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 period ended September 30, 2000

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR

15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission file number   0-16230

STRUCTURAL DYNAMICS RESEARCH CORPORATION

(Exact name of registrant as specified in its charter)



|                                | Ohio |  |  |                  |  |                     |  |  |  | 31-0733928
|------------------------------- | ---- |  |  | ---------------- |  | ------------------- |  |  |  | ----------
|(State or other jurisdiction of |      |  |  | (I.R.S. Employer
|incorporation or organization)  |      |  |  |                  |  | Identification No.)

2000 Eastman Drive, Milford, Ohio 45150

(Address of principal executive offices)

(Zip Code)

(513) 576-2400

(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 such reports), and (2) has been
subject to such filing requirements for the past 90 days.

| |  |  |  | Yes [X] |  |  | No [  ]
| |  |  |  | ------- |  |  | -------

As of October 31, 2000 there were 35,502,849 shares of the Registrant's Common Stock, without
par value, issued and outstanding.

STRUCTURAL DYNAMICS RESEARCH CORPORATION

Form 10-Q for period ending September 30, 2000

Table of Contents

|PART I.   | FINANCIAL INFORMATION                                                                 | Page                                      
|--------- | ------------------------------------------------------------------------------------- | ------------------------------------------
|Item 1.   | Financial Statements                                                                  |                                           
|          |                                                                                       | Consolidated Statements of Operations     
|          |                                                                                       | Consolidated Balance Sheets               
|          |                                                                                       | Consolidated Statements of Cash Flows     
|          |                                                                                       | Notes to Consolidated Financial Statements
|Item 2.   | Management's Discussion and Analysis of Financial Condition and Results of
Operations | 6                                         
|Item 3.   | Quantitative and Qualitative Disclosures About Market Risk                            | 13                                        
|          |                                                                                       |                                           
|PART II.  | OTHER INFORMATION                                                                     |                                           
|Item 6.   | Exhibits and Reports on Form 8-K                                                      | 13                                        
|          |                                                                                       |                                           
|SIGNATURE | 14                                                                                   

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements.

STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

|                           |                                   | Three Months

Ended September 30, |             | Nine Months 

Ended September 30,
|-------------------------- | --------------------------------- | --------------------------------- | ----------- | ---------------------------------
|                           |                                   | 2000                              |             | 1999                             
|Revenue:                   |                                   |                                   |             |                                  
|                           | Software licenses                 | $                                 | 32,932      | $                                
|                           | Software maintenance and services |                                   | 72,652      |                                  
|                           | Total revenue                     |                                   | 105,584     |                                  
|                           |                                   |                                   |             |                                  
|Cost of revenue:           |                                   |                                   |             |                                  
|                           | Cost of licenses                  |                                   | 8,816       |                                  
|                           | Cost of maintenance and services  |                                   | 40,590      |                                  
|                           | Total cost of revenue             |                                   | 49,406      |                                  
|Gross profit               |                                   | 56,178                            |             | 57,368                           
|                           |                                   |                                   |             |                                  
|Operating expenses:        |                                   |                                   |             |                                  
|                           | Selling and marketing             |                                   | 30,491      |                                  
|                           | Research and development          |                                   | 22,132      |                                  
|                           | General and administrative        |                                   | 5,104       |                                  
|                           | In-process research and           |                                   |             |                                  
|                           | development                       | --                                |             | 2,350                            
|Total operating expenses   |                                   | 57,727                            |             | 54,244                           
|                           | Operating income                  |                                   | (1,549)     |                                  
|                           |                                   |                                   |             |                                  
|Other income, net          |                                   | 2,174                             |             | 1,464                            
|Income before income taxes |                                   | 625                               |             | 4,588                            
|Income tax expense         |                                   | 329                               |             | 2,051                            
|                           | Net income                        | $                                 | 296

====== | $                                
|                           |                                   |                                   |             |                                  
|Net income per share:      |                                   |                                   |             |                                  
|                           | Basic                             | $                                 | .01         | $                                
|                           | Diluted                           |                                   | .01         |                                  
|                           |                                   |                                   |             |                                  
|Comprehensive income       | $                                 | (1,707)

======                   | $           | 3,538

======                    

See accompanying notes to consolidated financial statements.

STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)



|                                 | September 30,                                  | December 31,
|-------------------------------- | ---------------------------------------------- | ------------
|                                 | 2000                                           | 1999        
|Assets                           | (unaudited)                                    |             
|                                 |                                                |             
|Current assets:                  |                                                |             
|                                 | Cash and cash equivalents                      | $           
|                                 | Marketable securities                          |             
|                                 | Trade accounts receivable, net                 |             
|                                 | Other accounts receivable                      |             
|                                 | Prepaid expenses and other current assets      |             
|                                 |                                                | 267,930     
|                                 |                                                |             
|Marketable securities            |                                                | 8,585       
|                                 |                                                |             
|Property and equipment, at cost: |                                                |             
|                                 | Computer and other equipment                   |             
|                                 | Office furniture and equipment                 |             
|                                 | Leasehold improvements                         |             
|                                 |                                                | 107,584     
|                                 |                                                |             
|                                 | Less accumulated depreciation and amortization |             
|                                 | Net property and equipment                     |             
|                                 |                                                |             
|Marketable software costs, net   |                                                | 60,605      
|Goodwill and other intangibles   |                                                | 49,031      
|Other assets                     |                                                | 9,219       
|                                 |                                                |             
|                                 |                                                |             
|                                 | Total assets                                   | $           

See accompanying notes to consolidated financial statements.

STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share data)

|                                     | September 30,                                    | December 31,             
|------------------------------------ | ------------------------------------------------ | -------------------------
|                                     | 2000                                             | 1999                     
|Liabilities and Shareholders' Equity | (unaudited)                                      |                          
|                                     |                                                  |                          
|Current liabilities:                 |                                                  |                          
|                                     | Accounts payable                                 | $                        
|                                     | Accrued expenses                                 |                          
|                                     | Accrued income taxes                             |                          
|                                     | Deferred revenue                                 |                          
|                                     |                                                  | Total current liabilities
|                                     |                                                  |                          
|Long-term liabilities                |                                                  | 7,565                    
|                                     |                                                  |                          
|Shareholders' equity:                |                                                  |                          
|                                     | Common stock, stated value $.0069 per share      |                          
|                                     | Authorized 100,000 shares; outstanding shares-  
|                                     | 36,273 and 35,592 net of 2,618 and 2,678 shares 
|                                     | in treasury                                     
|                                     | Capital in excess of stated value                |                          
|                                     | Retained earnings                                |                          
|                                     | Accumulated other comprehensive income:          |                          
|                                     | Foreign currency translation adjustment          |                          
|                                     | Unrealized holding loss on marketable securities |                          
|                                     | Accumulated other comprehensive income           |                          
|                                     | Total shareholders' equity                       |                          
|                                     |                                                  |                          
|                                     |                                                  |                          
|                                     |                                                  |                          
|                                     | Total liabilities and shareholders' equity       | $                        

STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

|                                        | Nine Months Ended September 30,                             
|--------------------------------------- | ------------------------------------------------------------
|                                        | 2000                                                        
|Cash flows from operating activities:   |                                                             
|                                        | Net Income                                                  
|                                        | Adjustments to reconcile net income to net cash flows       
|                                        | from operating activities:                                  
|                                        | Amortization of computer software cost                      
|                                        | Depreciation                                                
|                                        | Amortization of goodwill and acquired intangibles           
|                                        | Purchased in-process research and development               
|                                        | Net loss on sale of business and property                   
|                                        | Other                                                       
|                                        | Changes in assets and liabilities from operating activities:
|                                        | Accounts receivable                                         
|                                        | Prepaid expenses and other assets                           
|                                        | Accounts payable and accrued expenses                       
|                                        | Income taxes                                                
|                                        | Deferred revenue                                            
|                                        | Other long-term liabilities                                 
|                                        | Net cash provided by operating activities                   
|                                        |                                                             
|Cash flows from investing activities:   |                                                             
|                                        | Purchases of marketable securities, net                     
|                                        | Additions to property and equipment, net                    
|                                        | Additions to marketable software costs                      
|                                        | Acquisitions, net of cash acquired                          
|                                        | Divestiture of certain operations                           
|                                        | Net cash used in investing activities                       
|                                        |                                                             
|Cash flows from financing activities:   |                                                             
|                                        | Issuance of common stock                                    
|                                        | Purchase of common stock                                    
|                                        |                                                             
|                                        |                                                             
|Effect of exchange rate changes on cash |                                                             
|Increase in cash and cash equivalents   |                                                             
|                                        |                                                             
|Cash and cash equivalents:              |                                                             
|                                        | Beginning of period                                         
|                                        | End of period                                               

