<PAGE>

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

                                 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 July 31, 2000

                                      OR

[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission File Number: 0-22369

                               BEA SYSTEMS, INC.
            (Exact name of registrant as specified in its charter)

                 Delaware                              77-0394711
     (State or other jurisdiction of               (I. R. S. Employer
      incorporation or organization)               Identification No.)

                            2315 North First Street
                          San Jose, California 95131
                   (Address of principal executive offices)

                                (408) 570-8000
             (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 August 31, 2000, there were approximately 380,046,000 shares of the
Registrant's Common Stock outstanding.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

                               BEA SYSTEMS, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                        Page No.
                                                                        --------
 <C>      <S>                                                           <C>
 PART I.  FINANCIAL INFORMATION
 ITEM 1.  Financial Statements (Unaudited):
          Condensed Consolidated Statements of Operations and
           Comprehensive Income (Loss) Three and Six months ended
           July 31, 2000 and 1999....................................       3
          Condensed Consolidated Balance Sheets
           July 31, 2000 and January 31, 2000........................       4
          Condensed Consolidated Statements of Cash Flows
           Six months ended July 31, 2000 and 1999...................       5
          Notes to Condensed Consolidated Financial Statements.......       6
 ITEM 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations.................................      10
          Quantitative and Qualitative Disclosure about Market
 ITEM 3.   Risks.....................................................      24
 PART II. OTHER INFORMATION
 ITEM 4.  Submission of Matters to a Vote of Security Holders........      24
 ITEM 6.  Exhibits and Reports on Form 8-K...........................      24
 Signatures...........................................................     25
</TABLE>

                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

                               BEA SYSTEMS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        AND COMPREHENSIVE INCOME (LOSS)
                     (in thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                      Three months
                                          ended         Six months ended
                                        July 31,            July 31,
                                    ------------------  ------------------
                                      2000      1999      2000      1999
                                    --------  --------  --------  --------
<S>                                 <C>       <C>       <C>       <C>       <C>
Revenues:
  License fees..................... $104,195  $ 64,897  $189,434  $120,803
  Services.........................   81,826    38,315   150,269    67,984
                                    --------  --------  --------  --------  ---
    Total revenues.................  186,021   103,212   339,703   188,787

Cost of revenues:
  Cost of license fees.............    4,503       952     8,278     2,117
  Cost of services.................   47,891    21,741    88,304    38,382
  Amortization of certain acquired
   intangible assets...............   10,184     7,262    20,167    14,102
                                    --------  --------  --------  --------  ---
    Total cost of revenues.........   62,578    29,955   116,749    54,601
                                    --------  --------  --------  --------  ---
Gross profit.......................  123,443    73,257   222,954   134,186

Operating expenses:
  Sales and marketing..............   76,969    48,528   145,664    90,318
  Research and development.........   21,574    13,800    40,453    25,844
  General and administrative.......   12,619     9,380    23,483    17,501
  Amortization of goodwill.........   14,309     1,597    26,504     2,586
  Acquisition-related charges......       -         -      2,200        -
                                    --------  --------  --------  --------  ---
    Total operating expenses.......  125,471    73,305   238,304   136,249
                                    --------  --------  --------  --------  ---
Loss from operations...............   (2,028)      (48)  (15,350)   (2,063)

Interest income (expense) and
 other, net........................    5,547      (285)    9,693      (673)
                                    --------  --------  --------  --------  ---
Income (loss) before provision for
 income taxes......................    3,519      (333)   (5,657)   (2,736)

Provision for income taxes.........    1,250     1,735     4,457     3,300
                                    --------  --------  --------  --------  ---
Net income (loss)..................    2,269    (2,068)  (10,114)   (6,036)
Other comprehensive income (loss):
  Foreign currency translation
   adjustments.....................     (444)      185      (302)     (125)
  Unrealized loss on available-for-
   sale investments, net of income
   taxes...........................     (265)      (94)     (505)     (116)
                                    --------  --------  --------  --------
Comprehensive income (loss)........ $  1,560  $ (1,977) $(10,921) $ (6,277)
                                    ========  ========  ========  ========  ===
Net income (loss) per share:
  Basic............................ $   0.01  $  (0.01) $  (0.03) $  (0.02)
                                    ========  ========  ========  ========  ===
  Diluted.......................... $   0.01  $  (0.01) $  (0.03) $  (0.02)
                                    ========  ========  ========  ========  ===
Number of shares used in per share
 calculations:
  Basic............................  374,440   306,480   370,699   304,740
                                    ========  ========  ========  ========  ===
  Diluted..........................  421,640   306,480   370,699   304,740
                                    ========  ========  ========  ========
</TABLE>

                            See accompanying notes.

