**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 September 30, 2001**

**OR**

**[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934**

**For the transition period from ________to _________**

**Commission file number 0-19872**

**WALKER INTERACTIVE SYSTEMS, INC.**
(Exact name of Registrant as specified in its Charter)



|**Delaware**                                                   | **95-2862954**                         
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

**303 Second StreetSan Francisco, California     94107**(Address of Principal Executive Offices including Zip Code)

**(415) 495-8811**(Registrant's Telephone Number, Including Area Code)







Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for the past 90 days.    YES [X]    NO [  ]

There were 14,987,487 Shares of $.001 Par Value Common Stock outstanding as of
                               November 9, 2001.







**WALKER INTERACTIVE SYSTEMS, INC.
      QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2001
                                TABLE OF CONTENTS**



|**PART I.   FINANCIAL INFORMATION**                                                                                   | **Page No.**
|--------------------------------------------------------------------------------------------------------------------- | ------------
|                                                                                                                      |             
|Item 1.   Interim Consolidated Financial Statements
                  (unaudited):                                    |             
|                                                                                                                      |             
|Consolidated Balance Sheets at September 30, 2001 and
     December 31, 2000                                          | 3           
|                                                                                                                      |             
|Consolidated Statements of Operations for the
          
    three months ended September 30, 2001 and 2000           | 4           
|                                                                                                                      |             
|Consolidated Statements of Cash Flows for the
          
    three months ended September 30, 2001 and 2000           | 5           
|                                                                                                                      |             
|Notes to Financial Statements                                                                                         | 6           
|                                                                                                                      |             
|Item 2.   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations | 8           
|                                                                                                                      |             
|Item 3.   Quantitative and Qualitative Disclosures About Market Risk                                                  | 18          
|                                                                                                                      |             
|**PART II.  OTHER INFORMATION**                                                                                       |             
|                                                                                                                      |             
|Item 6.   Exhibits and Reports on Form 8-K                                                                            | 23          
|                                                                                                                      |             
|**Signatures**                                                                                                        | 24          

---

**PART I -- FINANCIAL INFORMATION**

Item 1. Financial Statements

---

**WALKER INTERACTIVE SYSTEMS, INC.

                          CONSOLIDATED BALANCE SHEETS**
(in thousands, except share amounts)

`September 30 December 31,
                                                             2001         2000
                                                        ------------  ------------
                                                                (unaudited)
ASSETS                                                                            
Current assets:
   Cash and cash equivalents...........................      $3,651        $4,219
   Short-term investments..............................       3,721         5,400
   Accounts receivable, net of allowance for doubtful
     accounts of $557 - September 30, 2001 and $1,528 -
     December 31, 2000.................................       8,174         8,816
   Prepaid expenses....................................       1,162           854
   Other receivables...................................         122           370
                                                        ------------  ------------
       Total current assets............................      16,830        19,659
Property and equipment, net                                   1,782         2,121
Capitalized software, net of accumulated amortization
  of $50,171 - September 30, 2001 and $56,932 -
  December 31, 2000....................................       3,393         4,541
Long-term accounts receivable..........................         801         1,144
Other assets...........................................         429            95
                                                        ------------  ------------
Total assets...........................................     $23,235       $27,560
                                                        ============  ============

LIABILITIES AND STOCKHOLDERS' DEFICIT                                             
Current liabilities:
   Accounts payable....................................      $2,077        $2,625
   Accrued liabilities.................................       8,681        11,614
   Deferred revenue....................................      11,025        12,706
                                                        ------------  ------------
       Total current liabilities.......................      21,783        26,945
Deferred revenue.......................................       3,149         2,551
Other long-term obligations............................       2,862         3,287
                                                        ------------  ------------
       Total liabilities...............................      27,794        32,783
                                                        ------------  ------------

Commitments and contingencies

Stockholders' equity (deficit):
   Common stock, $.001 par value: 50,000 shares
    authorized; issued 14,987 shares - September 30,
    2001; 14,661 shares - December 31, 2000............          15            15
   Additional paid-in capital..........................      76,751        76,458
   Accumulated other comprehensive income..............         410           501
   Accumulated deficit.................................     (81,735)      (82,197)
                                                        ------------  ------------
       Total stockholders' deficit.....................      (4,559)       (5,223)
                                                        ------------  ------------
Total liabilities and stockholders' deficit............     $23,235       $27,560
                                                        ============  ============`

See notes to consolidated financial statements

---

**WALKER INTERACTIVE SYSTEMS, INC.

               CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**
(in thousands, except per share amounts)

`Three Months Ended    Nine Months Ended
                                          September 30,         September 30,
                                      --------------------- ---------------------
                                         2001       2000       2001       2000
                                      ---------- ---------- ---------- ----------
REVENUES:                                                                                 
  License............................      $822     $1,823     $6,502     $4,118
  Maintenance........................     5,565      6,366     16,971     20,761
  Consulting.........................     4,304      4,480     12,349     16,456
                                      ---------- ---------- ---------- ----------
     Total revenues..................    10,691     12,669     35,822     41,335

