R,
      we recognize stock-based compensation net of an estimated forfeiture rate and
      only recognize compensation cost for those shares expected to vest. Prior to
      SFAS 123R adoption, we accounted for share-based payments under Accounting
      Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
      ("APB 25") and accordingly, generally recognized compensation expense only
      when
      we granted options with a discounted exercise price.








Determining
      the appropriate fair value model and calculating the fair value of share-based
      payment awards require the input of highly subjective assumptions. In
      calculating such fair value, we make certain assumptions consisting of the
      expected life of the option, volatility, risk-free interest rate, dividend
      yield
      and the weighted average fair value of grants. Actual volatility, expected
      lives, risk-free interest rates and dividend yield may be different than our
      assumptions which would result in an actual value of the options being different
      than estimated. In determining volatility, we determined that a
      combination of implied volatility and historical volatility is a better
      indicator of expected volatility than historical volatility alone. We
      examined our historical pattern of option exercises and post-vesting termination
      behavior to determine the expected life assumption. The risk-free interest
      rate
      assumption is based upon observed interest rates appropriate for the term of
      our
      employee stock plans and our dividend yield assumption is based on our history
      and expectation of dividend payouts. In addition, we are required to estimate
      the expected forfeiture rate and only recognize expense for those shares
      expected to vest. If our actual forfeiture rate is materially different from
      our
      estimate, the stock-based compensation expense could be significantly different
      from what we have recorded in the current period.





The
      adoption of SFAS 123R has had a negative effect on our reported net income,
      due
      to our past use of stock option and employee stock purchase plan awards, and
      also affects our reported amounts for pre-tax expense, tax rate, cash flow
      from
      operations and diluted shares outstanding. See Note 2 of our Condensed
      Consolidated Financial Statements located in Item 1 for a further discussion
      on
      stock-based compensation.





**Recent
      Accounting Pronouncements**




See
      Note
      1 of the Condensed Consolidated Financial Statements in Item 1 for a full
      description of recent accounting pronouncements, including the respective
      expected dates of adoption and effects on results of operations and financial
      condition.







**Results
      of Operations**





***Net
      Revenues***


**Three
                  months ended**
                **March
                  31,****2006**
              
              
              **2005****(Dollars
                  in thousands)**Net
                  revenues
              
              $
              88,464
              
              $
              70,855Increase,
                  period over period
              
              $
              17,609Percentage
                  increase, period over period
              
              
              25
              %






Net
      revenues increased 25% (20% excluding the acquisition of Intranets) in the
      first
      quarter of 2006 as compared to the corresponding prior year period due primarily
      to growth in our domestic and international subscriber base and increased usage
      of existing and new service products. During the first quarter of 2006, the
      number of customers for our core applications increased by 28% to over 14,800
      customers as compared to the corresponding prior year period. In addition,
      the
      acquisition of Intranets has added an additional 9,000 new customers to our
      installed customer base.





During
      the first quarter of 2006, U.S. net revenues were $75.8 million, an increase
      of
      21% from the corresponding prior year period, while international net revenues
      increased 52% to $12.6 million. Included
      in net revenues for the first quarter of 2006 was $3.7 million of revenues
      related to Intranets.





One
      of
      the measurement tools, or metrics, which we use to help forecast future revenues
      is what we refer to as monthly revenue rate (“MRR”). We define MRR as the sum of
      the following: (i) committed monthly subscriptions, or the aggregate dollar
      amount of minimum minutes, named hosts and ports that are contractually
      committed to us, as of the end of the month, and (ii) average monthly
      uncommitted revenue for the quarter, or the aggregate dollar amounts of per
      minute or usage-based services such as reseller-related, overage, telephony
      and
      pay-per-use revenues for the quarter; divided by three. Our monthly subscription
      contracts at the end of March 2006 were approximately $22.1 million and our
      average monthly-uncommitted revenue in the quarter ended March 31, 2006 was
      $8.7
      million. Thus our monthly revenue rate exiting March 2006 was $30.8
      million .




While
      the
      quarter-exiting MRR is used by us as a forecasting tool for the following
      quarter's revenue, the actual revenue in the next quarter is impacted by other
      factors in addition to the MRR entering that quarter. These factors include
      such
      items as (i) new customer bookings and customer cancellations, and the timing
      of
      each during the quarter, (ii)







usage-based
      revenues, (iii) customer credits, (iv) set up fees, fees charged for one-time
      customer events and other non-recurring revenues that are not included in MRR,
      (v) partner commitment fees in deferred revenue, and (vi) sales reserve
      adjustments. Certain revenue elements not included in MRR have been declining
      in
      recent quarters due to changes in our business practices. For example, due
      to
      recent changes in our sales compensation plans, our sales employees, where
      permitted to give customer discounts, have been more apt than previously to
      give
      discounts on the set-up fee portion of a customer’s payment obligation and less
      apt than previously to give discounts on the monthly subscription, or MRR,
      portion of the customer’s payment obligation. Also, we now less frequently
      require a prepaid commitment from a reseller than we previously did. On the
      other hand, customer credits, which are among the factors outside of MRR that
      operate to reduce our revenue, have increased in recent quarters. Also,
      quarterly minutes-based subscriptions have been increasing. While quarterly
      or
      semiannual minutes-based subscriptions are included in the subscription portion
      of MRR, the revenue associated with them is recognized variably based on usage
      until the end of the quarterly or semiannual billing period .




The
      following table shows our MRR for the eight quarters ended March 31,
      2006:





**March**
              **31,****2006**
            
            
            **December
                31, 2005**
            
            
            **September**
              
              **30,
                2005**
            
            
            **June**
              **30,
                2005**
            
            
            **March**
              
              **31,
                2005**
            
            
            **December
                31, 2004**
            
            
            **September
                30, 2004**
            
            
            **June**
              
              **30,
                2004****(In
                millions)**Uncommitted
                usage - monthly average during the quarter
            
            $
            8.7
            
            $
            7.3
            
            $
            7.3
            
            $
            7.7
            
            $
            7.0
            
            $
            6.2
            
            $
            6.0
            
            $
            5.9Contracted
                subscriptions at the end of the quarter
            
            
            22.1
            
            
            21.4
            
            
            19.2
            
            
            18.3
            
            
            17.4
            
            
            16.8
            
            
            15.9
            
            
            15.1Total
                MRR
            
            $
            30.8
            
            $
            28.7
            
            $
            26.5
            
            $
            26.0
            
            $
            24.4
            
            $
            23.0
            
            $
            21.9
            
            $
            21.0





Beginning
      in the third quarter of 2005, we began using a new metric to calculate customer
      losses. This new metric is lost subscription customer ratio. Our
      lost
      customer ratio is based on customer count and is calculated as the quotient
      obtained from the following: (i) the average monthly number of lost customers
      (including customers who have switched their purchases of our services from
      us
      directly to our partners) during the quarter, divided by (ii) our total number
      of customers at the end of the last month of the quarter plus the average
      monthly number of lost customers during the quarter (including customers who
      have switched their purchases of our services from us directly to our partners).
      Our lost subscription customer ratio for the three months ended March 31, 2006
      was 2.2% per month, which includes Intranets beginning in the fourth quarter
      of
      2005. The following table shows our lost customer ratio for the eight quarters
      ended March 31, 2006:





**March**
              **31,
                2006**
            **December
                31, 2005**
            **September**
              **30,
                2005**
            **June**
              **30,
                2005**
            **March**
              **31,
                2005**
            **December
                31, 2004**
            **September
                30, 2004**
            **June****30,**
              **2004**Lost
                subscription customer ratio percentage
            2.2%
            2.2%
            1.9%
            1.9%
            2.0%
            1.9%
            1.3%
            1.5%








***Cost
      of Revenues***





Cost
      of
      revenues consists primarily of costs related to user set-up, network and data
      center operations, technical support and training activities, including Internet
      access and telephony communication costs, personnel, licensed software and
      equipment costs and depreciation. Total cost of revenues for the periods
      reported was as follows:




**Three
                  months ended**
                **March
                  31,****2006**
              
              
              **2005****(Dollars
                  in thousands)**Cost
                  of revenues
              
              $
              15,971
              
              $
              11,858Percentage
                  of net revenues
              
              
              18
              %
              
              17
              %Increase,
                  period over period
              
              $
              4,113Percentage
                  increase, period over period
              
              
              35
              %







Cost
      of
      revenues increased 35% during the first quarter of 2006 as compared to the
      corresponding prior year period due primarily to $780,000 of stock compensation
      expense related to the adoption of SFAS 123R as well as increases in the costs
      for delivering existing and new services to more domestic and international
      customers. In addition, we increased our technical staff 13% during the first
      quarter of 2006 as compared to the corresponding prior year period to support
      our installed base of customers as well as increased expenditures to expand
      and
      improve our worldwide network. We recorded amortization of developed technology
      related to the acquisition of Intranets of $440,000 during the first quarter
      of
      2006.





***Sales
      and Marketing***





Sales
      and
      marketing expense consists of personnel costs, including commissions for sales,
      marketing and customer care, as well as costs of public relations, advertising,
      marketing programs, lead generation, travel and trade shows. Sales and marketing
      expenses for the periods reported were as follows:




**Three
                  months ended**
                **March
                  31,****2006**
              
              
              **2005****(Dollars
                  in thousands)**Sales
                  and marketing
              
              $
              34,449
              
              $
              24,103Percentage
                  of net revenues
              
              
              39
              %
              
              34
              %Increase,
                  period over period
              
              $
              10,346Percentage
                  increase, period over period
              
              
              43
              %


Sales
      and
      marketing expense increased 43% during the first quarter of 2006 as compared
      to
      the corresponding prior year period due
      primarily to $2.7 million of stock compensation expense related to the adoption
      of SFAS123R, increased spending on sales and support personnel and additional
      spending on advertising and marketing related programs to build brand awareness
      and generate leads for our sales force. Sales and marketing headcount increased
      22% in the first quarter of 2006 as compared to the corresponding prior year
      period. During
      the first quarter of 2006, we continued to promote our new product releases,
      including WebOffice, which is intended to expand our offerings in the small
      to
      medium business market, as well as MeetMeNow and PCNow, which are targeted
      to
      individual professionals. During the first quarter of 2005 we recorded $1.1
      million related to losses from a fire
      at
      our Amsterdam headquarters. We subsequently received $924,000 during the second
      half of 2005 from our insurance carrier in connection with this loss, which
      amounts were recorded as a reduction to sales and marketing expense in the
      periods received.





***Research
      and Development***





Research
      and development expense consists primarily of salaries and other
      personnel-related expenses, depreciation of equipment and supplies, and
      consulting engineering services. Research and development expenses for the
      periods reported were as follows:




**Three
                  months ended**
                **March
                  31,****2006**
              
              
              **2005****(Dollars
                  in thousands)**Research
                  and development
              
              $
              13,506
              
              $
              10,067Percentage
                  of net revenues
              
              
              15
              %
              
              14
              %Increase,
                  period over period
              
              $
              3,439Percentage
                  increase, period over period
              
              
              34
              %





Research
      and development expense increased 34% during the first quarter of 2006 as
      compared to the corresponding prior year period due
      primarily to $1.5 million of stock compensation expense related to the adoption
      of SFAS123R and increases in equipment related expenses to develop and support
      existing and new products. The increase in research and development expense
      was
      offset in part by a reduction in headcount of 3% in the first quarter of 2006
      as
      compared to the corresponding prior year period.








***General
      and Administrative***





General
      and administrative expense consists primarily of personnel costs for finance,
      human resources, legal and general management, bad debt expense and professional
      services, such as legal, tax and accounting. General and administrative expenses
      for the periods reported were as follows:




**Three
                  months ended**
                **March
                  31,****2006**
              
              
              **2005****(Dollars
                  in thousands)**General
                  and administrative
              
              $
              9,574
              
              $
              5,783Percentage
                  of net revenues
              
              
              11
              %
              
              8
              %Increase,
                  period over period
              
              $
              3,791Percentage
                  increase, period over period
              
              
              66
              %


General
      and administrative expense increased 66% during the first quarter of 2006 as
      compared to the corresponding prior year period due
      primarily to $1.6 million of stock compensation expense related to the adoption
      of SFAS123R as well as increased employee-related expenses. The increase in
      employee-related expenses was due primarily to an increased headcount of 27%
      in
      the first quarter of 2006 as compared to the corresponding prior year period.
      The increase in general and administrative expense was offset in part by a
      net
      litigation settlement gain of $1.0 million during the first quarter of 2006
      related to our lawsuit against Raindance Communications, Inc. See Note 9 of
      our
      Condensed Consolidated Financial Statements located in Item 1 for further
      information.