                                       3
<PAGE>

                               BEA SYSTEMS, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                      January
                                                         July 31,       31,
                                                           2000         2000
                                                        -----------  ----------
                                                        (Unaudited)
<S>                                                     <C>          <C>
                        ASSETS

Current assets:
  Cash and cash equivalents............................ $  702,228   $  763,294
  Restricted cash......................................      1,989        1,631
  Short-term investments...............................     94,785       38,135
  Accounts receivable, net.............................    162,500      133,069
  Other current assets.................................     48,041       35,248
                                                        ----------   ----------
    Total current assets...............................  1,009,543      971,377

Computer equipment, furniture and leasehold
 improvements, net.....................................     43,143       27,978
Goodwill, net..........................................    163,702      141,457
Acquired intangible assets, net........................     47,980       61,600
Investments in equity securities.......................     81,851       38,060
Other long-term assets.................................     19,628       18,369
                                                        ----------   ----------
    Total assets....................................... $1,365,847   $1,258,841
                                                        ==========   ==========

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable..................................... $   14,963   $   14,848
  Accrued liabilities..................................    113,446       92,673
  Accrued income taxes.................................     11,981       27,021
  Deferred revenues....................................    141,814       96,537
  Current portion of notes payable, other long-term
   obligations and capital lease obligations ..........        606        4,454
                                                        ----------   ----------
    Total current liabilities..........................    282,810      235,533

Notes payable and other long-term obligations..........     21,668        6,005
Convertible subordinated notes.........................    561,941      572,484
Commitments and contingencies

Stockholders' equity:
  Common stock.........................................        379          361
  Additional paid-in capital...........................    715,179      650,128
  Accumulated deficit..................................   (213,069)    (202,951)
  Notes receivable from shareholders...................       (198)        (296)
  Deferred compensation................................       (777)      (1,144)
  Accumulated other comprehensive loss.................     (2,086)      (1,279)
                                                        ----------   ----------
    Total stockholders' equity.........................    499,428      444,819
                                                        ----------   ----------
    Total liabilities and stockholders' equity......... $1,365,847   $1,258,841
                                                        ==========   ==========
</TABLE>

                            See accompanying notes.

                                       4
<PAGE>

                               BEA SYSTEMS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                            Six months ended
                                                                July 31,
                                                            ------------------
                                                              2000      1999
                                                            --------  --------
<S>                                                         <C>       <C>
Operating activities:
  Net loss................................................. $(10,114) $ (6,036)
  Adjustments to reconcile net loss to net cash provided by
   operating activities:
    Depreciation and amortization..........................    4,934     3,429
    Amortization of deferred compensation..................      367       376
    Amortization of certain acquired intangible assets and
     acquisition-related charges...........................   50,238    16,688
    Amortization of debt issuance costs....................    1,108       522
    Debt conversion premium................................      236        -
    Changes in operating assets and liabilities............   19,274    14,254
    Other..................................................    2,107      (264)
                                                            --------  --------
Net cash provided by operating activities..................   68,150    28,969
                                                            --------  --------

Investing activities:
  Purchase of computer equipment, furniture and leasehold
   improvements............................................  (19,471)   (8,203)
  Payments for business combinations, net of cash acquired
   and investments in equity securities....................  (75,052)   (6,051)
  Net purchases of available-for-sale short-term
   investments.............................................  (56,905)  (10,096)
                                                            --------  --------
Net cash used in investing activities...................... (151,428)  (24,350)
                                                            --------  --------

Financing activities:
  Net borrowings under lines of credit.....................    1,978      (679)
  Net payments on notes payable, other long-term
   obligations and capital lease obligations...............  (10,927)     (116)
  Debt conversion premium..................................     (236)       14
  Proceeds from notes receivable...........................    1,191        -
  Net proceeds received for employee stock purchases.......   33,559     9,706
                                                            --------  --------
Net cash provided by financing activities..................   25,565     8,925
                                                            --------  --------
Net increase (decrease) in cash and cash equivalents.......  (57,713)   13,544
Effect of exchange rate changes on cash....................   (2,745)      896
Cash and cash equivalents at beginning of period...........  764,675   232,556
                                                            --------  --------
Cash and cash equivalents at end of period................. $704,217  $246,996
                                                            ========  ========
</TABLE>

                            See accompanying notes.

                                       5
<PAGE>

                               BEA SYSTEMS, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

  The condensed consolidated financial statements included herein are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows
for the interim periods. Certain amounts reported in prior periods have been
reclassified for comparative purposes. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the BEA
Systems, Inc. ("BEA" or the "Company") Annual Report on Form 10-K for the
fiscal year ended January 31, 2000. The results of operations for the six
months ended July 31, 2000 are not necessarily indicative of the results for
the entire fiscal year ending January 31, 2001.

  The consolidated balance sheet at January 31, 2000 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.

 Revenue recognition

  The Company recognizes revenues in accordance with the American Institute of
Certified Public Accountants Statement of Position 97-2, Software Revenue
Recognition, as amended. Revenue from software license agreements is
recognized when persuasive evidence of an agreement exists, delivery of the
product has occurred, no significant vendor obligations are remaining to be
fulfilled, the fee is fixed or determinable, and collectibility is probable.

  Services revenue includes consulting services, post-contract customer
support and customer training. Software maintenance agreements provide
technical support and the right to unspecified upgrades on an if-and-when
available basis. Consulting revenue and the related cost of services are
recognized on a time and materials basis. Post-contract customer support
revenue is recognized ratably over the term of the support period (generally
one-year) and customer training and other service revenues are recognized as
the related services are provided. The unrecognized portion of amounts paid in
advance for licenses and services is recorded as deferred revenues.