OPERATING EXPENSES:                                                                       
  Costs of revenues:
     Cost of licenses,
      maintenance and consulting.....     4,262      6,753     12,914     20,901
     Amortization of
      capitalized software...........       763        890      2,288      3,937
  Sales and marketing................     2,838      5,423      8,962     15,061
  Product development................     1,868      4,342      7,068     10,011
  General and administrative.........       988      2,868      4,346      8,634
  Impairment of capitalized
    software and goodwill............         0      4,799          0      4,799
  Restructuring charge...............         0      1,905          0      1,905
                                      ---------- ---------- ---------- ----------
     Total operating expenses........    10,719     26,980     35,578     65,248
                                      ---------- ---------- ---------- ----------
Operating income (loss)..............       (28)   (14,311)       244    (23,913)
     Interest income, net............        72        194        300        673
                                      ---------- ---------- ---------- ----------
Income (loss) before income taxes....        44    (14,117)       544    (23,240)
     Provision for income taxes......        25         50         75        148
                                      ---------- ---------- ---------- ----------

NET INCOME (LOSS)....................        19    (14,167)       469    (23,388)         
                                      ========== ========== ========== ==========

BASIC NET INCOME (LOSS) PER SHARE....     $0.00     ($0.97)     $0.03     ($1.61)         
                                      ========== ========== ========== ==========
Shares used to compute basic
     net income(loss) per share......    14,987     14,606     14,893     14,491
                                      ========== ========== ========== ==========

DILUTED NET INCOME (LOSS) PER SHARE..     $0.00     ($0.97)     $0.03     ($1.61)         
                                      ========== ========== ========== ==========
Shares used to compute diluted
     net income (loss) per share.....    14,988     14,606     14,954     14,491
                                      ========== ========== ========== ==========`

See notes to consolidated financial statements

---

**WALKER INTERACTIVE SYSTEMS, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)**
(in thousands)

`Nine Months Ended
                                                                 September 30,
                                                         ------------------------
                                                             2001          2000
                                                         -----------  -----------
CASH FLOWS FROM OPERATING ACTIVITIES:                                            
     Net income (loss)..................................       $469     ($23,388)
     Adjustments to reconcile net income (loss) to
       net cash used by operating activities:
       Depreciation and amortization....................      3,249        5,635
       Provision for doubtful accounts..................       (167)        (167)
       Loss on property retirements......................        52           --
       Impairment of capitalized software
       and goodwill......................................        --        4,799
     Changes in operating assets and liabilities:
       Accounts receivable..............................      1,057        5,458
       Prepaids and other assets........................       (308)       1,304
       Accounts payable & accrued liabilities...........     (3,815)           5
       Deferred revenue.................................     (1,083)      (4,415)
       Other............................................        (92)       1,038
                                                         -----------  -----------
           Net cash used by operating activities........       (638)      (9,731)
                                                         -----------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES:                                            
     Proceeds from employee stock purchase plan
       issuances and stock options exercised............        294        1,535
     Capital lease payments.............................        (98)          --
                                                         -----------  -----------
           Net cash provided by financing activities....        196        1,535
                                                         -----------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES:                                            
     Purchases of short- and long-term investments......     (4,490)      (3,330)
     Maturities of short-term investments...............      6,149          500
     Sales of short-term investments....................         --       10,162
     Purchases of property and equipment................       (670)        (533)
     Additions to capitalized software..................     (1,144)      (3,055)
     Other..............................................         29          (11)
                                                         -----------  -----------
           Net cash provided (used) by investing activit       (126)       3,733
                                                         -----------  -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS...............       (568)      (4,463)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD.........      4,219        9,187
                                                         -----------  -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD...............     $3,651       $4,724 
                                                         ===========  ===========
Supplemental disclosure:
    Cash paid for income taxes..........................        $78         $328`

See notes to consolidated financial statements

---

**WALKER INTERACTIVE SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

1. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and include all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for a fair
presentation of the financial position, operating results and cash flows for
those periods.  Results for the interim periods are not necessarily indicative
of the results for the entire year.  These consolidated financial statements and
any notes thereto should be read in conjunction with the audited consolidated
financial statements included in the Walker Interactive Systems, Inc. Annual
Report on Form 10-K for the year ended December 31, 2000.  Certain
reclassifications have been made to prior years' amounts in order to conform to
the 2001 consolidated financial statement presentation.

1. EARNINGS PER SHARE

The Company calculates basic earnings per share ("EPS") and
diluted EPS in accordance with Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share." Basic EPS is
computed by dividing net income (loss) by the weighted average number of common
shares outstanding for that period. Diluted EPS takes into account the effect of
dilutive instruments, such as stock options, and uses the average share price
for the period in determining the number of common stock equivalents that are to
be added to the weighted average number of shares outstanding.  Common stock
equivalents are excluded from the diluted loss per share calculation if the
effect would be antidilutive.

1. COMPREHENSIVE INCOME/(LOSS)
2. DIVESTITURES
3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
4. SUBSEQUENT EVENT

On November 1, 2001, the Company announced the acquisition of certain
assets of QSP Group PLC ("QSP").  QSP, headquartered in the UK, was a
provider of financial systems to global 2000 companies and was placed in
administrative receivership on October 17, 2001.  The Company acquired QSP's
intellectual property and a consulting services contract for $2 million in cash.
The Company intends to provide customer support and consulting services to QSP's
UK customers.



WALKER INTERACTIVE SYSTEMS, INC.