***Stock-Based
      Compensation***





The
      stock-based compensation cost was included in the Condensed Consolidated
      Statements of Income corresponding to the same functional lines as cash
      compensation paid to the same employees, as follows:


**Three
                    months ended**
                  **March
                    31,****2006**
                
                
                **2005****(Dollars
                    in thousands)**Cost
                    of revenues
                
                $
                778
                
                $
                —Sales
                    and marketing
                
                $
                2,702
                
                $
                —Research
                    and development
                
                $
                1,545
                
                $
                —General
                    and administrative
                
                $
                1,604
                
                $
                1Stock-based
                    compensation
                
                $
                6,629
                
                $
                1Percentage
                    of net revenues
                
                
                7
                %
                
                —
                %







Effective
      January 1, 2006, we adopted the fair value recognition provisions of SFAS123R
      using the modified prospective transition method and therefore have not restated
      results for prior periods. Under this transition method, stock-based
      compensation expense for the first quarter of 2006 includes compensation expense
      for all stock-based compensation awards granted prior to, but not yet vested
      as
      of January 1, 2006, based on the grant date fair value estimated in
      accordance with the original provision of SFAS No. 123. Stock-based
      compensation expense for all stock-based compensation awards granted after
      January 1, 2006 is based on the grant-date fair value estimated in
      accordance with the provisions of SFAS 123R. Prior to the adoption of
      SFAS 123R, we recognized stock-based compensation expense in accordance
      with APB 25.





***Interest
      and other income, net***





Interest
      and other income, net consists of net investment income, interest income and
      expense, the effect of non-functional currency transactions of our foreign
      subsidiaries, and certain other expenses. Interest and other income, net was
      $1.7 million in both the first quarter of 2006 and 2005, respectively. Interest
      and other income, net in the first quarter of 2006 was due primarily to interest
      income of $1.8 million from greater cash and investments balances and higher
      interest rates, offset in part by $115,000 related to currency exchange losses
      from transactions in other than the local currency of our foreign subsidiaries. In
      the
      first quarter of 2005, interest and other income, net consisted of interest
      income of $921,000 and gains from foreign currency exchange of $776,000, of
      which $581,000 related to prior periods.








***Provision
      for income taxes***




We
      recorded a provision for income taxes of $7.6 million for the first quarter
      of
      2006 based on our estimated effective tax rate for 2006 of 45.8%. Our estimated
      annual effective tax rate for 2006 is approximately 7.0 percentage points higher
      than 2005 due primarily to the tax impact of stock-based compensation under
      SFAS
      123R. With the adoption of SFAS 123R, the stock-based compensation related
      to
      incentive stock options is treated as a permanent tax difference. Therefore,
      the
      stock-based compensation is added back to income before income taxes and results
      in a higher effective tax rate in 2006 as compared to 2005. We expect to
      continue to use net operating loss carryforwards to offset U.S. taxable income
      in 2006; however, the utilization is limited on an annual basis based on Section
      382 of the Internal Revenue Code. For the first quarter of 2006, we evaluated
      our deferred tax assets and valuation allowance related to the utilization
      of
      our net operating loss carryforwards. The evaluation resulted in the realization
      of the tax benefit of these deferred assets of $1.8 million for the balance
      of
      the year, of which $1.6 million reduced goodwill related to the acquisition
      of
      Intranets.





**Liquidity
      and Capital Resources**


**Three
                months ended**
              **March
                31,****2006**
            
            
            **2005****(In
                thousands)**Net
                cash provided by operating activities
            
            $
            19,294
            
            $
            21,875Net
                cash used in investing activities
            
            
            (13,625
            )
            
            (22,625
            )Net
                cash provided by financing activities
            
            
            19,067
            
            
            4,057Net
                increase in cash and cash equivalents
            
            $
            24,736
            
            $
            3,307





We
      have
      generated cash from operations in each quarter since the third quarter of 2002.
      We anticipate cash flow from operations will fund our current operations.





As
      of
      March 31, 2006, cash, cash equivalents and short-term investments were $231.4
      million, an increase of $34.2 million compared with cash, cash equivalents
      and
      short-term investments of $197.2 million as of December 31, 2005. As of March
      31, 2006 and December 31, 2005, we had no debt.





***Operating
      Activities***




Net
      cash
      provided by operating activities decreased $2.6 million in the first quarter
      of
      2006 as compared to the corresponding prior year period. The decrease was due
      primarily to higher payments for taxes of $9.9 million in the first quarter
      of
      2006 compared to $1.2 million in the first quarter of 2005. Also, higher
      payments in accounts payable of $1.8 million and an increase in accounts
      receivable of $1.9 million as compared to the corresponding prior year period
      contributed to the decrease. In addition, with the adoption of SFAS 123R, $1.5
      million related to excess tax benefits from stock-based compensation, which
      was
      previously recorded in operating activities prior to the first quarter of 2006,
      was recorded in financing activities. The decrease in operating activities
      was
      offset in part by an increase in accrued liabilities of $5.4 million and higher
      net earnings, adjusted for non-cash reconciling items including stock-based
      compensation, provisions for doubtful accounts and sales reserve and
      depreciation and amortization.




***Investing
      Activities***





Net
      cash
      used in investing activities decreased $9.0 million in the first quarter of
      2006
      as compared to the corresponding prior year period. The decrease was due
      primarily to a decline in investment purchases of $13.1 million, offset in
      part
      by a reduction in sales of investments of $4.2 million. Capital purchases
      remained essentially flat at $3.7 million and $3.8 million in the first quarter
      of 2006 and 2005, respectively.





***Financing
      Activities***





Net
      cash
      provided by financing activities increased $15.0 million in the first quarter
      of
      2006 as compared to the corresponding prior year period. The increase was due
      primarily to proceeds received from issuances of common stock under employee
      stock programs of $17.6 million in the first quarter of 2006 as compared to
      $7.6
      million in the first quarter of 2005. In, addition, with the adoption of
      SFAS123R, we recorded $1.5 million of excess tax benefits from stock-based
      compensation in financing activities.





In
      the
      first quarter of 2005, we repurchased $3.6 million of common stock. We
      repurchase shares of our common stock under a program to manage the dilution
      created by shares issued under employee stock plans as well as to repurchase
      shares opportunistically. During
      the fourth quarter of 2005, our Board of Directors authorized an additional
      $10.0 million for share repurchases through June 2006 under our share repurchase
      program established in July 2004. As of the March 31, 2006, we have $10.0
      million remaining for share repurchases under our current program.








***Other***




In
      December 2004, we entered into an agreement with the government of Hong Kong
      and
      Hong Kong University of Science and Technology (HKUST) pursuant to which WebEx
      and the government of Hong Kong were each to pay equal amounts to fund certain
      research and development projects to be managed jointly by WebEx and HKUST.
      In
      December 2004 and April 2005, we paid $500,000 and $318,000, respectively,
      in
      cash pursuant to the agreement, which amounts were charged to research and
      development. We will obtain sole ownership of any intellectual property
      resulting from the projects, provided, however that WebEx and HKUST may agree
      that some of the proceeds of products and services arising from the projects
      will be paid to HKUST. Under this arrangement, we will provide one final payment
      of $110,000 due in April 2006. This future payment obligation is included in
      “Other commitments” in the table below.





We
      have a
      revolving credit line with a bank that provides available borrowings up to
      $7.0
      million. Amounts borrowed under the revolving credit line bear interest at
      the
      prime rate and may be repaid and re-borrowed at any time prior to the maturity
      date. The credit agreement expires June 15, 2006. The credit agreement is
      unsecured and is subject to compliance with covenants, including a minimum
      quick
      ratio and minimum profitability, with which we are currently in compliance.
      As
      of March 31, 2006, we had no outstanding borrowings under the credit line,
      but
      we did have a $3.2 million letter of credit issued under the line as security
      for our headquarters lease.





We
      expect
      that existing cash resources and cash generated from operations will be
      sufficient to fund our anticipated working capital and capital expenditure
      needs
      for at least the next 12 months. We anticipate that we will continue to generate
      cash from operations for at least the next 12 months  and
      that
      existing cash reserves will therefore be sufficient to meet our capital
      requirements during this period. We base our expense levels in part on our
      expectations of future revenue levels. If our revenue for a particular period
      is
      lower than we expect, we may take steps to reduce our operating expenses
      accordingly. If cash generated from operations is insufficient to satisfy our
      liquidity requirements, we may seek to sell additional public or private equity
      securities or obtain additional debt financing. There can be no assurance that
      additional financing will be available at all or, if available, will be
      obtainable on terms favorable to us. If we are unable to obtain additional
      financing, we may be required to reduce the scope of our planned technology
      and
      product development and sales and marketing efforts, which could harm our
      business, financial condition and operating results. Additional financing may
      also be dilutive to our existing stockholders .




***Lease
      Commitments***





During
      the fourth quarter of 2005, we began occupancy of new facilities located in
      Amsterdam, the Netherlands and Laguna Hills, California. The lease terms for
      these facilities are 60 and 64 months, respectively and each commenced in
      October 2005. Aggregate lease payments under the lives of both of these leases
      total an aggregate of $2.5 million.





With
      the
      acquisition of Intranets in September 2005, we assumed a lease obligation for
      office space in Burlington, Massachusetts. The lease term is for approximately
      66 months which commenced in January 2005. Future minimum lease payments under
      the life of the lease total $2.5 million. The lease requires a letter of credit
      of $260,000, which is collateralized by cash on deposit at a commercial bank.
      The cash on deposit and related interest is treated as restricted cash and
      is
      included in other non-current assets in the consolidated balance
      sheets.





In
      April
      2004, we signed a lease to occupy space in a building located in Santa Clara,
      California that serves as our corporate headquarters. The lease term is for
      approximately ten years, and initial occupancy commenced in the third quarter
      of
      2004. We took possession of additional space in January 2005 and are committed
      to occupy additional space in February 2008. The rent for all of this space
      is
      included in the future minimum rental payments. Minimum lease payments under
      this lease began in January 2005 and total an aggregate of $23.8 million for
      the
      life of the lease .





***Purchase
      Commitments***





As
      of
      March 31, 2006, our material purchase commitments, including those for
      telecommunication lines and data services, equipment and software and
      construction of leasehold improvements at new leased facilities, totaled $22.1
      million. The
      majority of the purchase commitments are expected to be settled in cash within
      12 months.








***Indemnity
      and Warranty Obligations***




In
      our
      agreements with customers and resellers, we agree to indemnify the customers
      and
      resellers in the event a third party asserts an intellectual property
      infringement claim against the customer or reseller based on our services.
      Certain restrictions are placed on the indemnity obligations, including
      geographical limitations and limitations on the type of claims covered. In
      addition, we have provided certain warranties and committed to maintain certain
      service levels in some of our agreements with customers and resellers. These
      warranty and service level provisions specify limited remedies available to
      the
      customer or reseller in the event of a breach of the warranty or a failure
      to
      maintain the specified service level. In addition, our agreements contain
      limitation of liability provisions, which disclaim responsibility for
      consequential, special or indirect damages and which generally limit our
      liability under the agreements to the amount of fees paid to us. However, any
      failure in a customer’s business interaction or other communications activity
      that is caused or allegedly caused by our services, could result in a claim
      for
      damages against us, regardless of our responsibility for the failure, and cause
      us to incur unexpected costs which could unfavorably impact our revenue. As
      of
      March 31, 2006, we had incurred no liability with respect to our indemnification
      obligations and had not incurred any material liability with respect to our
      warranty and service level obligations.





***Off-Balance-Sheet
      Arrangements***





As
      of
      March 31, 2006, we did not have any significant off-balance-sheet arrangements,
      as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.