 Recent acquisitions

  On March 21, 2000, the Company purchased The Workflow Automation Corporation
("Workflow") with $4.9 million in cash and the issuance of 470,718 shares of
BEA common stock, valued at $49.41 per share. The acquisition was accounted
for using the purchase method. An independent valuation was completed, in
which the majority of the purchase price was allocated to intangible assets.

  On April 19, 2000, the Company completed its acquisition of the services
business of The Object People, Inc. ("TOP"). The purchase price was
approximately $20.5 million in cash. The acquisition was accounted for using
the purchase method with a significant portion of the purchase price allocated
to intangible assets.

 Recent investments

  During fiscal 2000, the Company purchased 7,400,000 shares of WebGain, Inc.
Series A Preferred Stock for $37.0 million, representing a 48 percent
ownership interest on the acquisition date. Warburg Pincus Equity Partners,
L.P. and affiliated entities, which are direct or indirect affiliates of BEA,
hold the remaining non-employee ownership of WebGain, Inc. During March 2000,
the Company made an additional $5.0 million investment in WebGain, Inc. In
April 2000, WebGain, Inc. issued an $18.0 million 8% Convertible Note to the
Company, due April 2005. The Note is convertible, at the option of the
Company, at any time into Series A Preferred Stock. Subsequent to these
investments, the Company's ownership percentage in WebGain, Inc. remains at 48
percent.

                                       6
<PAGE>

                               BEA SYSTEMS, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


  During the first and second quarters of fiscal 2001, the Company invested in
several other privately held companies for a total of approximately $21.8
million. These investments are accounted for under the cost method, as
ownership is less than 20 percent and the Company does not have significant
influence over their operations.

 Stock split

  In April 2000, the Company completed a two-for-one common stock split in the
form of a stock dividend. All share information and per share amounts in the
accompanying consolidated financials statements reflect the effect of the
stock split.

Note 2. Supplemental Cash Flow Disclosures

  For the six months ended July 31, 2000, the holders converted approximately
$10.5 million of the outstanding $250 million 4% Convertible Subordinated
Notes due June 15, 2005 ("2005 Notes") into common stock. The value of stock
issued in business acquisitions for the six months ended July 31, 2000 was
approximately $23.2 million.

Note 3. Net Income (Loss) Per Share

  The Company has adopted Statement of Financial Accounting Standard No. 128,
Earnings per Share ("FAS 128"). Under this standard, basic net income (loss)
per share is computed based on the weighted average number of shares of the
Company's common stock outstanding. Diluted net income (loss) per share is
computed based on the weighted average number of shares of the Company's
common stock and common equivalent shares (stock options, warrants and
convertible notes), if dilutive.

  The following is a reconciliation of the numerators and denominators of the
basic and diluted loss per share computations (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                       Three months ended    Six months ended
                                            July 31,             July 31,
                                       --------------------  -----------------
                                         2000       1999       2000     1999
                                       ---------  ---------  --------  -------
      <S>                              <C>        <C>        <C>       <C>
      Numerator:
       Numerator for basic net income
        (loss) per share:
        Net income (loss)............  $   2,269  $  (2,068) $(10,114) $(6,036)
                                       =========  =========  ========  =======
       Numerator for diluted net
        income (loss) per share:
        Net income (loss)............  $   2,269  $  (2,068) $(10,114) $(6,036)
        Interest and amortization
         charges for 2005 Notes, net
         of taxes....................        125          -         -        -
                                       ---------  ---------  --------  -------
        Adjusted net income (loss)...  $   2,394  $  (2,068) $(10,114) $(6,036)
                                       =========  =========  ========  =======
      Denominator:
       Denominator for basic net
        income per share--weighted
        average shares...............    375,717    310,156   372,371  308,784
       Weighted average shares
        subject to repurchase........     (1,277)    (3,676)   (1,672)  (4,044)
                                       ---------  ---------  --------  -------
       Denominator for basic net
        income per share, weighted
        average shares, net .........    374,440    306,480   370,699  304,740
       Weighted average dilutive
        potential common shares,
        Using treasury stock method..     47,200          -         -        -
                                       ---------  ---------  --------  -------
       Denominator for diluted net
        income per share.............    421,640    306,480   370,699  304,740
                                       =========  =========  ========  =======
       Basic net income (loss) per
        share........................  $    0.01  $   (0.01) $  (0.03) $ (0.02)
                                       =========  =========  ========  =======
       Diluted net income (loss) per
        share........................  $    0.01  $   (0.01) $  (0.03) $ (0.02)
                                       =========  =========  ========  =======
</TABLE>

                                       7
<PAGE>

                               BEA SYSTEMS, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


  The computation of diluted net income per share for the three months ended
July, 31, 2000 includes the impact of options to purchase approximately 44.1
million shares of common stock, the conversion of the 2005 Notes which are
convertible into approximately 1.8 million shares of common stock, and
approximately 1.3 million shares of common stock which are subject to
repurchase. The $550 million 4% Convertible Subordinated Notes due December
15, 2006 ("2006 Notes") are excluded from the computation of basic and diluted
net income per share as the impact would be antidilutive for the periods
presented.