See accompanying notes to consolidated financial statements.

STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by SDRC
pursuant to the rules and regulations of the Securities and Exchange Commission.  As permitted
by the rules of the Securities and Exchange Commission applicable to quarterly reports on Form
10-Q, these notes are condensed and do not contain all disclosures required by generally accepted
accounting principles.  In the opinion of management, these financial statements contain all
adjustments (consisting of only normal recurring adjustments, unless otherwise noted) necessary
to present fairly SDRC's financial position, results of operations and cash flows as of the dates
and for the periods indicated.  These financial statements should be read in conjunction with the
Consolidated Financial Statements and related notes included in SDRC's Annual Report on Form
10-K for the year ended December 31, 1999.





(2) Earnings Per Share

Basic and diluted earnings per common share are computed using the weighted average number
of common and dilutive common equivalent shares outstanding during the period, respectively.
Dilutive common equivalent shares are calculated using the treasury stock method and consist of
dilutive stock option grants.

The reconciliations of amounts used for the basic and diluted earnings per share calculations are
as follows:

|                                 | Three Months

Ended September 30,       | Nine Months 

Ended September 30,
|-------------------------------- | --------------------------------------- | ---------------------------------
|                                 | 2000                                    | 1999                             
|Net income (numerator)           | $                                       | 296

======                      
|                                 |                                         |                                  
|Weighted average outstanding:    |                                         |                                  
|                                 | Common shares (basic denominator)       |                                  
|                                 | Dilutive employee stock options         |                                  
|                                 |                                         |                                  
|Common stock and dilutive common |                                         |                                  
|                                 | stock equivalents (diluted denominator) |                                  
|                                 |                                         |                                  
|Earnings per share:              |                                         |                                  
|                                 | Basic                                   | $                                
|                                 | Diluted                                 | $                                

Options to purchase 1,980 and 2,154 shares of common stock for the three and nine months
ended September 30, 2000 and 1,976 and 1,916 shares of common stock for the three and nine
months ended September 30, 1999 respectively, were not included in the computation of dilutive
earnings per share because the options' exercise price was greater than the average market price
of common shares.

(3) Acquisitions



In January 2000, SDRC acquired all the stock of Sherpa Systems Corporation ("Sherpa") and
Inso France Development, SA ("IFD") from Inso Corporation.  SDRC initially paid $5,000 in
cash and assumed net liabilities of approximately $6,342.  SDRC is also obligated to pay
contingent, cash consideration dependent on final 1999 Sherpa operating activity and 2000
Sherpa products revenue.  In July 2000, SDRC made a payment of approximately $2,700 toward
the additional consideration.  Current estimates of future payments do not exceed $3,000.  The
acquisition was recorded as a purchase and beginning January 2000, the operating results of
Sherpa and IFD have been included in SDRC's operating results. Goodwill of approximately
$14,190 has been recorded at September 30, 2000 and is being amortized over five years.  The
acquisition of Sherpa expanded SDRC's base of customers.  SDRC has designed a technology
transition path to migrate Sherpa users to Metaphase(R).