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



The following discussion of results of operations and
financial condition of the Company should be read in conjunction with the
Company's unaudited financial statements and notes thereto included elsewhere in
this Form 10-Q.  The report on this Form 10-Q contains forward-looking
statements, including statements related to industry trends and demand for
mainframe products, cash commitments and working capital requirements.
Discussions containing such forward-looking statements may be found in the
material set forth under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," generally and specifically therein
under the captions "Recent Developments," "Liquidity and Capital
Resources," and "Additional Risk Factors." Actual events or
results may differ materially from those discussed herein.  The Company
disclaims any obligation to update these forward-looking statements as a result
of subsequent events.  The risk factors on pages 15 through 21, among others,
should be considered in evaluating the Company's prospects and future financial
performance.

Walker designs its software products specifically for the Internet
architecture and business to business ("B2B") e-business models.  The
Company believes that its architecture is among the most scalable and adaptable
for the enterprise-level business software.  The Company's strategy is to offer
enterprise financial, operational and analytical e-business solutions to a
variety of industries.  Walker's e-business solutions support and enhance
enterprise-wide financial, operational and analytic processes, including
procurement, revenue management, financial management and insight, business
planning, budgeting, forecasting and financial consolidation.  The Company's
software products utilize the Microsoft Windows operating systems on the
desktop, NT, UNIX and S/390 operating systems on the server and industry-leading
On Line Analytical Processing ("OLAP"), Relational Database Management
Systems ("RDBMS") including IBM's DB2 and DB2 OLAP server, Hyperion
Solutions' Essbase and Microsoft  SQL/Server.  Walker e-business solutions
utilize the latest-generation IBM eServer zSeries Web Application Server.  In
addition, Walker utilizes iSeries, pSeries and xSeries as an integral part of
its e-business strategy for Walker's analytic solutions.



RECENT DEVELOPMENTS

The Company divested its IMMPOWER product line in April 2000 and its
Aptos product line in October 2000.  For the third quarter of 2000, revenues and
operating expenses from these divested product lines were $500,000 and $1.8
million, respectively. For the first nine months of 2000, revenues and operating
expenses from these divested product lines were $3.6 million and $6.2 million,
respectively. In October 2001, the Company executed a final settlement with B-
Plan regarding the Aptos divestiture.  (See Note 4 - Divestitures)

During the quarter ended September 30, 2000, the Board of Directors
approved a strategic restructuring plan designed to reduce costs and strengthen
the Company's position to successfully execute its e-business strategy.  The
Company recorded pretax restructuring charges totaling $1.9 million, primarily
severance costs related to involuntary employee terminations, and an impairment
charge of $4.8 million, primarily related to its legacy Tamaris software
product. As of September 30, 2001, approximately $400,000 of such cost has not
yet been paid out, the majority of which relates to long-term lease
obligations.

The product line divestitures and the on-going effect of the strategic
restructuring have reduced both total revenues and operating costs when
comparing both the three month and the nine month periods ending September 30,
2001 and 2000.

On March 5, 2001, the Company announced that its common stock was
removed from the Nasdaq National Market and became eligible for trading on the
OTC Bulletin Board under the symbol "WALK.OB". Nasdaq's decision to
delist the Company's common stock from the Nasdaq National Market was based
primarily on the Company's net tangible assets, as defined by Nasdaq, falling
below the minimum requirement.

On November 1, 2001, the Company announced the acquisition of certain
assets of QSP Group PLC ("QSP").

 

RESULTS OF OPERATIONS

Quarters ended September 30, 2001 and September 30,
2000

REVENUES

Total revenues for the three months ended September 30, 2001 were $10.7
million, a decrease of $2.0 million, or 15.6%, as compared to the three months
ended September 30, 2000.  The decrease in total revenues relates primarily to
divested product lines, and to the negative impact of the events of September
11, 2001, particularly on license agreements which are typically executed in the
last several weeks of a quarter.

License revenues for the three months ended September 30, 2001 were
$822,000, a decrease of $1.0 million, or 54.9%, as compared to the three months
ended September 30, 2000. The Company's e-business enterprise solutions have a
long sales cycle as collaborative commerce involves coordination with multiple
vendors, which generally increases the value of each transaction and adds time
and complexity to the process.  In the aftermath of the events of September
11th license revenues, where the agreements are traditionally
executed in the last several weeks of a quarter, were negatively impacted.

Maintenance revenues for the three months ended September 30,
2001 were $5.6 million, a decrease of $800,000, or 12.6%, as compared to the
three months ended September 30, 2000.  Approximately $300,000 of the decrease
relates to divested product lines.  The remainder of the decrease is
attributable to lower license revenue from the legacy product lines during 2000
resulting in the lapse of related maintenance contracts in excess of new
contracts and renewals during 2001.

Consulting revenues for the three months ended September 30, 2001 were
$4.3 million, a decrease of $176,000, or 3.9%, as compared to the three months
ended September 30, 2000. The decrease relates primarily to divested product
lines.

COSTS OF LICENSES, MAINTENANCE AND CONSULTING.

Costs of licenses, maintenance and consulting were $4.3 million for the
three months ended September 30, 2001, representing 39.9% of total revenues, and
$6.8 million for the three months ended September 30, 2000, representing 53.3%
of total revenues.

The costs of licenses as a percentage of license revenues
increased in the three months ended September 30, 2001 as compared to the three
months ended September 30, 2000. Although costs remained substantially the same
in absolute dollar terms, they increased as a percentage due to the lower
revenue base in three months ended September 30, 2001.