  The computation of basic and diluted net loss per share for the six months
ended July 31, 2000 excludes the impact of options to purchase approximately
47.0 million shares of common stock, the conversion of the 2006 Notes and the
remaining 2005 Notes, which are convertible into approximately 15.9 million
and approximately 1.8 million shares of common stock, respectively, and
approximately 1.7 million shares of common stock which are subject to
repurchase as such impact would be antidilutive for the period presented.

  The computation of basic and diluted net loss per share for the three and
six months ended July 31, 1999 excludes the impact of approximately 23.7
million and approximately 20.9 million stock options as well as the conversion
of the 2005 Notes (See Note 4), which were convertible into approximately 37.9
million shares of common stock and approximately 3.7 million and approximately
4.0 million shares of common stock which are subject to repurchase,
respectively, as such impact would be antidilutive for the periods presented.

Note 4. Convertible Subordinated Debt Offering

  In June and July 1998, the Company completed the sale of the 2005 Notes in
an offering to Qualified Institutional Buyers. The 2005 Notes are subordinated
to all existing and future senior indebtedness of the Company, and the
principal amount of the 2005 Notes is convertible at the option of the holder
at any time into common stock of the Company at a conversion rate of 151.48
shares per $1,000 principal amount of 2005 Notes (equivalent to an approximate
conversion price of $6.60 per share). The 2005 Notes are redeemable at the
option of the Company in whole or in part at any time on or after June 5,
2001, in cash plus accrued interest, if any, through the redemption date,
subject to certain events. Interest is payable semi-annually. At the end of
the second quarter of fiscal 2001, $238.1 million of the 2005 Notes had been
converted to common stock, leaving approximately $11.9 million as remaining
principal. The Company incurred no debt conversion premium in the quarter
ended July 31, 2000 and $236,000 of debt conversion premium in the quarter
ended April 30, 2000, which was charged to interest expense.

Note 5. Comprehensive Loss

  The components of accumulated comprehensive loss are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                           July
                                                            31,    January 31,
                                                           2000       2000
                                                          -------  -----------
      <S>                                                 <C>      <C>
      Foreign currency translation adjustment............ $(1,264)   $  (962)
      Unrealized loss on available-for-sale investments,
       net of tax........................................    (822)      (317)
                                                          -------    -------
      Total accumulated other comprehensive loss......... $(2,086)   $(1,279)
                                                          =======    =======
</TABLE>

Note 6. Commitments and Contingencies

 Litigation

  The Company is subject to legal proceedings and claims that arise in the
ordinary course of its business. While management currently believes the
amount of ultimate liability, if any, with respect to these actions will not
materially affect the financial position, results of operations, or liquidity
of the Company, the ultimate outcome of any litigation is uncertain, and the
impact of an unfavorable outcome could be material to the Company.

                                       8
<PAGE>

                               BEA SYSTEMS, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


 Employer Payroll Taxes

  The Company is subject to employer payroll taxes when employees exercise
stock options. The payroll taxes are assessed on the stock option gain, which
is the difference between the common stock price on the date of exercise and
the exercise price. The tax rate varies depending upon the employees' taxing
jurisdiction. The timing and amount of employer payroll taxes is directly
related to the timing and number of options exercised by employees, the gain
thereon and the tax rate in the applicable jurisdiction. For the three and six
months ended July 31, 2000, the Company recorded employer payroll taxes
related to stock option exercises of approximately $3.2 million and $5.5
million, respectively. For both the three and six months ended July 31, 1999,
the employer payroll taxes related to stock option exercises were not
significant. Because the Company is unable to predict these employer payroll
taxes, the Company is unable to predict what, if any, expense will be recorded
in a future period.

                                       9
<PAGE>

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

  The following discussion of the financial condition and results of
operations of BEA Systems, Inc. ("BEA" or the "Company") should be read in
conjunction with the Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and the Notes thereto included in the Company's Annual Report on Form 10-K for
the year ended January 31, 2000. This quarterly report on Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, including statements using terminology such as "may,"
"will," "expects," "plans," "anticipates," "estimates," "potential," or
"continue," or the negative thereof or other comparable terminology regarding
beliefs, plans, expectations or intentions regarding the future. Forward-
looking statements include statements regarding increased transaction loads on
web-based systems, the extension of computer systems to the Internet,
middleware market growth, opportunity for expansion of our business,
additional acquisitions, seasonality, return on investment, increases in
service revenues as a percentage in total revenues, planned investment in
product development, investing in services offerings, increase in cost of
licenses, increase in sales and marketing expenses, devoting substantial
resources to product development, continued hiring, expected amortization of
goodwill, continuing to make additional acquisitions and the effects of the
adoption of new accounting pronouncements. These forward-looking statements
involve risks and uncertainties and actual results could differ materially
from those discussed in the forward-looking statements. These risks and
uncertainties include, but are not limited to, those described under the
headings "Effect of New Accounting Pronouncements" and "Factors That May
Impact Future Operating Results", as well as risks described immediately prior
to or following some forward-looking statements. All forward-looking
statements and risk factors included in this document are made as of the date
hereof, based on information available to BEA as of the date thereof, and BEA
assumes no obligation to update any forward-looking statement or risk factors.