**Long
      Term Contracts**





The
      following table summarizes our significant contractual commitments at March
      31,
      2006, and the effect such obligations are expected to have on our liquidity
      and
      cash flows in future periods:




**Payments
                  due by period****Total**
              
              
              **Less
                  than 1 year**
              
              
              **1-3
                  years**
              
              
              **3-5
                  years**
              
              
              **More
                  than 5 years****(In
                  thousands)**Operating
                  lease commitments
              
              $
              42,389
              
              $
              4,897
              
              $
              12,521
              
              $
              11,403
              
              $
              13,568Purchase
                  commitments
              
              
              22,095
              
              
              21,141
              
              
              954
              
              
              —
              
              
              —Other
                  commitments
              
              
              110
              
              
              110
              
              
              —
              
              
              —
              
              
              —Total
              
              $
              64,594
              
              $
              26,148
              
              $
              13,475
              
              $
              11,403
              
              $
              13,568





**Item
      3.*****Quantitative
      and Qualitative Disclosures About Market Risk***





***Foreign
      Currency Risk***





A
      small,
      but growing, part of our business is conducted outside the United States. In
      the
      majority of non-U.S. transactions, whether they are revenue transactions or
      the
      payment of expenses or other obligations owing in the non-U.S. country, the
      currency involved is the local currency. In some countries we have far more
      sales collections than we do payment obligations; in other countries, the
      reverse is true. For example, in China we have significant payment obligations
      that must be made in Chinese currency including employee salaries and lease
      payments, and these are currently not offset by revenues in China. As a result
      of this imbalance between local currency collections and payments in certain
      non-U.S. countries, our financial results could be affected by factors such
      as
      changes in foreign currency exchange rates or weak economic conditions in such
      foreign markets. When the amount of revenues obtained from sources outside
      the
      United States becomes significant, we may engage in hedging activities or other
      actions to decrease fluctuations in operating results due to changes in foreign
      currency exchange rates.




***Interest
      Rate Risk***





We
      do not
      use derivative financial instruments or market risk sensitive instruments.
      Instead, we invest in highly liquid investments with short maturities.
      Accordingly, we do not expect any material loss from these investments and
      believe that our potential interest rate exposure is not material.











**Item
      4.*****Controls and Procedures*******




(a) *Evaluation
      of disclosure controls and procedures.* We
      maintain “disclosure controls and procedures,” as such term is defined in Rule
      13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that
      are designed to ensure that information required to be disclosed by us in
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized, and reported within the time periods specified in Securities and
      Exchange Commission rules and forms, and that such information is accumulated
      and communicated to our management, including our Chief Executive Officer and
      Chief Financial Officer, as appropriate, to allow timely decisions regarding
      required disclosure. In designing and evaluating our disclosure controls and
      procedures, management recognized that disclosure controls and procedures,
      no
      matter how well conceived and operated, can provide only reasonable, not
      absolute, assurance that the objectives of the disclosure controls and
      procedures are met. Additionally, in designing disclosure controls and
      procedures, our management necessarily was required to apply its judgment in
      evaluating the cost-benefit relationship of possible disclosure controls and
      procedures. The design of any disclosure controls and procedures also is based
      in part upon certain assumptions about the likelihood of future events, and
      there can be no assurance that any design will succeed in achieving its stated
      goals under all potential future conditions.





Based
      on
      their evaluation as the end of the period covered by this Quarterly Report
      on
      Form 10-Q, our Chief Executive Officer and Chief Financial Officer have
      concluded that, as of such date, our disclosure controls and procedures were
      effective at the reasonable assurance level.





(b) *Changes
      in internal control over financial reporting.* There
      was no significant change in our internal control over financial reporting
      (as
      defined in Rule 13a-15(f) under the Exchange Act) identified in connection
      with
      the evaluation described in Item 4(a) above that occurred during our last fiscal
      quarter that has materially affected, or is reasonably likely to materially
      affect, our internal control over financial reporting.





**PART
      II — OTHER INFORMATION**


**Item
      1.*****Legal
      Proceedings***





On
      September 27, 2005, we sued Raindance Communications, Inc. (“Raindance”), a
      competitor, for patent infringement. The complaint was filed in the U.S.
      District Court for the Northern District of California. There were no other
      parties to the action. In the action, we alleged that Raindance was infringing
      nine of our U.S. patents, and we sought both monetary damages from Raindance
      and
      an injunction against Raindance enjoining further acts we claimed to be
      infringing our patents. On October 14, 2005, Raindance filed a complaint against
      us for patent infringement. The complaint was filed in the U.S. District Court
      for the Eastern District of Texas. There were no other parties to the action.
      In
      the action, Raindance alleged that we were infringing two of Raindance’s
      patents, and Raindance sought both monetary damages from us and an injunction
      against us enjoining further acts Raindance claims to be infringing its patents.
      On March 31, 2006, the parties entered into agreements resulting in dismissal
      of
      both actions, releases of claims for past infringement, payments associated
      with
      those releases, and cross-licenses to each other’s patents. The terms of the
      agreements resulted in our receiving a net $1.0 million amount from Raindance,
      which amount was accounted for in our first quarter 2006 financial statements
      as
      a reduction to expense.





On
      March
      27, 2006, a lawsuit was filed in the United States District Court for the
      Southern District of Texas by Automated Business Companies against a number
      of
      companies, including us, alleging that the defendants’ services which “enable
      individuals to remotely control their personal computers” infringe three of the
      plaintiff’s patents.  We believe that the claims being asserted in the
      lawsuit are without merit and that we have meritorious defenses against such
      claims. Accordingly, we intend to vigorously defend ourselves against these
      claims.








**Item
      1A.** ***Risk
      Factors***





The
      following risk factors and other information included in this Quarterly Report
      should be carefully considered. The risks and uncertainties described below
      are
      not the only ones we face. Additional risks and uncertainties not presently
      known to us or that we deem immaterial also may impair our business operations.
      If any of the following risks occur, our business, financial condition,
      operating results, and cash flows could be materially adversely affected.








*The
      revenue uncertainty associated with one of our two primary pricing models,
      usage-based pricing, makes our quarterly results variable and difficult to
      predict, which could cause unpredictable fluctuations in our stock price.*




We
      use
      two primary pricing models to price our services: a committed-subscription
      pricing model and a usage-based pricing model. Each pricing model is responsible
      for a significant percentage of our total revenue. Because the usage-based
      portion of our revenue varies depending on customer usage, it is more difficult
      to predict than our subscription-based pricing and therefore our revenue may
      fluctuate unpredictably from publicly-announced targets, which in turn could
      cause our stock price to fluctuate unpredictably.




Our
      dominant pricing model has been a
      committed-subscription pricing model. A customer may subscribe to a certain
      number of concurrent-user ports per month, which enables the customer to have
      that set number of users connected to WebEx meetings at any one time, or to
      a
      minimum minutes commitment, which in the typical case enables the customer
      to
      have up to a set number of total minutes to utilize our services during a
      specified time period. With any of these committed subscription offerings,
      the
      customer sometimes also pays overage fees, in addition to the committed
      subscription price. Overage fees are charged when (i) a customer subscribing
      to
      a set number of ports uses more than the subscribed number of ports in one
      or
      more web conference sessions, or (ii) when a customer on a minutes-based
      subscription pricing model uses more than its commitment.





We
      also
      offer flat-rate priced services, meaning that the customer pays a set price
      per
      month that is not influenced by usage or subject to overage fees. One of our
      flat-rate offerings is the named host offering, in which a certain named
      individual may host meetings at which up to a certain number of attendees may
      participate. The
      named
      host service differs from the concurrent-user port offering in several respects:
      (i) with the concurrent user offering, any employee of the customer may host
      a
      meeting, whereas with the named host service only employees who are designated
      as named hosts may host a meeting, (ii) the price charged for a named host
      subscription is appreciably lower than the price charged for a concurrent user
      subscription, in part because the named host model is less flexible with respect
      to who can host a meeting, and (iii) unlike the concurrent user offering, with
      the named host offering there are effectively no overage fees. Our flat-rate
      offering is another of our committed subscription offerings .







During
      the fourth quarter of 2005 we introduced two new flat-rate offerings targeted
      at
      individuals and small businesses. The first offering, available for purchase
      online and called MeetMeNow, is a simple web conferencing service offered on
      a
      monthly basis. The second flat-rate offering is our new WebEx WebOffice line
      of
      collaboration services, which we offer for purchase through a variety of monthly
      subscription plans. We
      refer
      to the revenue associated with our various flat-rate subscription arrangements,
      together with the revenue from our ports subscription and minimum minutes
      subscription arrangements, as committed revenue .




In
      addition to our committed subscription offerings, there are several situations
      in which customers are charged per minute or usage-based pricing. These include
      certain reseller arrangements, customer overage fees for usage above the
      subscribed-to amount of ports or minutes, many types of telephony charges,
      individual pay-per-use services purchased directly from our website, and a
      limited number of customers who do not have a minimum commitment obligation
      of
      any kind. A majority of revenue received from our telecommunications partner
      arrangements is usage based. As previously discussed, overage fees are charged
      when a customer subscribing to a set number of ports uses more than the
      subscribed number of ports, or when a customer on a minutes pricing model uses
      more than its commitment. We get per-minute telephony revenue when we provide
      the audio conferencing component of a web collaboration session. Finally, we
      have per-minute web collaboration services
      available through our website and payable by credit card. We refer to the
      revenue derived from this per minute or usage-based pricing model, measured
      as
      of the end of any month, as uncommitted revenue .




For
      the
      quarter ended March 31, 2006, usage-based revenue was approximately 29% of
      our
      total revenue. The various usage-based revenue sources are more variable and
      difficult to predict than our committed subscription revenue sources, given
      that
      customer demand may vary from month to month depending on a number of factors,
      such as number of business days in a month or vacation patterns. Accordingly,
      to
      the extent the revenue derived from our various usage-based sources—or
      uncommitted revenue—grows faster than the combined revenue from ports, minimum
      minutes and flat-rate offerings—together called committed revenue—our overall
      revenue becomes more difficult to predict. The uncommitted revenue percentage
      of
      our overall revenue was higher in the first quarter of 2006 than in either
      the
      third quarter or the fourth quarters of 2005, a trend that if it continues
      in
      future quarters would increase the unpredictability of our total revenue.





*There
      are factors other than usage-based pricing--some within and some not within
      our
      control--that make our quarterly results variable and difficult to predict,
      which could cause unpredictable fluctuations in our stock price.*




For
      several additional reasons, some inside and some outside of our control, our
      quarterly revenue and operating results may fluctuate from quarter to quarter
      and may vary from publicly-announced quarterly or annual financial guidance.
      These additional factors include the emerging nature of the market for web
      collaboration services, fluctuations in sales and customer retention and the
      uncertain impact of competition, which are listed below along with several
      other
      factors which could cause our quarterly results to fluctuate
      unpredictably:




Factors
      outside our control include:




-
            the
                emerging nature of the market for, and the growth rate of, the market
                for
                web collaboration software and services generally and particularly
                for
                on-demand web collaboration services;




-
            market
                acceptance of our services;




-
            our
                resellers’ degree of success in distributing our services to end-users;




-
            the
                announcement, introduction and market acceptance of new or enhanced
                services or products by our competitors;




-
            changes
                in offerings, sourcing or pricing policies of our competitors and
                our
                distributors; and




-
            a
                trend toward lower average per-minute prices in the telecommunications
                sector generally.




Factors
      within our control include:




-
            our
                ability to develop, enhance and maintain our web communications network
                in
                a timely manner;




-
            the
                mix of web collaboration services we offer, and our introduction
                of
                asynchronous web collaboration services;







-
            our
                ability to attract and retain customers;




-
            the
                amount and timing of operating costs and capital expenditures relating
                to
                expansion of our business and network infrastructure; and




-
            changes
                in our pricing policies.




If
      any of
      these factors impact our business in an unplanned and negative manner during
      a
      particular period, our operating results may be below market expectations,
      in
      which case the market price of our common stock would likely decline. Also,
      factors such as the growth rate of the market for our services, our ability
      to
      maintain and enhance our network services and platform, and our competitors’
success could impact our longer-term financial performance by reducing demand
      for our services, which would harm our business.