The cost of maintenance, as a percentage of related revenue, increased
in the three months ended September 30, 2001 as compared to the three months
ended September 30, 2000. Although costs remained substantially the same in
absolute dollar terms, they increased as a percentage due to the lower revenue
base in three months ended September 30, 2001.

The costs of consulting, as a percentage of related revenue, decreased
in the three months ended September 30, 2001 as compared to the three months
ended September 30, 2000. The decrease reflects the effect of the restructuring
actions taken in the third quarter of 2000, together with a relative reduction
in the use of outside contractors in 2001.

SALES AND MARKETING.

Sales and marketing costs for the three months ended September 30, 2001
were $2.8 million, a decrease of $2.6 million, or 47.7%, as compared to the
three months ended September 30, 2000. As a percentage of total revenues, sales
and marketing expenses were 26.5% and 42.8% in the three months ended September
30, 2001 and 2000, respectively. The decrease is attributable to reduced
discretionary spending and reduced sales and marketing employee related costs.

PRODUCT DEVELOPMENT.

Product development related expenses, excluding amortization of
capitalized software, were as follows:

`Three Months Ended
                                          September 30,
                                      -------------------
                                         2001      2000
                                      --------- ---------
Product development expenditures.....   $2,298    $4,736
Less:
   Additions to capitalized software.     (430)     (394)
                                      --------- ---------
Product development expense..........   $1,868    $4,342
                                      ========= =========`

Net product development expense decreased $2.5 million, or 57%, in the
three months ended September 30, 2001 as compared to the three months ended
September 30, 2000 and was 17.5% and 34.3% of total revenues, respectively.  For
the three months ended September 30, 2001, total product development
expenditures decreased $2.4 million reflecting the effect of product line
divestitures and restructuring actions.  RareVision costs were approximately
$500,000 for the quarter ended September 30, 2001, compared to approximately
$1.2 million for the quarter ended September 30, 2000.  Additions to capitalized
software increased $36,000, or 9.1%, in the third quarter of fiscal 2001 as
compared to the third quarter of fiscal 2000 and were 18.7% and 8.3% of product
development expenditures, respectively. The increase in software costs
capitalized in the three months ended September 30, 2001 is primarily
attributable to additional investment in the next generation of the Company's
analytical product offering.

AMORTIZATION OF CAPITALIZED SOFTWARE.

Capitalized software amortization in the three months ended September
30, 2001 was $763,000, a decrease of $127,000, or 14.3%, as compared to the
three months ended September 30, 2000. Amortization has decreased since the
third quarter of fiscal 2000 due to the impairment of $4.8 million of
capitalized software during that quarter as part of the Company's restructuring
actions.

GENERAL AND ADMINISTRATIVE.

General and administrative expenses in the three months ended September
30, 2001 were $1.0 million, a decrease of $1.9 million, or 65.6%, as compared to
the three months ended Sept 30, 2000. As a percentage of total revenues, general
and administrative expenses were 9.2% and 22.6% in the three months ended
September 30, 2001 and 2000, respectively.  The decrease in the three months
ended September 30, 2001 is primarily due to the effect of the product line
divestitures, lower employee and facilities costs resulting from the Company's
restructuring actions during the third quarter of 2000, and a $300,000 reversal
of an accrual resulting from a favorable sales tax determination during the
third quarter of 2001.

PROVISION FOR INCOME TAXES.

In the three months ended September 30, 2001, the Company provided
$25,000 for state and foreign income taxes that could not be offset against net
operating loss carryforwards. In the three months ended September 30, 2000, the
Company recorded an income tax expense of $50,000 associated with state and
foreign taxes.



Nine months ended September 30, 2001 and September
30, 2000

REVENUES

Total revenues for the nine months ended September 30, 2001 were $35.8
million, a decrease of $5.5 million, or 13.3%, as compared to the nine months
ended September 30, 2000.  The decrease in total revenues relates primarily to
divested product lines.

License revenues for the nine months ended September 30, 2001 were $6.5
million, an increase of $2.4 million, or 57.9%, as compared to the nine months
ended September 30, 2000. The Company's e-business enterprise solutions have a
long sales cycle as collaborative commerce involves coordination with multiple
vendors, which generally increases the value of each transaction and adds time
and complexity to the process.  The Company was in the early stage of its
transition to e-business solutions during the nine months ended September 30,
2000 whereas the Company executed several significant license agreements during
the nine months ended September 30, 2001.

Maintenance revenues for the nine months ended September 30, 2001
were $17.0 million, a decrease of $3.8 million, or 18.3%, as compared to the
nine months ended September 30, 2000.  Approximately $1.6 million of the
decrease relates to divested product lines. The remainder of the decrease is
attributable to lower license revenue from the legacy product lines during 2000
resulting in the lapse of related maintenance contracts in excess of new
contracts and renewals.

Consulting revenues for the nine months ended September 30, 2001 were
$12.3 million, a decrease of $4.1 million, or 25.0%, as compared to the nine
months ended September 30, 2000. Approximately $1.9 million of the decrease
relates to divested product lines. Higher utilization rates for the nine months
ended September 30, 2001 were offset by headcount reductions made as part of the
Company's restructuring actions in the third quarter of 2000, which reduced
total consulting revenue.

COSTS OF LICENSES, MAINTENANCE AND CONSULTING.

Costs of licenses, maintenance and consulting were $12.9 million for the
nine months ended September 30, 2001, representing 36.1% of total revenues, and
$20.9 million for the nine months ended September 30, 2000, representing 50.6%
of total revenues.