Overview

  BEA Systems, Inc. ("BEA" or the "Company") is a leading provider of e-
commerce infrastructure software that helps companies of all sizes build e-
commerce systems that extend investments in existing computer systems and
provide the foundation for running a successful integrated e-business. BEA's
products are marketed and sold worldwide through a network of BEA sales
offices, as well as hardware vendors, independent software vendors ("ISVs")
and systems integrators ("SIs") that are BEA partners and distributors. The
Company's products have been adopted in a wide variety of industries,
including commercial and investment banking, securities trading,
telecommunications, airlines, retail, manufacturing, package delivery,
insurance and government, in many cases using the Internet as a system
component. BEA's products serve as a platform or integration tool for
applications such as billing, provisioning, customer service, electronic funds
transfers, ATM networks, securities trading, Web-based banking, Internet
sales, supply chain management, scheduling and logistics, and hotel, airline
and rental car reservations. Licenses for BEA products are typically priced on
a per-user, per-central processing unit basis, but BEA also offers licenses
priced on a per-server basis.

  The Company's core business has been providing infrastructure for Web-based
systems and high-volume transaction systems, such as Web-based retail sites,
inventory systems, telecommunications billing applications, commercial bank
ATM networks and account management systems, credit card billing systems and
securities trading account management systems. These Web-based and distributed
systems must be highly available, scale to process high transaction volumes
and accommodate large numbers of users. As the Internet and e-commerce
continue to develop and become more richly integrated, systems that
historically had been strictly internal are now being extended to the
Internet, such as telecommunications, bank and credit card account
information.

  BEA provides an e-commerce transaction platform that is designed to address
this demand and help companies quickly develop and integrate e-business
initiatives and reliably deliver a wider range of dynamic, personalized
services. In addition, BEA provides a personalization engine and components
used to build common e-commerce functionality, such as online catalog, dynamic
pricing, shopping cart and order processing.

                                      10
<PAGE>

  Acquisitions. Since its inception, BEA has acquired several companies and
product lines, as well as distribution rights to product lines. Through these
acquisitions, BEA has added additional product lines, additional functionality
to its existing products, additional direct distribution capacity and
additional service capacity. These acquisitions have resulted in significant
charges to BEA's operating results in the periods in which the acquisitions
were completed and have added intangible assets to BEA's balance sheet, the
values of which are being amortized and charged to BEA's operating results
over periods ranging from two to five years after completion of the
acquisitions. BEA's management views the middleware markets for its products
as growing, but that companies serving those markets are consolidating. This
consolidation presents an opportunity for BEA to further expand its product
lines and functionality, distribution capacity and service offerings and to
add new, related lines of business. BEA anticipates that it will make
additional, perhaps material, acquisitions in the future. The timing of any
such acquisition is impossible to predict and the charges associated with any
such acquisition could materially adversely affect BEA's results of operations
beginning in the periods in which any such acquisition is completed.

  Seasonality. As is common in the software industry, we believe that our
fourth quarter orders are favorably impacted by a variety of factors including
year-end capital purchases by larger corporate customers and the commission
structure for our sales force. This increase typically results in first
quarter customer orders being lower than orders received in the immediately
preceding fourth quarter. BEA anticipates that this seasonal impact is likely
to continue.

  Investment in Distribution Channel. BEA is currently investing in building
its sales and consulting capacity by aggressively hiring sales, technical
sales support and consulting personnel, as well as aggressively pursuing
relationships with system platform companies, packaged application software
developers, systems integrators and independent consultants, independent
software vendors, and distributors. This investment results in an immediate
increase in expenses, especially in sales and marketing.

  Increase in Service Revenues as a Percentage of Total Revenues. Service
revenues have increased as a percentage of total revenues. BEA believes that
its customer base has been in the process of transitioning to mission-critical
applications based on CORBA, Java and EJB programming models, but that
customers typically have not had sufficient numbers of system architects and
programmers experienced in building large, reliable systems on these
programming models. BEA believes that by providing its customers with
additional services, especially in architecting, building and deploying CORBA,
Java and EJB systems and training system architects and customers' programmers
to develop these systems, BEA can help facilitate customers' deployment of
systems based on our CORBA, Java and EJB platform products. The increase in
service revenues as a percentage of total revenues will have a negative impact
on gross margins and could have a negative impact on operating margins if the
increase in service revenues does not result in a concurrent increase in
license revenues.