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

(in thousands)

SDRC is a leading developer and global marketer of collaborative software and service solutions
for the product lifecycle.  Customers use SDRC's software solutions to develop mechanical
products and manage information about their products.  SDRC's computer-aided design,
computer-aided manufacturing and computer-aided engineering software tools are used to design
products, analyze performance and program manufacturability.  SDRC markets its integrated
mechanical CAD/CAM/CAE software under the brand name I-DEAS(R).  Metaphase is SDRC's
suite of Internet-enabled product knowledge management ("PKM") tools, which assists
companies in tracking and distributing product information from inception to manufacturing and
throughout the product lifecycle.  In 2000, SDRC introduced Accelis(TM), a web-based,  e-business integration framework to exchange product information among developers, suppliers,
customers and other participants in a product's lifecycle.  Complementing its software solutions,
SDRC supports its customers with training, software implementation and consulting services
through its professional services staff.

Certain statements in this Form 10-Q are forward looking statements that involve risks and
uncertainties, including the timely availability and acceptance of new products, the impact of
competitive products and pricing, the management of resources, and the other risks detailed from
time to time in SDRC's Securities and Exchange Commission reports.  SDRC's results could
differ from those results described herein.  Forward looking information should be evaluated in
the context of these and other factors, some of which are described in more detail in "Factors
That May Affect Future Results".

Revenue

SDRC's total revenue declined 3% for the three months ended September 30, 2000 compared to
the corresponding 1999 quarter.  Total maintenance and services revenue increased 9% while
license revenue decreased 22% for the third quarter of 2000.  Absent a 3% decline in revenue due
to weaker European currencies against the US dollar for the 2000 quarter, total revenue would
have remained flat as compared to the corresponding 1999 quarter.  For the nine months ended
September 30, 2000, total revenue increased 1% compared to the corresponding 1999 period.
Increases in maintenance and services revenue of 12% over the 1999 period, offset a 14% decline
in license sales in 2000.

CAD/CAM/CAE revenue represented 63% and 66% of total revenue for the three and nine
months ended September 30, 2000.  License sales of CAD/CAM/CAE declined 25% in the
quarter ended September 30, 2000 compared to the corresponding 1999 quarter and 16% for the
nine months ended September 30, 2000 compared to the 1999 period.  The comparison to 1999
includes several significantly large automotive industry license sales in 1999, particularly in the
third quarter.  Lower CAD/CAM/CAE license revenue in 2000 reflected a slower, more mature
market for high-end mechanical CAD products compared to the first nine months of 1999.
CAD/CAM/CAE services and maintenance revenue grew 2% and 3% respectively, for the three
and nine months ended September 30, 2000 compared to the corresponding 1999 periods.
Revenue growth from maintenance for both the three and nine months in 2000 was offset by
declines in consulting services revenue, compared to the corresponding 1999 periods.  The
increase in maintenance revenue was generated from supporting a larger CAD/CAM/CAE
installed customer base.

PKM license revenue declined 19% in the quarter ended September 30, 2000 compared to the
corresponding 1999 quarter and 11% for the nine months ended September 30, 2000 compared to
the corresponding 1999 period.  The PKM market is a relatively new and volatile market.
Metaphase license sales are characterized by large order sizes and long sales cycles.  For the first
nine months of 2000, SDRC finalized several multi-million dollar Metaphase license orders.
While the order sizes were larger in 2000 than in 1999, fewer orders were finalized through
September 2000.  PKM service and maintenance revenue grew 26% during the quarter ended
September 30, 2000 compared to the prior year quarter.  For the nine months ended September
30, 2000, PKM service and maintenance revenue grew 33% compared to the same period in
1999.  This growth was driven by maintenance and services revenue from an expanded customer
base.  Since last year, the installed base of customers has grown through acquisitions and new
license sales.  Revenue from PKM products accounted for 34% and 30% of total revenue for the
nine months ended September 30, 2000 and 1999, respectively.  SDRC expects PKM revenue to
become a larger portion of its total revenue in the future.