The costs of licenses, as a percentage of license revenues,
decreased in the nine months ended September 30, 2001 as compared to the nine
months ended September 30, 2000. The decrease results from the Company selling a
higher proportion of products that utilize the Company's own technology rather
than technology licensed from third parties.

The cost of maintenance, as a percentage of related revenue, increased
in the nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000. This increase is the result of increased costs during the
period, coupled with a reduction in the revenues in the nine months ended September
30, 2001.

The costs of consulting, as a percentage of related revenue, decreased
in the nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000. The decrease reflects the effect of the restructuring
actions taken in the third quarter of 2000, together with a relative reduction
in the use of outside contractors in 2001.

SALES AND MARKETING.

Sales and marketing costs for the nine months ended September 30, 2001
were $9.0 million, a decrease of $6.1 million, or 40.5%, as compared to the nine
months ended September 30, 2000. As a percentage of total revenues, sales and
marketing expenses were 25% and 36.4% in the nine months ended September 30,
2001 and 2000, respectively. The decrease is attributable to reduced
discretionary spending and reduced sales and marketing employee related costs.

PRODUCT DEVELOPMENT.

Product development related expenses, excluding amortization of
capitalized software, were as follows:

`Nine Months Ended
                                          September 30,
                                      -------------------
                                         2001      2000
                                      --------- ---------
Product development expenditures.....   $8,208   $13,066
Less:
   Additions to capitalized software.   (1,140)   (3,055)
                                      --------- ---------
Product development expense..........   $7,068   $10,011
                                      ========= =========`

Net product development expense decreased $2.9 million, or 29.4%, in the
nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000 and was 19.7% and 24.2% of total revenues, respectively.  For
the nine months ended September 30, 2001, total product development expenditures
decreased $4.9 million reflecting the effect of product line divestitures and
restructuring actions.  RareVision costs were approximately $2.9 million for the
nine months ended September 30, 2001, compared with $2.1 million for the nine
months ended September 30, 2000.  Additions to capitalized software decreased
$1.9 million, or 62.7%, in the nine months ended September 30, 2001 as compared
to the nine months ended September 30, 2000 and were 13.9% and 23.4% of product
development expenditures, respectively. The decrease in software costs
capitalized in the nine months ended September 30, 2001 is primarily
attributable to a larger portion of product development resources being
allocated to projects that do not meet the Company's capitalization criteria.
During the nine months ended September 30, 2000, significant research and
development resources were allocated to the Company's e2 product that was
launched in the second quarter of fiscal 2000.

AMORTIZATION OF CAPITALIZED SOFTWARE.

Capitalized software amortization in the nine months ended September 30,
2001 was $2.3 million, a decrease of $1.6 million, or 41.9%, as compared to the
nine months ended September 30, 2000. Amortization has decreased since the third
quarter of fiscal 2000 due to the impairment of $4.8 million of capitalized
software during that quarter as part of the Company's restructuring actions.

GENERAL AND ADMINISTRATIVE.

General and administrative expenses in the nine months ended September
30, 2001 were $4.3 million, a decrease of $4.3 million, or 50.0%, as compared to
the nine months ended September 30, 2000. As a percentage of total revenues,
general and administrative expenses were 12.1% and 20.9% in the nine months
ended September 30, 2001 and 2000, respectively.  The decrease in the nine
months ended September 30, 2001 is primarily due to the effect of the product
line divestitures, lower employee and facilities costs resulting from the
Company's restructuring actions during the third quarter of 2000, a $450,000
benefit from termination of a lease and a  $300,000 benefit from a favorable
sales tax determination.

PROVISION FOR INCOME TAXES.

In the nine months ended September 30, 2001, the Company provided
$75,000 for state and foreign income taxes that could not be offset against net
operating loss carryforwards. In the nine months ended September 30, 2000, the
Company recorded an income tax expense of $148,000 associated with state and
foreign taxes

LIQUIDITY AND CAPITAL RESOURCES



As of September 30, 2001, the Company's principal sources of liquidity
included cash, cash equivalents and short-term investments aggregating $7.4
million. In addition, in March 2001 the Company replaced its $6.0 million line
of credit, secured by marketable securities, with a new credit facility. Under
the terms of the new credit facility, which is renewable annually, the Company
may borrow up to $6.0 million, dependent upon the amount of eligible accounts
receivable, as defined in the agreement.   No borrowings were outstanding as of
September 30, 2001.

The Company's operating activities used cash of $638,000 and $9.7
million in the nine months ended September 30, 2001 and September 30, 2000,
respectively. Cash flows from operating activities for the nine months ended
September 30, 2001 primarily reflected net income of $469,000; a decrease in
accounts receivable, net of reserves, of $890,000; a decrease in accounts
payable and accrued expenses of $3.8 million; a decrease in deferred revenue of
$1.1 million, and depreciation and amortization of $3.2 million. Cash flows from
operating activities for the nine months ended September 30, 2000 primarily
reflected a net loss of $23.4 million; depreciation and amortization of $5.6
million; a decrease in accounts receivable, net of reserves, of $5.3 million;
and a decrease in deferred revenue of $4.4 million.

Financing activities provided $196,000 and $1.5 million in cash during
the nine months ended September 30, 2001 and September 30, 2000, respectively,
substantially all of which comprised proceeds from the issuance of stock under
the Company's employee stock purchase plan and proceeds from stock options
exercised.