  Product Development. In Fiscal 2001, BEA continues to invest in product
development, particularly BEA WebLogic Collaborate(TM) (formerly known as
"Project e-Collaborate"), BEA WebLogic Commerce-Server(TM) and BEA WebLogic
Personalization Server(TM). BEA WebLogic Collaborate(TM) is business-to-
business integration software that provides an open, scalable and dynamic way
to rapidly create and manage multi-party trading exchanges. BEA WebLogic
Commerce-Server(TM) and BEA WebLogic Personalization Server(TM) enable
companies to quickly deliver highly personalized e-commerce applications.
BEA's planned investment in these efforts may affect BEA's anticipated overall
financial results, particularly cost of revenues as a percentage of total
revenues, research and development expense as a percentage of total revenues
and may create product transition concerns in BEA's customer base. In
addition, investment in these projects results in an immediate increase in
expenses, especially in research and development, although the return on such
investment, if any, is not anticipated to occur until future periods. These
expenses adversely affect BEA's operating results in the short-term and also
in the long-term if the anticipated benefits of such investment do not
materialize.

                                      11
<PAGE>

Results of Operations

 Three and six months ended July 31, 2000 and 1999

 Revenues

  BEA's revenues are derived from fees for software licenses, customer
support, education and consulting services. Total revenues increased 80.2
percent from the quarter ended July 31, 1999 to the quarter ended July 31,
2000. Total revenues also increased 79.9 percent from the six months ended
July 31, 1999 to the six months ended July 31, 2000. These increases reflect
the rapid adoption of our solutions for e-commerce systems resulting in
additional sales to existing customers and to new customer accounts and
increases in demand for consulting services.

  License Revenues. License revenues increased 60.6 percent from the second
quarter of fiscal 2000 to the second quarter of fiscal 2001. For the six
months ended July 31, 2000, license revenues increased 56.8 percent from the
six months ended July 31, 1999. These increases were mainly due to rapid
adoption of our products for e-commerce systems and expansion of the Company's
direct sales force and introduction of new products and new versions of
existing products. License revenues as a percentage of total revenues
represented 56.0 percent and 62.9 percent of revenues in the second quarters
of fiscal 2001 and 2000, respectively, and 55.8 percent and 64.0 percent of
total revenues for the six months ended July 31, 2000 and 1999, respectively.
These percentage decreases were attributable to the significant increase in
service revenues as a result of increased demand for the Company's consulting
services.

  Service Revenues. Service revenues increased 113.6 percent in the second
quarter of fiscal 2001 compared with the same quarter in fiscal 2000. For the
six months ended July 31, 2000, service revenues increased 121.0 percent from
the same period of the prior fiscal year. Service revenues as a percentage of
total revenues represented 44.0 percent and 37.1 percent of total revenues in
the second quarter of fiscal 2001 and 2000, respectively, and 44.2 percent and
36.0 percent of total revenues for the six months ended July 31, 2000 and
1999, respectively. These increases were primarily due to the increased
revenues from consulting resulting from an increased customer base and
increased number of service personnel and consultants as a result of the
Company's increased focus on service offerings. We expect to continue
investing in our services offerings, especially consulting and education
services.

International Revenues. International revenues accounted for 41.5 percent of
total revenue in the quarter ended July 31, 2000 compared with 40.7 percent in
the same quarter of the prior fiscal year. For the six months ended July 31,
2000 and 1999, international revenues were 41.8 percent and 40.6 percent of
total revenues, respectively.

  Revenues from the European, Middle East and Africa region ("EMEA") and
Asia/Pacific region ("APAC") increased in the second quarter of fiscal 2001 to
$54.5 million and $20.2 million, respectively, from $32.9 million and $8.6
million in the same quarter of the prior fiscal year. Revenues from EMEA
represented 29.3 percent of total revenues in the second quarter of fiscal
2001, compared with 31.9 percent in the same quarter of the prior fiscal year
and 30.3 percent compared with 32.4 percent for the six month periods ended
July 31, 2000 and 1999, respectively. Revenues from APAC represented 10.8
percent of total revenues in the second quarter of fiscal 2001, compared with
8.3 percent in the same quarter of the prior fiscal year and 10.5 percent
compared with 7.9 percent for the six month periods ended July 31, 2000 and
1999, respectively. Revenues from other non-United States regions were
immaterial.

 Cost of Revenues

  Total cost of revenues represented 33.6 percent and 29.0 percent of total
revenues in the quarters ended July 31, 2000 and 1999, respectively. For the
six months ended July 31, 2000 and 1999, cost of revenues represented 34.4
percent and 28.9 percent, respectively. The increases were primarily due to
the increase in service revenues as a percentage of total revenues. Service
revenues carry a substantially higher cost of revenues than software licenses.
Amortization charges included in cost of revenues also contributed to the
increase.

                                      12
<PAGE>

  Cost of Licenses. Cost of licenses includes expenses related to the purchase
of compact discs, costs associated with transferring the Company's software to
electronic media, the printing of user manuals, packaging and distribution
costs as well as royalties paid to third parties. Cost of licenses represented
4.3 percent and 1.5 percent of license revenues in the second quarters of
fiscal 2001 and 2000, respectively. For the six months ended July 31, 2000 and
1999, cost of licenses represented 4.4 percent and 1.8 percent of license
revenues, respectively. These increases were due to increased royalties paid
to third parties, primarily resulting from license and reseller agreements
signed in the third quarter of fiscal 2000. We expect cost of licenses to
increase as a percentage of license revenue in fiscal 2001 because the terms
of these license agreements continue through our full fiscal year.