*One
      of our subscription-based offerings, the named host offering, is the choice
      of
      an increasing percentage of our subscription-based customers, both new and
      existing, because of its lower price relative to our other committed
      subscription offerings. This customer purchasing trend could reduce our revenue
      unless and until the volume of additional customers makes up the difference.*




A
      number
      of our new and existing customers are selecting our named host offering.
      Approximately 89% of our new subscription-based agreements entered into during
      the first quarter of 2006 were named host agreements, and approximately 46%
      of
      our current subscription-based agreements are named host agreements. Because
      the
      amount we charge for a named host is less than the amount we charge for a
      concurrent user, we often get less revenue from customers who select the named
      host pricing model than we have historically from our concurrent user customers.
      In addition, we generally do not receive overage revenue under the named host
      model. This loss of subscription and overage revenue may be offset in the future
      if named host customers increase the number of named hosts they subscribe to
      or
      if the number of customers increases due to the availability of this
      lower-priced model. If neither of these trends occurs, our operating results
      will be negatively affected .







*We
      expect that our operating expenses will continue to increase, and if our revenue
      does not correspondingly increase, our business and operating results will
      suffer.*




We
      expect
      to continue to spend substantial financial and other resources on developing
      and
      introducing new services, on expanding our sales and marketing organization,
      on
      enhancing our network infrastructure and on upgrading leased facilities such
      as
      our European headquarters. Examples of substantial financial outlays and
      commitments made during the past two years include our purchase of a building
      in
      Mountain View, California which now serves as one of our primary network
      operating center facilities, and our signing a ten-year lease for space in
      a
      Santa Clara, California building which became our corporate headquarters in
      January 2005. We base our expansion plans and expense levels in part on our
      expectations of future revenue levels. If our revenue for a particular quarter
      is lower than we expect, we may be unable to reduce, proportionately, our
      operating expenses for that quarter, in which case our operating results for
      that quarter would suffer. And because our fixed expenses have increased
      appreciably due to our expectations relating to future revenue levels, if our
      revenue is sufficiently below expectation in one or more quarters, we may be
      unable to effect proportionate reductions in our operating expenses in a timely
      manner and, therefore, our operating results could suffer.







*Most
      of our customers do not have long-term obligations to purchase our services;
      therefore, our revenue and operating results could decline if our customers
      do
      not continue to use our services.*




Most
      of
      our customer contracts have initial terms of three to twelve months. These
      contracts are typically automatically renewed except where a customer takes
      action to cancel a contract prior to the end of an initial or renewal term.
      In a
      few customer situations, including contracts with the federal government, the
      contract can be terminated by the customer at any time during the term of the
      agreement. Our lost subscription customer ratio was 2.2% for the quarter ended
      March 31, 2006. In addition to cancellation, a customer may stop buying our
      services directly from us and, instead, start purchasing our services from
      one
      of our resellers. A customer may also change the number of ports or types of
      services that the customer purchases directly from us such that the overall
      subscription revenue to us is lower, such as switching from a concurrent user
      or
      minimum minutes offering to a named host offering. The
      reasons why a customer would cancel use of our services have included the
      pricing of our service offerings, the failure of the customer’s employees to
      learn about and use our services, the failure of the services to meet the
      customer’s expectations or requirements, financial difficulties experienced by
      the customer, or the customer’s decision to use services or products offered by
      a competitor. As a result of customer cancellations or reductions in purchases
      of our services, we may need to invest additional dollars in sales and marketing
      in order to compensate for increases in net customer losses, or we may need
      to
      invest in the development or acquisition of new offerings in an attempt to
      increase customer retention. We may not obtain a sufficient amount of new or
      incremental business to compensate for any customers that we may lose. The
      loss
      of existing customers or our failure to obtain additional customers, and the
      additional expense associated with acquiring new customers or developing or
      acquiring new products, could harm our business and operating results.










*Our
      business and operating results may suffer if we fail to establish reseller
      relationships, if our resellers experience financial hardships, do not
      successfully market and sell our services, or devote greater efforts to the
      products and services of competitors, or if we fail to become a significant
      participant in the telecommunications provider distribution channel.*




As
      of
      March 31, 2006, we had distribution agreements in place with telecommunications
      partners, software vendors, web services providers and miscellaneous other
      resellers that during the first quarter of 2006 accounted for 15% of our
      revenue. Our revenue generally consists of initial set-up fees, commitment
      payments, and service fees. The majority of the payments received from these
      resellers are per minute or usage-based payments. We must continue to establish
      and extend these distribution relationships. Establishing these distribution
      relationships can take as long as several months or more. It typically also
      takes several months before our distribution arrangements generate significant
      revenue. Our resellers are not prohibited from offering and reselling the
      products and services of our competitors, and a significant majority of our
      resellers currently do so. Such resellers (i) may be forced for financial
      hardship reasons, or may choose, to devote insufficient resources to marketing
      and supporting our services, (ii) may devote greater resources to marketing
      and
      supporting the products and services of our competitors including specific
      efforts to persuade the reseller’s customers to switch from our services to
      those of our competitors, or (iii) may be persuaded by a competitor of ours
      to
      sever the reseller’s distribution arrangement with us and possibly also become
      the exclusive reseller of that competitor. An example of a reseller which may
      devote greater resources to marketing and supporting the products and services
      of our competitors is our distributor Intercall, whose
      corporate parent West Corporation in April 2006 acquired our competitor
      Raindance and who therefore may increase its support of the Raindance offering,
      or cease offering some or all of our offerings, to our detriment. With
      regard to the telecommunications-provider distribution channel for web
      collaboration services which may prove economically significant in the future,
      our web collaboration services competitors may be more successful in partnering
      with telecommunications providers, or telecommunications providers may
      independently enter the web collaboration services business, either alone or
      with web conferencing vendors that do not include us. If we fail to establish
      new distribution relationships in a timely manner, if our resellers do not
      successfully distribute our services, if we lose existing resellers for whatever
      reason or if we fail to become a significant participant in the
      telecommunications-provider distribution channel, our ability to maintain
      current levels of market acceptance of our web collaboration services will
      suffer and our business and operating results will be harmed.







*If
      continuing consolidation within the telecommunications industry causes one
      or
      more of our key resellers to significantly curtail or discontinue a reseller
      arrangement with us, our revenues may be negatively affected.* **




Our
      various reseller relationships accounted for 15% of our total revenue in the
      first quarter of 2006. Two of our large resellers, telecommunications providers
      AT&T and MCI, recently have been acquired by, respectively, SBC
      Communications and Verizon Communications. The acquisition of MCI was completed
      in January 2006, and the former MCI is now part of the business unit of Verizon
      known as Verizon Business. The acquisition of AT&T was completed in November
      2005, and the combined entity is now known as AT&T. If one, or both, or
      other of our large resellers were to significantly reduce the scope of or
      discontinue a reseller arrangement with us whether as a result of having been
      acquired by another entity or otherwise, our reseller-related revenue could
      drastically decline, and our business could suffer significantly.







*Our
      total revenue may suffer if we are unable to manage our distribution
      relationships successfully to prevent the undercutting of our direct sales
      efforts.* **




We
      sell
      our services directly to customers and also indirectly through our resellers
      which buy and resell our services. We enter into distribution relationships
      so
      that we can obtain additional customers through third parties that we could
      not
      obtain through our direct sales efforts. Under our agreements with our
      resellers, we sell our services on a discounted basis to the reseller, which
      in
      turn marks up the price and sells the services to the end-user. In such cases,
      we contract directly with the reseller, and revenue is recognized on amounts
      charged to the reseller. We
      also
      have another type of distribution arrangement—known as a referral arrangement—in
      which a third party refers a potential customer to our direct sales force,
      which
      in turn seeks to enter into a contract directly with the potential customer.
      When a sale is made from us to a customer through a lead provided by a referral







agent,
      the referral agent receives from us a
      percentage of the proceeds from the sale of WebEx services to the customer,
      we
      include the revenue received by us within the broad category of revenue received
      from services sold directly to customers, and we record the amount paid to
      the
      referral agent as sales and marketing expense. In either the reseller or
      referral agent case, the income per sale received by us when a sale is generated
      by a third party is not as great as it would have been had the sale been made
      by
      us directly, for the same volume of WebEx services. To the extent that sales
      of
      our services generated by our resellers or referral agents are sales that,
      absent the existence of the distribution arrangement, would be made by our
      direct sales force, our income per sale may decrease. Additionally, to the
      extent our existing customers discontinue direct agreements with us in order
      to
      purchase our services from our resellers or through our referral agents, our
      income per sale may decrease.







*We
      expect to depend on sales of our standalone WebEx Meeting Center service for
      a
      significant percentage of our revenue for the foreseeable future.*




Our
      standalone WebEx Meeting Center service, the service which generates our largest
      sales revenue, accounted for approximately 36% of our revenue for the quarter
      ended March 31, 2006. We have developed and are selling other services, such
      as
      our Event Center, Training Center, Sales Center, Support Center (including
      components WebEx Remote Support, WebEx Remote Access, and the newly-launched
      WebEx System Management), our MeetMeNow service, our PCNow service, and our
      various add-ons such as our audio conferencing service. Our services other
      than
      Meeting Center may not provide significant revenue in the future. If we are
      not
      successful in developing, deploying and selling services other than our
      standalone Meeting Center service, and if sales of our standalone Meeting Center
      service decline or do not increase, our operating results will suffer.







*We
      have modified our business strategy from a narrow focus on web meetings to
      a
      more diverse product line of web collaboration services, and if our investments
      in these new markets are not well targeted or well executed, if overall market
      growth in these new segments is less than anticipated or if we are unable to
      compete successfully in these new market segments, our operating results could
      suffer.*




Our
      business strategy has shifted from a focus on real-time web meetings and
      closely-related applications to an emphasis on a more diverse product line
      of
      web collaboration services, including the asynchronous collaborative service
      offerings we now offer as a result of our acquisition of Intranets. This
      strategy includes a greater emphasis on selling services provided by, or
      obtained through acquisition of, third parties rather than our historical
      practice of selling services developed solely by us. Because the markets for
      these web collaboration services are just emerging, it is uncertain how
      successful WebEx will be in these markets. It is also uncertain how much
      investment in sales, marketing, product development and infrastructure will
      be
      necessary to compete successfully in these markets. If our investments in these
      new markets do not produce or exceed our expected return, our financial results
      will suffer .





*If
      our marketing, branding and lead-generation efforts are not successful, or
      if
      our decision to shift resources to sales and marketing from research and
      development causes service quality problems or delays in the rollout of new
      services or service upgrades, our business may be harmed.*




We
      believe that continued marketing and brand recognition efforts will be critical
      to achieve widespread acceptance of our web collaboration services. In the
      current calendar year, we intend to invest more of our budget on sales and
      marketing and to reduce the percentage of our budget spent on research and
      development. Nevertheless, our marketing and advertising campaigns or branding
      efforts may not be successful. For example, certain sales promotion initiatives,
      such as free introductory or free trial use, may dampen short-term sales even
      as
      such initiatives attempt to cultivate participants’ desire to purchase and use
      our services, in that a customer who might have otherwise purchased our services
      will instead receive free use of our services for the trial period of time.
      In
      addition, failure to adequately generate and develop sales leads could
      negatively impact our revenue and therefore our financial results. More
      specifically, our inability to generate and cultivate sales leads into large
      organizations, where there is the potential for significant use of our services
      and where any future marketplace standardization of our service might emerge,
      could harm our business. If our marketing, branding or lead-generation efforts
      are not successful, or if a shift in resource emphasis from research and
      development to sales and marketing causes a decline in the quality of services
      delivered or delays in the deployment of new or upgraded services, our business
      and operating results will be harmed.










*If
      our services fail to function, whether because of the large number of
      participants or because of separate quality-related issues, we may lose
      customers and our business and reputation may be harmed.*




Our
      business strategy requires that our services be able to accommodate large
      numbers of meetings and users at any one time. Our data network monitoring
      system measures the capacity of our data network by bandwidth use. The goal
      of
      our data network capacity planning is to have our average daily peak usage
      be
      less than 50% of our data network capacity. From time to time daily peak usage
      exceeds 50% of data network capacity. However, by monitoring and managing our
      data network resources we have been able to meet our internal goal of
      maintaining average daily peak usage at less than 50% of our data network
      capacity. Whenever average daily peak usage increases to a point approaching
      or
      exceeding 50% of our data network capacity, we add capacity so that we continue
      to meet our internal target of having average daily peak usage be less than
      50%
      of our data network capacity. During the quarter ended March 31, 2006, the
      average of our daily peak usages, as a percentage of our data network capacity,
      was less than 50% of our total capacity.