Investing activities used $126,000 in cash during the nine months ended
September 30, 2001 and provided $3.7 million in cash during the nine months
ended September 30, 2000.  The major cash flows in the nine months ended
September 30, 2001 comprised net investment activity totaling $1.7 million,
offset by additions to capitalized software of $1.1 million and fixed asset
purchases of $670,000. The major cash flows in the nine months ended September
30, 2000 comprised net investment activity totaling $7.3 million, offset by
additions to capitalized software of $3.1 million and fixed asset purchases of
$533,000.

The Company believes that its principal sources of liquidity, which
include cash and cash equivalents of $7.4 million as of September 30, 2001 and
funds expected from operations will satisfy the Company's currently anticipated
working capital and capital expenditure requirements for at least the next
twelve months. In addition, the Company has a credit facility that provides for
up to $6.0 million of borrowings, dependent upon the amount of eligible accounts
receivable, as defined in the agreement. However, there can be no assurance that
the Company will not need to raise additional capital to fund operations within
this period.  There can be no assurance that additional financing can be
obtained on acceptable terms, or at all.  If additional funds are raised by
issuing equity securities, dilution to stockholders may result.  If adequate
funds are not available, the Company may be harmed.



ADDITIONAL RISK FACTORS

The Company operates in a rapidly changing environment that involves
numerous risks and uncertainties which could have a material adverse effect on
the Company. The following discussion details some, but not all, of these risks
and uncertainties.

FLUCTUATION IN OPERATING RESULTS

The Company's operating results fluctuate as a result of a
variety of factors including:

> (i) the execution of new license agreements;

> (ii) the shipment of software products;

> (iii) customer acceptance criteria for services performed;

> (iv) completion of milestone or other significant development
> requirements pursuant to the Company's license agreements;

> (v) the financial terms of consulting agreements and the inclusion
> of fixed as opposed to variable pricing;

> (vi) third-party royalty payments for licensed software;

> (vii) the demand for the Company's products and services;

> (viii) changes in the Company's product mix;

> (ix) the development and launch of new products, and the life cycles
> of the Company's existing products;

> (x) research and development expenditures required to update and
> expand the Company's product portfolio and related third-party consulting costs;

> (xi) sales and marketing expenses generally related to the entry
> into new markets with new or existing products and maintenance of market share
> in existing markets;

> (xii) acquisitions and the integration and development of acquired
> entities or products;

> (xiii) competitive conditions in the industry; and

> (xiv) general economic conditions.

As a result, the Company believes that period-to-period comparisons of
its operating results are not necessarily meaningful and should not be relied
upon as indications of future performance.

The Company's quarterly operating results are particularly dependent on
the number of license agreement bookings executed in each quarter. In addition,
the Company's consulting and maintenance revenue is dependent on the license
agreements booked in recent quarters. The amount of quarterly bookings has
varied substantially from quarter to quarter due to a variety of reasons
including:

> (i) a high proportion of license agreements are negotiated during the latter
> part of each quarter and these negotiations may not be completed before the
> quarter end;

> (ii) the sales cycles for some of the Company's products are
> relatively long due to the Company's focus on "enterprise solutions"
> as opposed to individual products, which adds complexity to the customer's
> selection, negotiation and approval process;

> (iii) the Company's longer sales cycle resulting from its transition
> to e-business, as the transition to collaborative commerce involves coordination
> with multiple vendors that can delay the sales process;

> (iv) the amount related to each booking may vary significantly due
> to the need for different solutions for different customers;

> (v) procurement procedures may vary from customer to customer, which
> may affect the timing of the bookings;

> (vi) the period for a customer to complete product evaluations and
> to complete any subsequent purchase approval may be delayed due to resource
> limitations; and

> (vii) economic, political and industrial conditions can adversely
> affect business opportunities without notice.

In addition, bookings that are executed during a
particular quarter may not be recognized as revenue during such quarter because
such bookings may not have met the Company's revenue recognition criteria. No
assurance can be given that the Company will be able to effect new bookings in
accordance with historical results or management's expectations, and the
inability of the Company to do so could have a material adverse effect on the
Company's operating results.

While the Company typically sells its software under
a standard license agreement, license agreements associated with large
enterprise solutions often require the negotiation of terms and conditions that
differ substantially from the Company's standard license agreement terms. The
negotiation of these agreements may extend the sales cycle. The Company may not
always obtain terms and conditions that permit the recognition of revenue upon
shipment of the licensed product or under the percentage of completion method of
contract accounting rules. Accordingly, revenue may not be recognized after
shipment of a product because specified milestones have not been met or because
applicable services have not been completed.

The Company has and expects to enter into fixed-
price consulting agreements, particularly in response to increased competition
in the industry. The Company has recognized lower profit margins on certain
fixed-price service agreements when compared to variable agreements. No
assurance can be given that the Company will be able to conclude fixed-price
agreements on terms that will allow the Company to achieve acceptable operating
margins.

The Company has historically generated a majority of
its consulting revenue from pre- and post-implementation services. The Company
has provided services that include, but are not limited to, Year 2000 readiness
engagements, best practice solution engagements and other hardware and software
solutions. The Company intends to continue its pursuit of consulting engagements
for which the Company believes it is qualified. There can be no assurances that
these engagements will result in profit margins equal to or greater than those
engagements that are specific to a customer's product implementation. Also,
there can be no assurances that consulting revenue generated from non-
implementation related projects will continue in the future.