  Cost of Services. Cost of services consists primarily of salaries and
benefits for consulting, education and product support personnel. Cost of
services increased 120.3 percent in the second quarter of fiscal 2001 compared
to the same quarter of the prior fiscal year. For the six months ended July
31, 2000, cost of services increased 130.1 percent from the same period of the
prior fiscal year. These increases were the result of overall increased demand
for the Company's consulting services, increased professional services'
headcount and the expansion of customer support centers in Europe and Asia.
Cost of services represented 58.5 percent and 56.7 percent of service revenues
in the quarters ended July 31, 2000 and 1999, respectively. For the six months
ended July 31, 2000 and 1999, cost of services represented 58.8 percent and
56.5 percent of service revenues, respectively. These increases were a result
of increased consulting costs attributable to increased consulting revenues.

  Amortization of Certain Acquired Intangible Assets, included in Cost of
Revenues. The amortization of certain acquired intangible assets, consisting
of developed technology, distribution rights, trademarks and tradenames,
totaled $10.2 million and $7.3 million for the second quarters of fiscal 2001
and 2000, respectively. For the six months ended July 31, 2000 and 1999,
amortization of certain acquired intangible assets included in cost of
revenues totaled $20.2 million and $14.1 million, respectively. These
increases were primarily due to intangible assets resulting from a number of
strategic acquisitions, particularly the fiscal 2000 acquisition of The Theory
Center, Inc. ("TTC"). In the future, amortization expense associated with
these intangible assets recorded prior to July 31, 2000 is expected to total
$10.1 million and $6.9 million for the third and fourth quarters of fiscal
2001, respectively, and approximately $15.9 million, $9.1 million, and $6.0
million for the fiscal years ending January 31, 2002, 2003 and thereafter,
respectively.

 Operating Expenses

  Sales and Marketing. Sales and marketing expenses include salaries,
benefits, sales commissions, travel and facility costs for the Company's sales
and marketing personnel. These expenses also include programs aimed at
increasing revenues, such as advertising, public relations, trade shows and
user conferences. Sales and marketing expenses increased 58.6 percent in the
second quarter of fiscal 2001 compared with the same quarter of the prior
fiscal year. For the six months ended July 31, 2000, sales and marketing
expenses increased 61.3 percent from the same period of the prior fiscal year.
These increases were due to increased commissions on the Company's increased
revenue base, the expansion of the Company's direct sales force and an
increase in marketing personnel and programs. Sales and marketing expenses
decreased as a percentage of revenues to 41.4 percent from 47.0 percent in the
second quarters ended July 31, 2000 and 1999, respectively, and to 42.9
percent from 47.8 percent for the six months ended July 31, 2000 and 1999,
respectively. These decreases were due to the allocation of the increased
sales and marketing expenses over a larger revenue base. The Company expects
to continue to invest in sales channel expansion and marketing programs to
promote the Company's products and brand. Accordingly, the Company expects
sales and marketing expenses to continue to increase in future periods.

  Research and Development. Research and development expenses consist
primarily of salaries and benefits for software engineers, contract
development fees, costs of computer equipment used in software development and
facilities expenses. Total expenditures for research and development increased
56.3 percent in the second quarter of fiscal 2001 compared with the same
quarter in fiscal 2000. For the six months ended July 31, 2000, research and
development expenses increased 56.5 percent from the same period of the prior
fiscal year. These increases were attributed to an increase in product
development personnel and related expenses. Research and

                                      13
<PAGE>

development expenses represented 11.6 percent and 13.4 percent of total
revenues in the second quarters of fiscal 2001 and 2000, respectively, and
11.9 percent and 13.7 percent of total revenues in the six months ended
July 31, 2000 and 1999, respectively. These decreases were primarily due to
the allocation of the increased research and development expenses over a
larger revenue base. The Company expects to continue to commit substantial
resources to product development and engineering in future periods. As a
result, the Company expects research and development expenses to continue to
increase in future periods. Additionally, management intends to continue
recruiting and hiring experienced software development personnel and to
consider the licensing and acquisition of technologies complementary to the
Company's business.

  General and Administrative. General and administrative expenses include
costs for the Company's human resources, finance, legal, information
technology, facilities and general management functions. General and
administrative expenses increased 34.5 percent in the second quarter of fiscal
2001 compared with the same quarter of fiscal 2000. For the six months ended
July 31, 2000, general and administrative expenses increased 34.2 percent from
the same period of the prior fiscal year. These increases were attributed to
the expansion of the Company's support infrastructure, including information
systems and associated expenses necessary to manage the Company's growth.
General and administrative expenses represented 6.8 percent and 9.1 percent of
total revenues for the quarters ended July 31, 2000 and 1999, respectively,
and 6.9 percent and 9.3 percent of total revenues for the six month periods
ended July 31, 2000 and 1999, respectively. These decreases were primarily due
to the allocation of the increased general and administrative expenses over a
larger revenue base.