For the three months ended September 30, 2000 and 1999, revenue in North America accounted
for 42% and 46%, Europe 37% and 36%, and Asia Pacific 21% and 18% respectively, of total
revenue.  An increase in PKM products revenue in Europe was partially offset by the devaluation
of European currencies, as the U.S. dollar strengthened in the third quarter of 2000.  The decrease
in North America revenue for the quarter was due to a significant license sale from a large
automotive supplier in the 1999 quarter that did not recur.  For the nine months ended September
30, 2000 and 1999, revenue in North America accounted for 42% and 45%, Europe 36% and
33% and Asia Pacific 22% and 22%, respectively.  SDRC expects the international market to
continue to account for a significant portion of total future revenue.

Cost of Revenue

Cost of revenue consists principally of the staff and related costs associated with fee-based
services and support for software maintenance contracts, amortization of goodwill, acquired
intangibles and capitalized software costs, royalty fees paid to third parties under licensing
agreements and the cost of distributing software products.  Cost of revenue decreased 4% and
increased 8% for the three and nine months ended September 30, 2000 respectively, compared to
the three and nine months ended September 30, 1999.  Cost of revenue represented 47% and 45%
of revenue for the three and nine months ended September 30, 2000 respectively, compared to
47% and 42% of revenue for the corresponding three and nine month periods in 1999.  For the
first nine months of 2000, incremental costs of maintenance and services were greater than
declines in the total cost of licenses.

The cost of licenses decreased 32% for the quarter ended September 30, 2000 and 19% for the
nine months ended September 30, 2000 compared to the same periods in 1999.  In the third
quarter of 1999, cost of licenses included a non-recurring royalty charge of $4,200 paid to a third
party supplier in connection with a major Metaphase license sale.  Aside from this anomaly, third
party royalties were lower in the 2000 quarter than the corresponding 1999 quarter, due to lower
license sales.  Due to recent acquisitions, the amortization of capitalized software, goodwill and
acquired intangibles increased 52% for the third quarter of 2000 and 37% for the nine months
ended September 30, 2000 compared to the corresponding 1999 periods.  The cost of licenses, as
a percentage of license revenue, was 27% and 21% for the three and nine month periods ended
September 30, 2000 respectively, compared to 30% and 22% for the same periods in 1999.   The
decrease in third party royalties, particularly in the third quarter of 2000, more than offset the
increase in the amortization of software, goodwill and other intangibles.

The cost of services and maintenance, as a percentage of related revenue, was 56% and 58% for
the three and nine months ended September 30, 2000 respectively, compared to 58% and 56% for
the corresponding periods in 1999.  The cost of maintenance and services increased 5% and 16%
for the three and nine months ended September 30, 2000 respectively, compared to the
corresponding periods in 1999.  The increases in 2000 are due to a 6% increase in customer
support personnel as a result of product maintenance growth for both I-DEAS and Metaphase and
a 5% increase in services personnel.  Additionally, the use of outside contractors increased to
support PKM customer implementation projects. Amortization of intangibles from recent
acquisitions also contributed to the increase compared to last year.

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of the compensation, travel and facility costs
associated with the worldwide sales and marketing staff.  These also include advertising cost,
product localization and amortization of acquired trade names and customer lists.  Selling and
marketing expenses represented 29% of revenue for the quarter ended September 30, 2000
compared to 28% for the corresponding 1999 quarter.  Total selling and marketing expenses
remained flat for the quarter ended September 30, 2000 compared to the same period in 1999.
Increases in bad debt reserves in Europe were offset by decreases in worldwide sales
commissions and advertising costs compared to the prior year quarter.  Selling and marketing
costs for the nine months ended September 30, 2000 decreased 3% compared to the same prior
year period.  The decrease was primarily due to lower sales commissions associated with a
decrease in license revenue and to a lesser extent, lower amounts paid for advertising costs.