Employee and facility related expenditures comprise
a significant portion of the Company's operating costs and expenses, and are
therefore relatively fixed over the short term. In addition, the Company's
expense levels are based, in significant part, on the Company's forecasted
revenue. If revenue levels fall below expectations, operating results are likely
to be adversely affected. There can be no assurance that the Company will be
able to achieve profitability on a quarterly or annual basis in the future. Any
of the foregoing factors could cause the Company's future operating results to
fall below the expectations of public securities market analysts, which could
have an adverse effect on the trading price of the Company's common stock. See
"Volatility of Stock Price."

NASDAQ DELISTING

The Company received a Nasdaq Staff Determination indicating
that the Company failed to comply with the listing requirements of the Nasdaq
National Market. A determination was made by the Panel on March 5, 2001 to
delist the Company's securities from the Nasdaq Stock Market effective with the
open of business March 6, 2001. As of March 6, 2001 the Company's stock has
traded on the Over the Counter ("OTC") Bulletin Board. This is
generally considered a less efficient market, and the Company's stock price, as
well as the liquidity of its common stock, may be adversely affected as a
result.

VOLATILITY OF STOCK PRICE

Technology companies, including the
Company, frequently experience volatility in their common stock prices. Factors
such as quarterly fluctuations in results of operations, announcements of
technological innovations by the Company or its competitors or the introduction
of new products by the Company or its competitors and macroeconomic conditions
in the computer hardware and software industries generally may have a
significant adverse impact on the market price of the Company's stock. If
revenues or earnings in any quarter fail to meet the expectations of the
investment community, there could be an immediate impact on the Company's stock
price. In addition, the Company has issued shares and stock options, which, if
sold directly or exercised and sold on the open market in large concentrations,
could cause the Company's stock price to decline in the short term. Furthermore,
the stock market has from time to time experienced extreme price and volume
fluctuations which have particularly affected the market price for many
technology companies, in some cases unrelated to the operating performance of
those companies. These broad market fluctuations may materially adversely affect
the market price of the stock of the Company.

RELIANCE ON THIRD PARTY TECHNOLOGY

The Company generates revenue from
internally developed software products, some of which utilize technology
licensed from third parties. The Company expects to continue utilizing third
party technology and may enter into agreements with additional business
partners. If sales of software utilizing third party technology increase
disproportionately, gross margins may be below historical levels due to third
party royalty obligations. There can be no assurances that the third parties
will renew existing agreements with the Company or will not require financial
conditions that are unfavorable to the Company. In addition, there can be no
assurances that existing third party agreements will not be terminated.

INDUSTRY

Certain software companies, including the
Company, have experienced significant economic downturns as a result of
technological shifts and competitive pressures. These downturns are
characterized by decreased product demand, price erosion, work slowdowns and
layoffs. The Company's operations may, in the future, experience substantial
fluctuations from period to period because of such industry patterns and general
economic and political conditions which could affect the timing of orders from
customers. There can be no assurance that such factors will not have a
materially adverse effect on the Company's business, operating results or
financial condition.

INTERNATIONAL

The Company will continue its presence in
international markets by marketing its B2B e-business solutions for the
enterprise to Global 2000 organizations. Risks associated with such pursuits
include, but are not limited to, the following: changing market demands,
economic and political conditions in foreign markets, foreign exchange
fluctuations, longer collections cycles, difficulty in managing a geographically
dispersed organization and changes in international tax laws. Operating results
are likely to be adversely affected if the Company's operations in international
markets are not successful.

COMPETITION

The business and financial applications
software market for large, complex organizations is intensely competitive. The
Company's principal competitors with e-business solutions are SAP AG, Oracle
Corporation and PeopleSoft, Inc. With the Horizon suite of analytic
applications, the Company principally competes with Hyperion Solutions
Corporation and Comshare, Inc.

The Company also competes to a lesser extent with
other independent software application vendors. Some of the Company's current
and potential competitors have substantially greater financial, technical,
marketing and sales resources than the Company. Some of these competitors also
offer business application products not offered by the Company, primarily in the
areas of human resources and manufacturing. However, Walker remains one of the
few companies committed to providing and enhancing applications for the
mainframe environment. Most of the competitors listed above compete with Walker
by offering UNIX-based applications.

The Company encounters competition from a broader
range of firms in the market for professional services. Principal competitors
include Accenture (formerly Andersen Consulting) and IBM Global Services, the
consulting divisions of the major accounting firms, all of which possess greater
resources than the Company, and niche-consulting firms that specialize in the
Company's products and compete primarily on the basis of price of services
provided.

The principal competitive factors in the market for
business and financial applications software and services include product
functionality, flexibility, portability, integration, reliability, performance,
product availability, speed of implementation, quality of customer support and
user documentation, vendor reputation, experience, financial stability, cost
effectiveness and price. The Company believes that it competes favorably with
respect to these factors. There can be no assurance, however, that the Company
will be able to compete successfully in the future.