In
      addition to our data network, we also maintain an integrated telephony network
      for which capacity planning and service-level monitoring is necessary. Meeting
      our goal of having average daily peak usage be less than 50% of our network
      capacity depends on our continuing ability to add both data network and
      telephony network capacity whenever we so desire. Securing such additional
      network capacity has not been a problem for us to date, due to the abundance
      of
      supply available for purchase. However, there can be no assurance that such
      supply of data network and telephony network capacity will always be available
      or available at reasonable prices.





If
      we
      fail to invest adequately to increase the capacity and quality of our data
      and
      telephony networks consistent with the growth in usage of each, or if there
      are
      supply constraints with respect to the acquisition of additional data network
      or
      telephony capacity, the performance of these networks could be adversely
      impacted. In addition, we may encounter performance or other service-quality
      problems when making upgrades and modifications to either or both of these
      networks. If our services do not perform adequately because of capacity-related
      or other quality-related problems with either or both of our data and telephony
      networks, we may lose customers and be unable to attract new customers and
      our
      operating results would be harmed.







*We
      rely on our China subsidiary, which exposes us to economic and political risks
      in China, foreign exchange risk, risks related to political tension between
      China and the United States, risks arising from an inability to enforce our
      intellectual property rights, and risks relating to possible Chinese government
      monitoring of portions of our service delivery operations or infrastructure.*




We
      have
      relied, and for the foreseeable future we plan to continue to rely, on our
      subsidiary WebEx China to conduct a significant portion of our quality assurance
      testing and software development activities, as well as a number of other
      activities including lead research for our sales personnel, creation of
      technical documentation, preparation of marketing materials and the provisioning
      of customer websites. We have five facilities in China, located in Hefei,
      Hangzhou, Shanghai, Shenzhen and Suzhou. Our China subsidiary employed, as
      of
      March 31, 2006, approximately 780 of our worldwide employees. Our reliance
      on
      WebEx China for a significant portion of our quality assurance, software
      development and other activities exposes us to a variety of economic and
      political risks including, but not limited to, technology-development
      restrictions, potentially costly and pro-employee labor laws and regulations
      governing our employees in China, and travel restrictions. Further, our
      per-employee productivity is lower in China than it is in the United States.




We
      also
      face foreign exchange risk in that we have significant payment obligations
      that
      must be made in Chinese currency including employee salaries and lease payments,
      which are currently not offset by sales revenue in China. The Chinese currency,
      or yuan, is a currency whose rate of exchange with other currencies is
      controlled by the Chinese government, and the Chinese government’s decision in
      July 2005 (i) to slightly revalue the yuan’s longtime fixed relationship to the
      U.S. dollar in favor of the yuan, and (ii) to allow a floating relationship
      between the yuan and a basket of international currencies, could over a period
      of time result in a significant appreciation of the yuan relative to the U.S.
      dollar and thereby increase the cost of our Chinese operations and increase
      the
      negative effect of the foreign exchange risk we face in China.




In
      addition, we face risks related to the fact that our operations in China are
      not
      immune from possible Chinese government monitoring or intrusion. As evidenced
      by
      recent publicized issues involving U.S. Internet technology companies, the
      Chinese government may engage in or require as condition of doing business
      in
      China, government monitoring and regulation of Internet services. Although
      we
      are not currently aware of any such activity or requirement, if such monitoring
      or regulation of our services were to occur, this could cause us to lose
      customers and could deter potential future customers from signing up for our
      services which would damage our operating results.








Finally,
      political and economic tensions between the United States and China could harm
      our ability to conduct operations in China, which could increase our operating
      costs and harm our business and operations. If we lost the services of our
      WebEx
      China subsidiary, we would incur increased costs, which would harm our operating
      results and business. Finally, because a substantial amount of our research
      and
      development activity takes place in China, our business may be harmed if we
      encounter difficulties enforcing our intellectual property rights there.








*Our
      international business activities expose us to foreign exchange risk, foreign
      country economic conditions and the challenges of managing a global business
      operation, any of which if not managed successfully could harm our financial
      condition.* **




A
      small
      part of our sales and support activities, and a significant portion of our
      customer provisioning and research and development activities, are conducted
      outside of the United States. Customer payments to us, and payments by us to
      both our foreign-based vendors and to our foreign-based employees, are generally
      made in the local currency. As a result, our financial results could be affected
      by factors such as changes in foreign currency exchange rates or weak economic
      conditions in foreign markets. We do not currently engage in hedging activities
      or other actions to decrease fluctuations in operating results due to changes
      in
      foreign currency exchange rates, although we may do so when the amount of
      revenue obtained from sources outside the United States becomes significant. We
      conduct sales, marketing, network and customer support operations in countries
      outside of the United States, and we currently have subsidiaries in each of
      the
      following non-U.S. countries: China, Hong Kong, Japan, Australia, India, the
      United Kingdom, France, Germany and the Netherlands. Our future results could
      be
      materially adversely affected by a variety of challenges generally associated
      with managing a global business including, among others, the
      following:




-
            staffing
                and managing international operations including multiple non-U.S.
                subsidiary structures;




-
            handling
                the various accounting, tax and legal complexities arising from our
                international operations;




-
            properly
                designing, testing andmaintaining
                internal controls over financial reporting in our non-U.S. subsidiaries,
                as required under the Sarbanes-Oxley Act of 2002 and related laws
                and
                regulations;




-
            understanding
                cultural differences affecting non-U.S. employee relations or sales
                transactions;
                and




-
            addressing
                political, economic or social instabilities that may arise from time
                to
                time in a specific non-U.S. country or
                region.




The
      cost
      of meeting these and other challenges, or our failure to address adequately
      one
      or more of such challenges, could have a material adverse impact on our costs,
      expenses, and financial condition .








*We
      could incur unexpected costs resulting from claims relating to use of our
      services.*




Many
      of
      the business interactions supported by our services are critical to our
      customers’ businesses. Although it is not standard practice for us to do so, in
      some situations we do make warranties in our customer agreements as to service
      uptime, or the percentage of time that our network will be operational and
      available for customer use. Accordingly, any failure by us to fulfill such
      warranty obligation, or more generally any failure in a customer’s business
      interaction or other communications activity that is caused or allegedly caused
      by our services, could result in a claim for damages against us, regardless
      of
      our responsibility for the failure, and cause us to incur unexpected costs
      which
      could unfavorably impact our revenue.







*The
      software underlying our services is complex, and our business and reputation
      could suffer if our services fail to perform properly due to defects or similar
      problems with our underlying software.*




Complex
      software, such as the software underlying our services, often contains defects.
      We may be forced to delay commercial release of new services or new versions
      of
      existing services until problems are corrected and, in some cases, we may need
      to implement enhancements to correct defects or bugs that we do not detect
      until
      after deployment of our services. If we do detect a defect or bug in our
      software before we introduce new versions of our services, we might have to
      limit our services for an extended period of time while we resolve the problem.
      In addition, problems with the software underlying our services could result
      in:







-
            damage
                to our reputation;




-
            damage
                to our efforts to build brand awareness;




-
            loss
                of customers, or loss of or delay in revenue;




-
            delays
                in or loss of market acceptance of our services; and




-
            unexpected
                expenses and diversion of resources to remedy errors.







*If
      our services do not work with the many hardware and software platforms used
      by
      our customers and end-users, or if we do not successfully adapt our MediaTone
      on-demand delivery platform to the increasing numbers of customers and varieties
      of web collaboration services we are developing, our business may be harmed.*




We
      currently serve customers and end-users that use a wide variety of constantly
      changing hardware and software applications and platforms. If our services
      are
      unable to support these platforms, they may fail to gain broad market
      acceptance, which would cause our operating results to suffer. Our success
      also
      depends on our ability to deliver our services to multiple platforms and
      systems, to modify our services and underlying technology as new versions of
      applications are introduced, and to manage our MediaTone platform such that
      it
      is able to handle the increasing scale and diversity of our on-demand
      collaboration services. In addition, the success of our services depends on
      our
      ability to anticipate and support new standards, especially web standards.
      If we
      fail to maintain the capacity and quality of our MediaTone network across a
      wide
      variety of user computer platforms, or fail in our efforts to utilize the
      MediaTone network to support new web collaboration services, our business will
      suffer.







*We
      rely on third parties for technologies we use in conducting our business, and
      in
      certain cases we rely on third parties to provide us with products we include
      in
      our set of commercial offerings. If we cannot continue to license these
      third-party technologies or products in a timely manner and on commercially
      reasonable terms, our business could suffer.*




We
      intend
      to continue to license technologies from third parties, which are integrated
      into our services and which constitute new web collaboration services. For
      example, we license database, operating system, server and enterprise marketing
      automation software, application server, monitoring and management software,
      billing software, font-rendering technology, voice-over-Internet protocol (VOIP)
      technology, and credit card payment processing services. As our sales volume,
      together with the scale and variety of our collaborative service offerings,
      grows larger, managing these third-party relationships and integrating the
      licensed technologies into our services, into our service delivery
      infrastructure and into our sales and marketing operations has become more
      important to the health of our business. If we are unable to meet the challenges
      associated with these more numerous and complex relationships with third-party
      providers, our business could suffer. Also, we are now relying on third parties
      to supply us with certain of our web collaboration services themselves, such
      as
      the System Management service that is a new offering within the Support Center
      family of services. These product-related third-party technologies, and any
      that
      we may utilize in the future, may not continue to be available to us on
      commercially reasonable terms. In addition, we may fail to successfully
      integrate any licensed technology or licensed product into our MediaTone service
      delivery platform. This in turn could increase our costs and harm our business
      and operating results .







*Our
      recent growth has placed a strain on our infrastructure and resources, and
      if we
      fail to manage our future growth to meet customer and distribution partner
      requirements, both within the U.S. and internationally, our business could
      suffer.*




We
      have
      experienced a period of rapid expansion in our personnel, facilities, and
      infrastructure that has placed a significant strain on our resources. As an
      example of this expansion, our worldwide headcount increased from 1,036 at
      March
      31, 2003 to 2,059 at March 31, 2006. The March 31, 2006 total includes 79
      employees who joined WebEx as part of the acquisition of Intranets. We expect
      to
      continue to increase our personnel during the remainder of 2006. Our expansion
      has placed, and we expect that it will continue to place, a significant strain
      on our management, operational and financial resources. In addition to
      completing the physical transfer of one of our primary network operations
      centers from our former San Jose headquarters to a facility in Mountain View,
      California, we are continuing to transition another of our network operations
      centers from a Denver, Colorado facility to a co-location facility located
      in
      Ashburn, Virginia.








Separately,
      we are continuing periodically to update our information technology
      infrastructure to meet increased requirements for capacity, flexibility and
      efficiency resulting from the growth of our business. In the event these
      recently re-deployed or recently-updated systems or technologies do not meet
      our
      requirements or are not deployed in a successful or timely manner, our business
      may suffer.







*Breaches
      of our physical or technical security systems, or the security systems of our
      vendors who partner with us in the delivery of services to customers, may result
      in violations of our confidentiality and security obligations to our customers,
      may result in damage to our systems and our reputation, may endanger the safety
      of our employees and may harm our financial performance.*





Our
      customers and end-users may use our services to share confidential and sensitive
      information, the security of which is critical to their business. Third parties
      may attempt to breach our security or the security of our vendors or customers.
      For example, although we are not aware of any breaches to the security of our
      primary service delivery infrastructure or our primary web collaboration service
      offerings, we have faced from time to time multiple ancillary security-related
      issues such as credit card payment verification problems, abuse of free trial
      offerings made available on our public website, and theft of audio-conferencing
      services by non-contracted parties.





We
      may be
      liable to our customers for any breach in security, and any breach could harm
      our reputation and cause us to lose customers or incur additional expenses,
      or
      both. For example, in connection with customer purchases of our services and
      with the help of an outside vendor, we process tens of thousands of credit
      card
      transactions per month, and any failure in either our or the vendor’s security
      system to safeguard customer information could result in violations of law
      or
      industry standards by us, damage to our customers or damage to our financial
      performance or reputation.