Research and Development Expenses

Research and development expenses consist primarily of salaries, benefits, computer equipment
and facility costs associated with the product development staff.  They exclude costs which are
capitalized in accordance with Statement of Financial Accounting Standards No. 86, Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. Research and
development expenses increased 30% and 29% for the three and nine months ended September
30, 2000 respectively, compared to the three and nine months ended September 30, 1999.  The
increase resulted primarily from a decline in the amount of software development cost
capitalized.  In the three and nine months ended September 30, 2000, SDRC capitalized $3,394
and $12,778 of software development cost respectively, compared to $6,269 and $18,303 in the
corresponding 1999 periods.  The substantial decrease in capitalization is due to the timing of
extensive work on I-DEAS 8.  Software capitalization for I-DEAS 8 began in late 1998 and ran
through its release in June 2000, with the majority of the capitalization work being performed in
the third and fourth quarter of 1999.  In future periods, the amount of capitalized software
development cost and accordingly, research and development expenses, may vary depending on
the stage of development and the extent of functionality being performed on future product
releases.  The increase in research and development expense in 2000 is also, to a lesser extent,
attributed to a 2% increase in product development staff and higher external consulting costs,
both of which supported solutions for the e-business environment.  Aggressive development of
e-business collaboration software may require an increased investment in product development
resources.

General and Administrative Expenses

General and administrative expenses consist of costs associated with the executive, finance,
legal, human resource and corporate administrative staffs.  General and administrative expenses
represented 5% of revenue for the three and nine months ended September 30, 2000 and 4% of
revenue for the three and nine months ended September 30, 1999.  General and administrative
expenses increased to $5,104 and $14,946 for three and nine months ended September 30, 2000
respectively, compared to $4,424 and $13,730 for the corresponding 1999 periods.  The increases
were a result of higher compensation, facility and equipment expenses.  General and
administrative expenses in the future are expected to remain a small percentage of total revenue.

Other Income, net

For three and nine months ended September 30, 2000, other income was $2,174 and $6,359 and
reflects interest income from cash equivalents and marketable securities of $2,425 and $6,134
respectively.   In addition to interest income, other income in 2000 reflects a net gain of
approximately $969 associated with the settlement of a lease obligation for an unoccupied
building in the United Kingdom.  During the first quarter of 2000, other income included a
charge of approximately $1,400 for the divestiture of SDRC's Advanced Test & Analysis
operations.  Other income for three and nine months ended September 30, 1999 was $1,464 and
$4,899 and consisted of interest income of  $1,874 and $5,228 respectively.  The increase in
interest income during 2000 is due to higher yields on larger invested balances and includes $300
in additional interest received in the third quarter of 2000 related to refunds of prior year income
taxes.

Taxes

The effective tax rate for three and nine months ended September 30, 2000, was 53% and 39%
respectively, compared to 45% and 38% for the corresponding 1999 periods.  The increase in the
effective tax rate is primarily due to the non-deductible goodwill amortization associated with the
TD Technologies, Inc. ("TD") acquisition in September 1999 and the Sherpa acquisition in
January 2000.

Comprehensive Income

The differences between net income and comprehensive income were primarily due to unrealized
gains and losses from the translation of foreign subsidiaries' balance sheets into U.S. dollars.  For
nine months ended September 30, 2000 the loss on currency translation was $3,795 as compared
to $1,341 for the corresponding 1999 period due to the strengthening of the US dollar against the
foreign currencies of the subsidiaries.

Acquisitions

In January 2000, SDRC acquired all the stock of Sherpa and IFD from Inso Corporation.  SDRC
initially paid $5,000 in cash and assumed net liabilities of approximately $6,342.  SDRC is also
obligated to pay contingent, cash consideration dependent on final 1999 Sherpa operating activity
and 2000 Sherpa products revenue.  The transaction was recorded as a purchase and beginning
January 2000, the operating results of Sherpa and IFD have been included in SDRC's operating
results.  Goodwill of approximately $14,190 has been recorded at September 30, 2000 and is
being amortized over five years.  The acquisition of Sherpa expanded SDRC's base of customers.
SDRC has designed a technology transition path to migrate Sherpa users to Metaphase.

Liquidity and Capital Resources

During the nine months ended September 30, 2000, SDRC generated $53,058 of cash from
operating activities compared to $72,204 for the same period in 1999.  Less operating cash was
generated in 2000 compared to the 1999 period primarily due to lower operating income.  Timing
differences in vendor payments and prepaid expenses also contributed to the decrease in
operating cash in 2000.