RAPID TECHNOLOGICAL CHANGE

The software industry is characterized by
rapid technological change. The pace of change has accelerated due to advances
in mainframe and client/server technology and the growth in Internet, Intranet
and extranet utilization. The Company expects to evaluate potential
opportunities and may invest in those that are compatible with the Company's
strategic direction. However, there can be no assurance that any such
investments will be profitable. The Company's products are also designed
primarily for use with certain mainframe and client/server systems. The
introduction of products embodying new technologies and the emergence of new
industry standards can render existing products obsolete. Accordingly, the
Company's future success depends in part upon its ability to continue to enhance
its current products and to develop and introduce new products that respond to
evolving customer requirements and keep pace with technological development and
emerging industry standards, such as new operating systems, hardware platforms,
interfaces and third party applications software.

There can be no assurances that:

> (i) the Company will be successful in developing and marketing
> product enhancements or new products that respond to technological change,
> changes in customer requirements or emerging industry standards;

> (ii) the Company will not experience difficulties that could delay
> or prevent the successful development, introduction and marketing of such
> products and enhancements; or

> (iii) any new products or enhancements that it may introduce will
> achieve market acceptance.

PRODUCT DEVELOPMENT

The Company's continued success is
dependent on its continued ability to introduce, develop and market new and
enhanced versions of its software products, although there can be no assurance
that this process can be maintained. The Company plans to continue its
investment in product development in future periods. However, there can be no
assurance that revenues will be sufficient to support the future product
development that is required for the Company to be competitive. Although the
Company may be able to release new products in addition to enhancements to
existing products, there can be no assurance that the Company's new or upgraded
products will be accepted, will not be delayed or canceled, or will not contain
errors or "bugs" that could affect the performance of the product or
cause damage to users' data.

PROPRIETARY RIGHTS

The Company regards its products as
proprietary. Through its license agreements with customers and its internal
security systems, confidentiality procedures and employee agreements, the
Company has taken steps to maintain the trade secrecy of its products. However,
there can be no assurances that misappropriation will not occur. In addition,
the laws of some countries do not protect the Company's proprietary rights to
the same extent as do the laws of the United States. There can be no assurance
that the confidentiality of any proprietary information will provide any
meaningful competitive advantage. The Company has no patents relating to its
products. The Company believes that, because of the rapid pace of technological
change in the computer software industry, that patents and copyrights are less
significant than factors such as the knowledge, ability and experience of the
Company's employees, frequent product enhancements and the timeliness and
quality of support services. There can be no assurance that the Company's
current efforts to retain its products as proprietary will be adequate.

Although the Company believes that its products do
not infringe upon the proprietary rights of third parties, there can be no
assurance that third parties will not assert infringement claims against the
Company in the future with respect to current or future products or that any
such assertions will not require the Company to enter into royalty arrangements
or result in costly litigation.

PRODUCT LIABILITY

The Company's license agreements with its
customers contain provisions designed to limit the Company's exposure to
potential product liability claims. It is possible, however, that the limitation
of liability provisions contained in such license agreements may not be enforced
as a result of international, federal, state and local laws or ordinances or
unfavorable judicial decisions. The license and support of the Company's
software for use in mission critical applications creates the risk of product
liability claims against the Company. Damage liability or injunctive relief
resulting from such a claim could cause a materially adverse impact on the
Company's business, operating results and financial condition.

EMPLOYEES

The Company believes that its continued
success will depend in large part upon its ability to attract, train and retain
highly skilled technical, sales, marketing and managerial personnel. Because of
the high level of demand, competition for such personnel is intense and the
Company sometimes experiences difficulty in locating candidates with appropriate
qualifications or within desired geographic locations. Revenue growth is
dependent on the Company's ability to attract, train, retain and productively
manage such personnel.

FACILITIES

The Company has its headquarters in San Francisco, California under
a lease that expires in 2007. Although commercial building vacancy rates have
historically been low in San Francisco, recent changes in the technology sector
have resulted in a significant increase in available office space. The Company's
San Francisco headquarters office space exceeds its current needs, and the
Company is seeking to reduce this excess office space. Failure to do so on
commercially acceptable terms may adversely affect the Company's operations and
financial results.

ACQUISITION-RELATED RISKS

The Company has acquired and may continue to acquire
complimentary businesses, products or technology. The process of integrating an
acquired company's business into the Company's operations may result in
unforeseen operating difficulties and expenditures and may require significant
management attention that would otherwise be available for the ongoing
development of the Company's business. There can be no assurance that any
anticipated benefits of an acquisition will be realized. Future acquisitions by
the Company could result in potentially dilutive issuances of equity securities,
the incurrence of debt and contingent liabilities and amortization related to
goodwill and other intangible assets, which could materially affect the
Company's operating results and financial condition. Acquisitions involve
numerous risks, including difficulties in the assimilation of operations,
technologies and products of the acquired company, risks associated with
entering markets in which the Company has no or limited direct prior experience
and the potential loss of key employees of the acquired company.



Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in the reported market risks as discussed
in the Company's Annual Report on Form 10-K for the year ended December 31,
2000.





PART II.  OTHER INFORMATION

Item 6.	EXHIBITS AND REPORTS ON FORM 8-K



1. Exhibits

None

1. Reports on Form 8-K

None

---

WALKER INTERACTIVE SYSTEMS, INC.

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.



| |                                 
| | --------------------------------
| | WALKER INTERACTIVE SYSTEMS, INC.

| |             
| | ------------
| | (Registrant)



| |     |                      
| | --- | ---------------------
| | By: | /s/ Stanley V. Vogler

| |                        
| | -----------------------
| |                        
| | Stanley V. Vogler      
| | Chief Financial Officer
|