In
      addition, computers are vulnerable to computer viruses, physical or electronic
      break-ins and similar disruptions, which could lead to interruptions, delays
      or
      loss of data. A breach of the physical security of our facilities may endanger
      the safety of our employees. We may be required to expend significant capital
      and other resources to further protect against security breaches or to resolve
      problems caused by any breach, including litigation-related expenses if we
      are
      sued .






*Changes
      in our executive management team may be disruptive to our
      business.*





From
      time
      to time there are changes in our executive management team, including the hiring
      and departure of executives, and the reorganization of responsibilities and
      personnel. For example, during the first quarter of 2006 we had a reorganization
      affecting the leadership of our sales and customer care organization, our
      product and engineering organization and our marketing organization, which
      are
      important areas of our business. In addition, our president and chief operating
      officer announced his intention to leave the Company. Such changes may be
      disruptive to our business, because the executives and employees reporting
      to
      them require time to become fully productive in their new roles and new
      organizations. Planned changes in the Company’s organization or management may
      not achieve the expected benefits. In addition, the departure of executives
      may
      create temporary voids in leadership in critical areas of the Company. Because
      of these risks, organizational and management changes may have an adverse impact
      on our financial performance. We do not have long-term employment agreements
      or
      life insurance policies on any of our senior executives.






*If
      we
      are unable to attract, integrate and retain qualified personnel, our business
      could suffer.*





Our
      future success will depend on our ability to attract, train, retain and motivate
      highly skilled engineering, technical, managerial, sales and marketing and
      customer support personnel. We expect to continue to increase our personnel
      during the remainder of 2006. As the U.S. economy in general and the technology
      sector in particular continue to grow, we could encounter increasing difficulty
      hiring qualified personnel. We could encounter the same difficulty in other
      countries and regions where we operate and where the demand for skilled
      technology workers is growing quite rapidly, such as in China and India where
      we
      have experienced a significant degree of salary pressure and turnover in our
      workforce. If we encounter difficulty hiring, integrating and retaining a
      sufficient number of qualified personnel in the future, the quality of our
      web
      collaboration services and our ability to develop new services, obtain new
      customers and provide a high level of customer service could all suffer, and
      consequently the health of our overall business could suffer. If in our hiring
      we hire employees from our competitors, we face a risk that a competitor may
      claim that we have engaged in unfair hiring practices, which could cause us
      to
      incur costs in defending ourselves against such claims, regardless of their
      merits. Also, our competitors appear to value certain specialized skills
      possessed by certain of our technical and sales employees, having hired or
      attempted to hire such individuals in recent quarters. If the rate at which
      such
      employees are hired away increases appreciably, our business and operations
      could be harmed.










*Interruption
      or malfunction of our internal business processing systems, including those
      resulting from upgrades to our comprehensive database system and from our recent
      integration of a billing application licensed from a third-party into our
      business processing systems , could result in customer invoicing delays and
      other disruptions to our revenue-related financial accounting
      processes* *.*




Our
      business, which includes thousands of subscription customers and a large number
      of daily transactions, is substantially dependent on the continuous and
      error-free functioning of our automated business processing systems covering
      such areas as order-entry, billing, contract management and collection
      activities. We currently are utilizing an internally-developed, proprietary
      business processing system to capture and record, for billing and financial
      statement generation purposes, customer usage of our various services. Because
      we have to rely on our own know-how and experience, rather than that of an
      outside vendor, to identify, diagnose and repair any bugs,
      start-up problems or other malfunctions relating to the new system, any such
      malfunction could cause delays or errors in transaction processing, which could
      negatively affect customer relationships and could harm our business .
      Actual
      malfunction-related costs that could have negative effects on our business
      include (i) delays in generating, or inability to generate, customer invoices,
      (ii) difficulty, or inability, to track the customer usage data needed to
      generate invoices, (iii) our having to deploy additional resources internally
      to
      troubleshoot these invoice and data collection problems and to complete the
      processing of sales transactions, and (iv) our having to issue credits to
      certain customers due to discrepancies or disagreements with particular
      invoices.





During
      the second quarter of 2005, we experienced actual malfunctions of our new
      business processing system that resulted in an inability to capture certain
      customer usage data we need to prepare invoices and also resulted in delays
      in
      the issuing of invoices to customers. We could experience such malfunctions
      in
      the future. In addition, we recently have added to our proprietary business
      processing system a billing application licensed from a third party, and we
      could encounter malfunctions associated with the integration of the third-party
      billing application into our business processing system.





During
      the first quarter of 2006 we completed the installation of a key upgrade to
      the
      application we use for financial reporting, human resource management and other
      enterprise resource planning functions. During the remainder of 2006 we plan
      to
      install upgrades to other portions of the application. Any
      material interruption or malfunction associated with the installation of these
      upgrades or the associated operation of the application, including bugs or
      start-up problems relating to installation of the upgrades, could result in similar
      billing, collection, credit-issuance and other revenue-related financial
      accounting problems.





Such
      interruptions or malfunctions relating to the upgrades or the integration of
      the
      third-party billing application, were they to become persistent or large-scale,
      could harm our customer relationships. In addition, such malfunctions could
      interfere with the accuracy of our
      financial reporting and could disrupt related internal control compliance
      activities, which could result in our violating legal requirements applicable
      to
      public companies.  Any such result could harm our business and stock
      price .







*Interruptions
      in either our internal or outsourced computer and communications systems could
      reduce our ability to provide our revenue-generating services and could harm
      our
      business and reputation.*




The
      success of our on-demand web collaboration services depends on the efficient
      and
      uninterrupted operation of our internal and outsourced computer and
      communications hardware, software and services. In 2004 we completed
      installation of an updated version of our server management system, which system
      monitors and reports on the status of our various servers through which our
      real-time web collaboration services are delivered to customers. Any system
      failure, including the malfunction of the new server management system, that
      causes an interruption in our web collaboration services or a decrease in their
      performance, could harm our relationships with our customers and resellers.
      In
      addition, some of our communications hardware and software are hosted at
      third-party co-location facilities, and we rely as well on the functional
      operation of connectivity infrastructure such as fiber provided by third-party
      service providers. These systems and operations, including those of our
      third-party service providers, are vulnerable to damage or interruption from
      human error, telecommunications failures, physical or remote break-ins, physical
      damage to fiber lines or other third-party service provider infrastructure,
      sabotage, computer viruses and intentional acts of vandalism. In addition,
      third-party co-location facilities may discontinue their operations due to
      poor
      business performance. Because a substantial part of our central computer and
      communications hardware and network operations are located in the San Francisco
      Bay Area, an earthquake or other natural disaster could impair the performance
      of our entire network. In the event of damage to or interruption of our internal
      or outsourced systems, if we are unable to implement our disaster recovery
      plans
      or our efforts to restore our services to normal levels in a timely manner
      are
      not successful, our business would be harmed. In addition, business interruption
      insurance may not adequately compensate us for losses that may occur, which
      would harm our
      business.










*We
      might have liability for content or information transmitted through our
      services.*




Claims
      may be asserted against us for defamation, negligence, copyright, patent or
      trademark infringement and other legal theories based on the nature and content
      of the materials transmitted through our web collaboration services. Defending
      against such claims could be expensive, could be time-consuming and could divert
      management’s attention away from running our business. In addition, any
      imposition of liability could harm our reputation, could harm our business
      and
      operating results, or could result in the imposition of criminal penalties.







*Our
      success depends upon the patent protection of our software and technology.*




Our
      success and ability to compete depend to a significant degree upon the
      protection of our underlying software and our proprietary technology through
      patents. We regard the effective protection of patentable inventions as
      important to our future opportunities. We currently have 25 issued patents,
      including eight we acquired in connection with our 2003 acquisition of certain
      assets of Presenter, Inc., five we purchased in 2004 from NCR Corporation and
      one that we own as a result of our acquisition of Intranets. Our patents are
      in
      several areas including peer-to-peer connections to facilitate conferencing,
      document annotation, optimizing data transfer, graphical user interface for
      extracting video presentations, and remote collaboration systems involving
      multiple computers. We currently have over 55 patent applications pending in
      the
      United States Patent Office. We may seek additional patents in the future.
      Our
      current patent applications cover different aspects of the technology used
      to
      deliver our services and are important to our ability to compete. However,
      it is
      possible that:




-
            any
                patents acquired by or issued to us may not be broad enough to protect
                us;




-
            any
                issued patent could be successfully challenged by one or more third
                parties, which could result in our loss of the right to prevent others
                from exploiting the inventions claimed in those patents and subjecting
                us
                to claims for seeking to enforce such patents;




-
            current
                and future competitors may independently develop similar technology,
                duplicate our services or design around any of our patents;




-
            our
                pending patent applications may not result in the issuance of patents;
                and




-
            effective
                patent protection, including effective legal-enforcement mechanisms
                against those who violate our patent-related assets, may not be available
                in every country in which we do business.







*We
      also rely upon trademarks, copyrights and trade secrets to protect our
      technology, which may not be sufficient to protect our intellectual property.*




We
      also
      rely on a combination of laws, such as copyright, trademark and trade secret
      laws, and contractual restrictions such as confidentiality agreements and
      licenses, to establish and protect our technology. Also, our software is
      automatically protected by copyright law. These forms of intellectual property
      protection are critically important to our ability to establish and maintain
      our
      competitive position. However,




-
            third
                parties may infringe or misappropriate our trademarks such as our
                registered Meeting Center trademark which is currently being used
                by at
                least one competitor that believes our trademark to be invalid, and
                may
                also infringe our copyrights and similar proprietary rights;




-
            laws
                and contractual restrictions, particularly those existing within
                or
                applied within non-U.S. jurisdictions such as China, may not be sufficient
                to prevent misappropriation of our technology or to deter others
                from
                developing similar technologies;







-
            effective
                trademark, copyright and trade secret protection, including effective
                legal-enforcement mechanisms against those who violate our trademark,
                copyright or trade secret assets, may be unavailable or limited in
                foreign
                countries;




-
            other
                companies may claim common law trademark rights based upon state
                or
                foreign laws that precede the federal registration of our marks;
                and




-
            policing
                unauthorized use of our services and trademarks is difficult, expensive
                and time-consuming, and we may be unable to determine the extent
                of any
                unauthorized use.





Reverse
      engineering, unauthorized copying or other misappropriation of our proprietary
      technology could enable third parties to benefit from our technology without
      paying us for it, which would significantly harm our business.







*We
      may face intellectual property infringement claims that could be costly to
      defend and result in our loss of significant rights.*




We
      may be
      subject to legal proceedings and claims, including claims of alleged
      infringement of the copyrights, trademarks and patents of third parties. Our
      services may infringe issued patents. The holders of such patents could initiate
      infringement claims against us. Also, in response to an infringement action
      brought by us, the defendant in such action could file counterclaims against
      us
      in the same proceeding or file a separate action against us in a different
      court. For example, in March 2006 a lawsuit was filed in U.S. federal
      district court by Automated Business Companies against a number of companies,
      including us, alleging that the defendants' services infringe three of the
      plaintiff's patents.  Future
      intellectual property dispute proceedings such as the Automated Business
      Companies action can be expensive, time-consuming and may divert management
      attention and engineering resources from their other
      responsibilities.





In
      addition, we may be unaware of filed patent applications which have not yet
      been
      made public and which relate to our services. From time to time, we have
      received notices alleging that we infringe intellectual property rights of
      third
      parties. In such cases, we investigate the relevant facts, respond to the
      allegations and, where the facts, applicable law, and other conditions warrant,
      consider settlement options. Intellectual property claims that may be asserted
      against us in the future could result in litigation. Intellectual property
      litigation is expensive and time-consuming and could divert management’s
      attention away from running our business. Intellectual property litigation
      could
      also require us to develop non-infringing technology or enter into royalty
      or
      license agreements. These royalty or license agreements, if required, may not
      be
      available on acceptable terms, if at all, in the event of a successful claim
      of
      infringement. Our failure or inability to develop non-infringing technology
      or
      license proprietary rights on a timely basis would harm our business .