SDRC used $35,093 and $47,622 of cash for investing activities during the nine months ended
September 30, 2000 and 1999, respectively.  In 1999, SDRC spent $15,228, net of cash acquired,
to purchase all the stock of Enterprise Software Products, Inc. ("ESP") and paid $320 related to
the TD acquisition.  In January 2000, SDRC acquired Sherpa and IFD. As of September 30,
2000, SDRC used approximately $7,388 of cash for the acquisition of Sherpa and IFD and
expects to pay up to $3,000 more to complete the acquisition during the next six months. In
August 2000, SDRC paid $1,450 to acquire all the stock of New Technologies, Inc. ("NTI").   In
March 2000, SDRC sold its Advanced Test & Analysis operations and agreed to make incentive
payments to the acquirer for retaining key personnel to complete service contracts for SDRC.  As
of September 30, 2000, SDRC paid approximately $873 toward the incentive obligation and
expects to make additional payments of approximately $328 to the acquirer over the next three
months.

Cash provided from the issuance of common stock for employee stock incentive plans, net of
treasury stock acquired, for nine months ended September 30, 2000 was $4,340.  In September
2000, SDRC purchased 120 shares of its own common stock for $1,994 pursuant to the 1998
treasury stock repurchase program.  During the first nine months of 1999, SDRC acquired 295
shares of its own common stock for $4,762.  The repurchase program is funded from working
capital and is intended to offset the issuance of shares under the existing employee stock plans.

At September 30, 2000, SDRC had cash and investments of $140,017 compared to $121,507 at
December 1999.  SDRC's net working capital was $121,744 at September 30, 2000.  SDRC does
not have any long-term debt obligations.  SDRC uses portions of its cash and investments to
purchase additional shares of its own stock or to acquire technology complementary to its
product offerings. In October 2000, $9,067 was spent to acquire an additional 870 shares.  The
existing sources of liquidity and funds anticipated to be generated from operations are expected
to provide adequate cash to fund SDRC's projected needs for the foreseeable future.

Factors That May Affect Future Results

Product Development

SDRC has embarked on a strategy to expand its product line coverage for visualization features,
data exchange functionality, Internet operable design and expedient Metaphase implementation
tools.  The markets for these initiatives, and the entire collaborative product development
industry, are highly competitive and characterized by rapid technological change, shifting
customer needs and continual innovation.  SDRC's success is dependent on its ability to
anticipate user needs and to keep pace with new technological developments which customers
need.  SDRC and its competitors are spending significant resources to develop Internet-based
collaboration tools.   In March 2000, SDRC announced a new product brand, Accelis, which will
be the foundation for SDRC's line of e-business integration tools.  The speed and degree that
SDRC can develop and market Internet-operable data exchange and other e-business features
through Accelis and its other product lines, will affect future operating results.

SDRC has committed to providing certain enhancements and integrations to customers within
aggressive time frames.  Failure to meet these time frames could result in delayed or lost revenue
opportunities.  SDRC relies on highly skilled technical and other key employees who are
competitively recruited within the software industry.  Additionally, SDRC relies, to a lesser
degree, on third parties for development.  Failure to attract and retain key personnel and maintain
important third party relationships could have an adverse impact on future operating results.

Sales Execution

SDRC's sales approach emphasizes enterprise-wide collaboration solutions, which include
software licenses, support and consulting services, primarily to large customer accounts.  During
1999, the Company initiated a new selling strategy, called SDRC's Partnership for Competitive
Excellence ("SPACE"), deployed as a means to invigorate its selling efforts to large, enterprise-wide opportunities.  Enterprise solution sales are complex and the sales process and approval
cycles can be lengthy.  Historically, a significant portion of SDRC's revenue is generated from
shipments in the last month of a quarter.  Failure to close a few large orders in a particular
quarter may negatively impact operating results.  In addition, higher volumes of orders have been
experienced in the fourth quarter.  The concentration of orders toward the end of the period
makes projections of quarterly financial results difficult.  SDRC usually ships software licenses
within one to two weeks after receipt of a customer order.  Orders may exist at the end of a
quarter, which have not been shipped; however, the value of such orders is not indicative of
revenue results for any future period.