*We
      may engage in future acquisitions or investments that could dilute the ownership
      of our existing stockholders, cause us to incur significant expenses, fail
      to
      complement our existing revenue models or harm our operating results.*




We
      may
      acquire or invest in complementary businesses, technologies or services. For
      example, in September 2005 we acquired Intranets, a company which provides
      web-based collaborative application services primarily to small businesses.
      We
      have changed the name of this subsidiary to WebExOne, Inc., and the various
      collaboration services are now marketed and sold under a new brand name we
      are
      utilizing called WebEx WebOffice. Operating and integrating newly-acquired
      businesses, employees, technologies or services may be expensive and
      time-consuming. To finance any material acquisitions in the future, it may
      be
      necessary for us to reduce our cash reserves or to raise additional funds
      through public or private financings. Additional funds may not be available
      on
      terms that are favorable to us and, in the case of equity financings as with
      acquisitions made with our stock, may result in dilution to our stockholders.
      We
      may be unable to complete any acquisitions or investments on commercially
      reasonable terms, if at all. Even if completed, we may be unable to operate
      any
      acquired businesses profitably, successfully integrate the employees,
      technology, products or services of any acquired businesses into our existing
      business, or achieve post-integration financial targets established for specific
      acquisitions. To illustrate, we could fail to successfully manage the
      newly-acquired WebExOne portion of our business, including such key areas as
      WebExOne sales activity, WebExOne employee motivation and retention including
      key WebExOne executives, and the WebExOne service delivery infrastructure.
      Also,
      we face possible future integration-related risks such as those associated
      with
      transferring the WebExOne service delivery infrastructure from its current
      platform to our proprietary MediaTone platform. Expenses associated with, and
      diverted WebEx employee time and energy required in connection with, the
      integration of a newly-acquired business such as WebExOne, could further harm
      our operating results. More generally, if we are unable to operate and integrate
      any newly acquired entities or technologies effectively, including those related
      to our acquisition of the former Intranets entity now renamed WebExOne, our
      operating results could suffer. Future acquisitions by us, or deterioration
      of
      the businesses we have acquired, could also result in large and immediate
      write-downs, or incurrence of debt and contingent liabilities, any of which
      would harm our financial performance .










*We
      must compete successfully in the web collaboration services market.*




The
      market for collaboration software and services is intensely competitive, subject
      to rapid change and is significantly affected by new product and service
      introductions and other market activities of industry participants. Although
      we
      do not currently compete against any one entity with respect to all aspects
      of
      our services, we do compete with various companies in regards to specific
      elements of our on-demand web collaboration services. For example, we compete
      with providers of traditional communications technologies such as
      teleconferencing and videoconferencing, application software and tools companies
      including online application services providers, and web conferencing products
      and services such as Adobe Systems, Cisco Systems, Citrix Systems, Genesys,
      IBM,
      Microsoft, Netviewer, NTR, Oracle, PC Visit, Saba, and Salesforce.com.





In
      addition to the above competitors, certain of our resellers offer competitive
      web conferencing, web application and other web collaboration services. One
      of
      our key resellers, Intercall, is a subsidiary of West Corporation which recently
      acquired our competitor Raindance. As a result of its acquisition of Raindance,
      Intercall could choose to increase its emphasis on offerings competitive with
      ours, or cease to offer some or all of our offerings, or both.





Other
      companies could choose to extend their products and services to include
      competitive interactive communication offerings in the future. Many of our
      current and potential competitors have longer operating histories, significantly
      greater financial, technical and other resources and greater name recognition
      than we do. Our current and future competitors may be able to respond more
      quickly to new or emerging technologies and changes in customer requirements.
      In
      addition, current and potential competitors have established, and may in the
      future establish, cooperative relationships with third parties and with each
      other to increase the availability of their products and services in the
      marketplace. Competitive pressures could reduce our market share or require
      us
      to reduce the price of our services, either of which could harm our business
      and
      operating results. For example, we offer VOIP to customers seeking that option
      for the audio portion of their web conferencing service activity, which puts
      us
      in competition with increasing numbers of low cost providers of VOIP products
      and services of ever-increasing quality. One or more of these competitors may
      offer a sufficiently low-cost, feature-attractive, audio-centric VOIP offering
      that, though not a web conferencing offering, might divert business away from
      us, or one or more of these competitors might themselves leverage their
      experience in the VOIP segment of web communications to develop and market
      a web
      conferencing or web application product or service of their own. Finally, our
      revenues and market share could also be reduced if, during this time period
      where the market is still relatively new and competitors are still emerging,
      we
      do not capitalize on our current market leadership by timely developing and
      executing corporate strategies that will increase the likelihood that our
      services will be accepted as the market standard in preference to the offerings
      of our current and future competitors .







*Competition
      from Microsoft in the collaboration software and services markets, from other
      vendors specifically targeted at the low-end market, or customers offering
      customer-premises products may adversely affect our operating results.*




Competition
      from Microsoft in the collaboration software and services markets may adversely
      affect us. Microsoft since 2003 has had a product offering which is competitive
      with ours and which is called Microsoft Office Live Meeting. Microsoft in March
      2005 announced the certain improvements to the Live Meeting service and other
      product developments. In mid-2005, Microsoft announced the acquisition of
      collaboration software provider Groove Networks. In November 2005, Microsoft
      previewed by press announcement its new Microsoft Office Live offering, which
      it
      described as a set of Internet-based software services. Microsoft is currently
      offering a free “beta”, or pre-commercial release, version of Office Live.
      Microsoft’s investment of development and marketing resources in products or
      services that compete directly with us and Microsoft’s integration of
      competitive technologies from other companies, including Groove Networks and
      Placeware, may have an adverse impact on our business. More generally, Microsoft
      may attempt to leverage its dominant market position in the operating system,
      productivity application or browser markets, through technical integration
      or
      bundled offerings, to expand further its presence in these web collaboration
      markets. This expanded Microsoft presence in web collaboration markets could
      make it difficult for other vendors of web collaboration products and services,
      such as WebEx, to compete.





In
      addition, some competitors offer web collaboration products and services
      targeted at customers who are more price-conscious and are less concerned about
      functionality, scalability, integration and security features. Such offerings
      may make it more difficult for us to compete in that segment of the market
      and
      may cause some of our existing customers to







switch
      to
      these competitors. In 2005, we introduced new services with lower entry prices
      that enable us to compete more effectively with such offerings. If our industry
      were to experience a general decline in prices and there were not a sufficient
      increase in volume to compensate for the price reductions, we might be forced
      to
      change the extent and type of resources we deploy in the selling of our services
      in an effort to maintain operating margins. Such forced price reductions, as
      well as costs or lost sales associated with a transitioning to different sales
      practices, could have a negative effect on our operating results.





Finally,
      some of our competitors offer software products or products that are a
      combination of software and hardware that include web collaborations
      functionality, and which allow customers to purchase such products, install
      them
      at their own facilities, and manage the products by themselves. If significant
      numbers of existing or potential customers determine that they would prefer
      to
      have their basic web conferencing or more advanced web collaboration needs
      met
      with these types of products, demand for WebEx services may decrease.







*Our
      future success depends on the broad market adoption and acceptance of web
      collaboration services.*




The
      market for web collaboration services is relatively new and rapidly evolving.
      Growth in market demand for collaboration services over the Web is uncertain.
      If
      the market for web collaboration services does not continue to grow, our
      business and operating results will be harmed. Factors that might influence
      broad market acceptance of our services include the following, all of which
      are
      beyond our control:




-
            willingness
                of businesses and end-users to use web collaboration services;




-
            the
                continued growth and viability of the Web as an instrument of commerce;




-
            the
                willingness of our resellers to integrate web collaboration services
                in
                their service offerings; and




-
            the
                ongoing level of security and reliability for conducting business
                over the
                Web.







*Our
      success depends on the continued growth of web usage and the continued growth
      in
      reliability and capacity of the Internet.*




Because
      customers access our network through the Web, our revenue growth depends on
      the
      continued development and maintenance of the Internet infrastructure. This
      continued development of the Web would include maintenance of a reliable network
      with the necessary speed, data capacity and security, as well as timely
      development of complementary products and services, including high-speed modems
      and other high-bandwidth communications technologies, for providing reliable,
      high-performance Internet access and services. The success of our business
      will
      rely on the continued improvement of the Web as a convenient and reliable means
      of customer interaction and commerce, as well as an efficient medium for the
      delivery and distribution of information by businesses to their employees.
      If
      increases in web usage or the continued growth in reliability and capacity
      of
      the Internet fail to materialize, our ability to deliver our services may be
      adversely affected and our operating results could be harmed.







*We
      face risks associated with government regulation of the Internet, and related
      legal uncertainties.*




Currently,
      a relatively small number of existing laws or regulations specifically apply
      to
      the Internet, other than laws generally applicable to businesses. Many
      Internet-related laws and regulations, however, are pending and may be adopted
      in the United States, in individual states, in local jurisdictions, and in
      other
      countries. These laws may relate to many areas that impact our business,
      including encryption, network and information security, the convergence of
      traditional communication services, such as telephone services, with Internet
      communications, taxes and wireless networks. For example, media reports have
      surfaced from time to time concerning possible future regulation, and perhaps
      also taxation, of VOIP products and services similar to the manner in which
      current telephony services are currently regulated and taxed. These types of
      regulations could differ between countries and other political and geographic
      divisions both inside and outside the United States. Non-U.S. countries and
      political organizations may impose, or favor, more and different regulation
      than
      that which has been proposed in the United States, thus furthering the
      complexity of regulation. In addition, state and local governments within the
      United States may impose regulations in addition to, inconsistent with, or
      stricter than federal regulations. The adoption of such laws or regulations,
      and
      uncertainties associated with their validity, interpretation, applicability
      and
      enforcement, may affect the available distribution channels for, and the costs
      associated with, our products and services. The adoption of such laws and
      regulations may harm our business.








In
      addition to the effect of such potential future laws and regulations, existing
      laws and regulations in both domestic and non-U.S. jurisdictions could be
      interpreted to apply to our web collaboration business, in which case our
      regulatory compliance obligations and associated financial burdens could
      increase. An example of a non-U.S. law or regulation that we are expending
      resources, both infrastructure-related and legal-related, to comply with are
      the
      various privacy statutes enacted by the European Union. Examples of U.S. laws
      and regulations that we may have to expend greater resources to comply with
      are
      various U.S. state sales tax laws and regulations that may be held by the
      applicable authorities to apply to the sale of our web collaboration services. We
      do not
      currently collect sales tax from customers in the United States.  However,
      two states and one city have indicated that they intend to audit us in
      connection with, respectively, potential sales and use tax liability, and in
      April 2006 the city sent us a notice of assessment concerning use tax. Moreover,
      in the future federal tax authorities or the tax authorities in one or more
      states could assert that we are obligated to collect such taxes from our
      customers and remit those taxes to those authorities.  The collection and
      remittance of such taxes could increase the cost of our services and harm our
      operating results. In addition, such authorities may seek to collect sales
      taxes
      for sales of services by us that occurred in the past.  If such a claim
      were to be asserted against us and if we were unable to collect such taxes
      from
      our customers, we may be required to pay such back taxes and any associated
      interest and penalties, which would increase our costs and harm our operating
      results .







*Current
      and future economic and political conditions may adversely affect our business.*




Current
      economic and political conditions, including the effects of the war in Iraq,
      uncertainty about Iraq’s political future, continuing tensions throughout the
      Middle East and the supply and price of petroleum products continue to impact
      the U.S. and global economy, and any negative development in one of these
      geopolitical areas could cause significant worldwide economic harm. The
      sustained price of petroleum products at or above present levels may negatively
      impact the U.S. and world economies generally, which in turn could hurt our
      business. Any significant downturn in the U.S. economy, whether due to the
      effect of increasing interest rates or otherwise, could cause existing or
      potential customers to decide not to purchase our services, which in turn would
      hurt our business. To the extent that changes in laws, regulations or taxes
      in
      the U.S. diminish the economic benefits of arrangements by U.S. companies with
      non-U.S. subsidiaries or suppliers, our business would be adversely affected.
      As
      with our operations in China, our operations in India could be significantly
      disrupted if U.S. relations with India deteriorate, or if India becomes involved
      in armed conflict or otherwise becomes politically destabilized. Moreover,
      depending on severity, a significant terrorist attack anywhere in the world
      and
      particularly one within the United States could have a significantly negative
      effect on both the domestic and global economies. If economic conditions worsen
      as a result of economic, political or social turmoil or military conflict,
      or if
      there are further terrorist attacks in the United States or elsewhere, our
      customers may not be able to pay for our services and our resellers may cease
      operations, which may harm our operating results.