SDRC sells its products through a common direct sales force.  As SDRC moves to enterprise
solution selling, more effort is needed through greater sales management involvement.
Accordingly, organizational execution, sales force training and related issues could hinder the
sales force's ability to secure customer accounts to the extent planned.  Besides its own sales
force, SDRC continues to rely on distributors, representatives and value-added resellers to sell a
significant portion of its software licenses.  Changes with a distributor, representative or value-added reseller, or disruptions in the internal sales organization could have a significant impact on
operating results in a quarter.

Product Markets

SDRC derives most of its revenue from selling software products and services to the high-end
users in the mechanical collaborative product design market.  SDRC invests resources in product
development, selling, marketing and customer service opportunities with the expectation of
revenue growth and incremental earnings.  SDRC expects the Internet to continue to grow as a
medium of commerce.  If manufacturers and their product partners do not adopt the Internet for
product data exchange, or adopt it slower than expected, revenues will be less than expected.
Likewise, if market growth rates for the CAD/CAM/CAE or PKM markets are less than
forecasted, SDRC's license revenue growth, as well as maintenance and services revenue growth,
are likely to be less than expected.  Market growth, and SDRC's ability to match resource levels
with revenue levels, will directly impact its future operating results.  SDRC's operating expense
levels are planned, in part, on forecasted revenue, and expense levels are generally committed in
advance.  Since expenses are relatively fixed in the near term, future operating results will be
impacted by SDRC's ability to convert invested outlays into expected revenue at profitable
margins.

International Business

A significant portion of SDRC's revenues is from international markets.  As a result, SDRC's
financial results could be impacted by weakened general economic conditions, differing
technological advances or preferences, volatile foreign exchange rates and government trade
restrictions in any country in which SDRC does business.  SDRC has invested sizable resources
in the Asia Pacific region, particularly in Japan and South Korea.  Economic instability in this
region could lead to an adverse impact on SDRC's operation results and financial position.

Technology Investment

Over the past two years, SDRC has purchased software technology and spent significant internal
resources to develop new functionality.  SDRC acquired Imageware Corporation, TD, ESP,
Sherpa and NTI with the objective of extending its CAD/CAM/CAE and PKM product offerings
and expanding its customer base.  Additionally, SDRC capitalized approximately $33,000 of
internal development cost for I-DEAS, its latest version of web-enabled CAD/CAM/CAE
software, released in June 2000.  These investments have resulted in increased amortization
expenses for capitalized software, goodwill and other acquired intangible assets, which will
continue over the next few years.  In addition to these investments, SDRC may acquire additional
technologies that have strategic benefit.  The effect on future earnings will depend, in part, on
SDRC's ability to integrate the purchased technology and advance it for SDRC's customers.
Market growth and sales expansion must be sufficient to cover a higher fixed cost structure or
operating results will be negatively impacted.  If operating results are continually less than
planned, SDRC's ability to recover the carrying value of an intangible may be impaired.  Under
such circumstances, SDRC will review the operating results and expected cash flows associated
with the related intangible.  If the fair value of the intangible is less than the carrying value, an
impairment charge will be recorded against net operating income in the period the impairment is
determined.

Stock Market Volatility

The trading price of SDRC's stock, like other software and technology stocks, is subject to
significant volatility.  If revenue or earnings fail to meet investors' expectations, there could be an
immediate and significant adverse impact on the trading price of SDRC's stock.  In addition,
SDRC's stock price may be affected by broader market factors that may be unrelated to SDRC's
performance.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

There have not been any significant changes to SDRC's financial market risk exposure since
filing of the 1999 Annual Report on Form 10-K.

PART II.  OTHER INFORMATION

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

|a) | Exhibits                                                         
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|   | 10                                                               
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|   | 27                                                               
|b) | No report on Form 8-K was filed during the third quarter of 2000.

SIGNATURE

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

|                        |     |                        |  |  | STRUCTURAL DYNAMICS RESEARCH CORPORATION
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|Date: November 13, 2000 | By: | /s/ Jeffrey J. Vorholt
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