*We
      may experience electrical system failures whether accidentally or intentionally
      caused, which could disrupt our operations and increase our expenses.*




California
      has experienced, and could in the future experience energy shortages and
      blackouts. As was made evident by the well-publicized August 2003 blackout
      that
      simultaneously affected several eastern U.S. states for a period exceeding
      24
      hours, a similarly widespread, long-lasting power outage could occur in northern
      California. As with the eastern U.S. power supply, an important source of
      electrical power to northern California consists of a multi-state grid situated
      in the western United States. An accidental interruption of, or criminal
      disruption to, a key supply or distribution component of the power grid could
      cause a significant power outage in northern California. If power outages or
      energy price increases occur in the future in northern California or other
      locations where we maintain operations, such events could disrupt our
      operations, prevent us from providing our services, harm our reputation, and
      result in a loss of revenue and increase in our expenses, all of which could
      substantially harm our business and results of operations.







*We
      face risks associated with potential future zoning activity relating to our
      Mountain View network operations center property.*





We
      own
      real property in Mountain View, California on which resides a building that
      serves as one of our primary network operations center facilities. Proposals
      have been made to the Mountain View City Council to rezone the area surrounding
      our facility from industrial to residential use. If such rezoning, and the
      accompanying expansion of neighboring residential development, takes place,
      operations in our building could be impeded, interrupted or otherwise negatively
      affected by construction activities, the new residents, or city







ordinances
      relating to noise or other byproducts of our building’s operations. Because of
      such negative circumstances, we might be forced to re-locate to a less suitable
      and perhaps more expensive site for our network operations facility, which
      would
      negatively affect our business. Having to invest additional resources and
      management time in the locating and fitting of the alternative network
      operations site would further hurt our business.







*New* *Financial
      Accounting Standards Board (FASB) rules relating to equity-compensation
      programs, changes we are making in our equity compensation programs in response
      to the new rules,* *will
      significantly affect our results of operations* *.*




The
      Financial Accounting Standards Board (FASB) has adopted final rules which change
      the way companies account for equity compensation in their financial statements.
      The new accounting standard is effective for fiscal years that begin after
      June
      15, 2005, and accordingly is reflected in the financial statements contained
      in
      this Quarterly Report. This accounting rule change requires companies to report
      as a compensation expense equity compensation provided to employees, including
      stock options, purchases of stock at a discount pursuant to an employee stock
      purchase plan, and other forms of equity compensation. The new accounting rule
      has had a negative effect on our reported net income, due to our past extensive
      use of stock option and employee stock purchase plan awards, and also affects
      our reported amounts for pre-tax expense, tax rate, cash flow from operations
      and diluted shares outstanding.





In
      2005,
      in anticipation of the new accounting rule, we amended our employee stock
      purchase plan to reduce the length of the offering period and the maximum number
      of shares that can be purchased during an offering period. In addition, now
      that
      the new FASB rule has taken effect, we are revising our equity compensation
      practices further to include alternative forms of equity compensation which
      will
      have a less negative effect on our reported net income, shares outstanding
      and
      other financial statement measures. These alternative forms of equity
      compensation will be selected from among the several forms of equity instruments
      provided for in our current 2000 Stock Incentive Plan. The precise impact of
      these changes in equity compensation practices, and any others we implement,
      on
      our business is difficult to predict.





The
      new
      FASB rule has added, and we believe will continue to add, complexity and
      uncertainty to our management of employee compensation practices, and for the
      foreseeable future will continue to demand a significant amount of management
      attention. On the one hand, if our policy of reduced equity compensation, or
      our
      plan to switch to alternative forms of equity compensation, are objected to
      by
      sufficient percentages of existing or potential future employees, either (i)
      we
      may be forced to increase cash compensation to make up for such reduced and
      modified stock-based compensation opportunities, which would increase our
      expenses, or (ii) we risk losing, or being unable to recruit, key personnel
      because our new equity compensation packages may not be deemed competitive
      in
      the technology company labor marketplace, which would hurt our business. In
      particular, the equity compensation packages offered by private companies—that
      is, companies whose securities are not publicly traded—could look appreciably
      more attractive to current or potential employees if we reduce our equity
      compensation packages too much. On the other hand, if in implementing these
      new
      equity issuance practices we are too liberal in the amount of equity
      compensation that we grant through new forms of equity instruments, whether
      because of the demands of the technology labor market, miscalculation of the
      effects of the new forms of equity grants on our compensation expense or
      otherwise, our compensation expense will increase appreciably and our results
      of
      operations may be further negatively affected . ******







*While
      we believe that we currently have adequate internal controls over financial
      reporting, we are exposed to risks and increased expense from recent legislation
      requiring companies to evaluate those internal controls* *.*




Section
      404 of the Sarbanes-Oxley Act of 2002 requires our management to report on,
      and
      our independent auditors to attest to, the effectiveness of our internal control
      structure and procedures for financial reporting. We completed an evaluation
      of
      the effectiveness of our internal controls for the fiscal year ended December
      31, 2005, and we have an ongoing program to perform the system and process
      evaluation and testing supporting our legal obligation to comply with these
      requirements. Our business continues to expand in size and complexity, and
      accordingly in 2006 we expect to incur increased expense, relative to our
      expenditures in 2005, and to devote additional management resources to comply
      with Section 404. Any additional acquisitions we may pursue and complete will
      increase our Section 404-related expenses, compliance activities and resource
      allocation. In the event that our chief executive officer, chief financial
      officer or independent registered public accounting firm determine that our
      internal controls over financial reporting are not effective as defined under
      Section 404, investor perceptions of our company may be adversely affected
      and
      could cause a decline in the market price of our stock, and we could experience
      further increases in expenses and redirection of management resources in order
      to remedy such ineffective internal controls .










*Our
      stock price has been and will likely continue to be volatile because of stock
      market fluctuations that affect the prices of technology stocks. A decline
      in
      our stock price could result in securities class action litigation against
      us
      that could divert management’s attention and harm our business.*




Our
      stock
      price has been and is likely to continue to be highly volatile. For example,
      between January 1, 2006 and May 1, 2006, our stock price has traded as high
      as
      $36.04 on May 1, 2006, and as low as $21.50 on January 3, 2006. Our stock price
      could fluctuate significantly due to a number of factors, including:




-
            variations
                in our actual or anticipated operating results;




-
            sales
                of substantial amounts of our stock;




-
            announcements
                by or about us or our competitors, including technological innovation,
                new
                products, services or acquisitions;




-
            litigation
                and other developments relating to our patents or other proprietary
                rights
                or those of our competitors;




-
            conditions
                in the Internet industry;




-
            changes
                in laws, regulations, rules or standards by governments, regulatory
                bodies, exchanges or standards bodies; and




-
      changes in securities
      analysts’ estimates of our performance, or our failure to meet analysts’
expectations.




Many
      of
      these factors are beyond our control. In addition, the stock markets in general,
      and the Nasdaq National Market and the market for Internet technology companies
      in particular, continue to experience significant price and volume fluctuations.
      These fluctuations often have been unrelated or disproportionate to the
      operating performance of these companies. These broad market and industry
      factors may decrease the market price of our common stock, regardless of our
      actual operating performance. In the past, companies that have experienced
      volatility in the market prices of their stock have been the objects of
      securities class action litigation. If we were to be the object of securities
      class action litigation, we could face substantial costs and a diversion of
      management’s attention and resources, which could harm our business .








**Item
      2.*****Unregistered
      Sales of Equity Securities and Use of Proceeds***





**(c)**  **Issuer
      Purchases of Equity Securities.**





The
      WebEx
      Board of Directors in November, 2005 approved a new share repurchase program,
      effective January 1, 2006, which authorizes the repurchase of, at the discretion
      of WebEx management, up to $10,000,000 of the Company’s common stock through
      June 30, 2006. During the quarter ended March 31, 2006, we did not make any
      repurchases under this repurchase program, nor did we make any other repurchases
      of our equity securities.














**Item
      6.*****Exhibits***





**Exhibits:**





**Exhibit**
              **Number**
            **Description**3.1*
            Amended
                and Restated Certificate of Incorporation3.2**
            Amended
                and Restated Bylaws4.1*
            Form
                of Common Stock Certificate10.1#
            Summary
                of Modifications to Registrant’s 2006
                Director Cash Compensation Plan10.2#
            Summary
                of Performance Measures
                Established for Registrant’s Executive Cash Bonus
                Plan31.1
            Certification
                of the Chief Executive Officer
                Pursuant to Rule 13a-14(a)/15d-14(a)31.2
            Certification
                of the Chief Financial Officer
                Pursuant to Rule 13a-14(a)/15d-14(a)32.1+
            Certification
                of Chief Executive Officer
                Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section
                906 of
                The Sarbanes-Oxley Act of 200232.2+
            Certification
                of Chief Financial Officer
                Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section
                906 of
                The Sarbanes-Oxley Act of 2002


__________





*  Incorporated
      by reference from Exhibits 3.3 and 4.1 of Amendment No. 1 to the Registrant's
      Registration Statement on Form S-1 (File No. 333-33716) filed with the
      Securities and Exchange Commission on June 21, 2000.





**  Incorporated
      by reference from Exhibit 3.2 of Registrant's Annual Report on Form 10-K (File
      No. 0-30849) for the fiscal year ended December 31, 2000 filed with the
      Securities and Exchange Commission on April 2, 2001.





#  Denotes
      a
      management contract or compensatory plan or arrangement.





+  The
      certifications filed as Exhibits 32.1 and 32.2 are not deemed “filed” for
      purpose of Section 18 of the Exchange Act and are not to be incorporated by
      reference into any filing of the Company under the Securities Act of 1933 or
      the
      Securities Exchange Act of 1934, whether made before or after the date hereof
      irrespective of any general incorporation language contained in any such filing,
      except to the extent that the registrant specifically incorporates it by
      reference.

















**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.







**WEBEX
                  COMMUNICATIONS, INC.**Date: May
                  9, 2006
                By:
                /s/ MICHAEL
                  T. EVERETTMichael
                  T. Everett*Chief
                    Financial Officer*
                  (Duly
                    Authorized Officer and Principal Financial Officer)
  **WEBEX
                  COMMUNICATIONS, INC.**Date: May
                  9, 2006
                By:
                /s/ DEAN
                  MACINTOSHDean
                  Macintosh*Vice
                    President, Finance*
                  (Duly
                    Authorized Officer and Principal Accounting
                    Officer)





**EXHIBIT
      INDEX**


**Exhibit**
              **Number**
            **Description**3.1*
            Amended
                and Restated Certificate of Incorporation3.2**
            Amended
                and Restated Bylaws4.1*
            Form
                of Common Stock Certificate10.1#
            Summary
                of Modifications to Registrant’s 2005
                Director Cash Compensation Plan10.2#
            Summary
                of Performance Measures
                Established for Registrant’s Executive Cash Bonus
                Plan31.1
            Certification
                of the Chief Executive Officer
                Pursuant to Rule 13a-14(a)/15d-14(a)31.2
            Certification
                of the Chief Financial Officer
                Pursuant to Rule 13a-14(a)/15d-14(a)32.1+
            Certification
                of Chief Executive Officer
                Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section
                906 of
                The Sarbanes-Oxley Act of 200232.2+
            Certification
                of Chief Financial Officer
                Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section
                906 of
                The Sarbanes-Oxley Act of 2002


__________





*  Incorporated
      by reference from Exhibits 3.3 and 4.1 of Amendment No. 1 to the Registrant's
      Registration Statement on Form S-1 (File No. 333-33716) filed with the
      Securities and Exchange Commission on September 21, 2000.





**  Incorporated
      by reference from Exhibit 3.2 of Registrant's Annual Report on Form 10-K (File
      No. 0-30849) for the fiscal year ended December 31, 2000 filed with the
      Securities and Exchange Commission on April 2, 2001.





#  Denotes
      a
      management contract or compensatory plan or arrangement.





+  The
      certifications filed as Exhibits 32.1 and 32.2 are not deemed “filed” for
      purpose of Section 18 of the Exchange Act and are not to be incorporated by
      reference into any filing of the Company under the Securities Act of 1933 or
      the
      Securities Exchange Act of 1934, whether made before or after the date hereof
      irrespective of any general incorporation language contained in any such filing,
      except to the extent that the registrant specifically incorporates it by
      reference.