  Amortization of Goodwill. Amortization of goodwill increased in the second
quarter of fiscal 2001, compared to the second quarter of fiscal 2000, due to
goodwill resulting from various acquisitions completed in fiscal 2000 and in
the first half of fiscal 2001. In the future, amortization of goodwill
recorded prior to July 31, 2000 is expected to total $14.6 million for both
the third and fourth quarters of fiscal 2001, respectively, and approximately
$50.1 million, $43.3 million, and $41.1 million for the fiscal years ending
January 31, 2002, 2003 and thereafter, respectively.

  Acquisition related charges. In the second quarters of fiscal 2001 and 2000,
respectively, there were no acquisition-related charges. For the six months
ended July 31, 2000, acquisition related charges were related to the write-off
associated with the acquired in-process research and development of
approximately $2.2 million relating to The Workflow Automation Corporation
("Workflow") acquisition, which occurred in the first quarter of fiscal 2001.

  Interest Expense; Interest Income and Other, Net. Interest expense was $5.6
million in the second quarter of fiscal 2001, compared with $2.5 million in
the same quarter of the prior fiscal year. For the six months ended July 31,
2000, interest expense increased to $11.6 million, compared to $5.1 million
for the same period of the prior fiscal year. These increases were due to a
higher average amount of outstanding borrowings, primarily due to the issuance
of $550 million 4% Convertible Subordinated Notes due December 15, 2006 ("2006
Notes") in fiscal 2001 and 2000. Interest income and other, net in the second
quarter of fiscal 2001 and 2000 was $11.1 million and $2.2 million,
respectively, and for the six months ended July 31, 2000 and 1999 was $21.3
million and $4.4 million, respectively. These increases were due to the
investment of higher average cash, cash equivalents and short-term investment
balances, generated primarily from the Company's debt and equity offerings.

  Provision for Income Taxes. The Company has provided income taxes of $1.3
million and $4.5 million for the quarter and six months ended July 31, 2000,
respectively, as compared to $1.7 million and $3.3 million for the quarter and
six months ended July 31, 1999. The income tax expense provided in both years
consist primarily of US federal minimum tax, US current state income taxes,
foreign withholding taxes and foreign income tax expense incurred as a result
of local country profits. The income taxes provided for in the quarter ended
July 31, 2000 were slightly lower than in the comparable quarter ended July
31, 1999 due to a difference in the mix of foreign profit levels and local
country tax rates. The increase in income taxes provided through the first six
months of fiscal 2001 relative to the same period in the prior fiscal year was
primarily due to an overall increase in US federal minimum tax, US current
state income taxes, and foreign withholding taxes.


                                      14
<PAGE>

  Under Statement of Financial Accounting Standards No. 109 Accounting for
Income Taxes ("FAS 109"), deferred tax assets and liabilities are determined
based on the difference between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. FAS 109
provides for the recognition of deferred tax assets if realization of such
assets is more likely than not. Based upon the available evidence, which
includes BEA's historical operating performance and the reported cumulative
net losses from prior years, the Company has provided a valuation allowance
against its net deferred tax assets to the extent that they are dependent upon
future taxable income for realization. The Company intends to evaluate the
realizability of the deferred tax assets on a quarterly basis.

Liquidity and Capital Resources

  As of July 31, 2000, cash, cash equivalents and short-term investments
totaled $799.0 million, down from $803.1 million at January 31, 2000. The
decrease in cash, cash equivalents and short-term investments was primarily
due to cash used in the acquisition of the services business of The Object
People, Inc. ("TOP") and the Company's strategic equity investments in
privately-held companies, offset primarily by $68.2 million of cash generated
from operations.

  Cash generated from operating activities rose to $68.2 million for the six
months ended July 31, 2000, compared with $29.0 million generated in the same
period of the prior fiscal year. Cash provided by operating activities for the
six months ended July 31, 2000, resulted primarily from depreciation,
amortization and deferred revenues, net of an increase in accounts receivable.
Cash provided by operating activities for the six months ended July 31, 1999,
resulted primarily from depreciation, amortization and deferred revenues, net
of an increase in accounts receivable.

  Investing activities consumed $151.4 million for the six months ended July
31, 2000, compared with $24.4 million in the same period of the prior fiscal
year. Cash used for investing activities for the first six months of fiscal
2001 was primarily for a strategic acquisition and equity investments in
privately-held companies amounting to an aggregate of $75.0 million, capital
expenditures of $19.5 million and purchases of short-term investments of $56.9
million. In the same period of the prior fiscal year the primary use of cash
for investing activities was due to purchases of short-term investments and
purchases of computer equipment, furniture and leasehold improvements.

  The Company generated $25.6 million from financing activities in the first
six months of fiscal 2001, compared with $8.9 in the same period of fiscal
2000. The primary source of cash from financing activities in both the first
six months of fiscal 2001 and 2000 was the proceeds received from employee
stock purchases and the issuance of common stock by BEA pursuant to stock
option exercises.

  As of July 31, 2000, the Company's outstanding short and long-term debt
obligations were $584.2 million, up from $582.9 million at January 31, 2000.
At July 31, 2000, the Company's outstanding debt obligations consisted
principally of the $561.9 million of convertible notes and $22.3 million of
other short-term and long-term debt. At January 31, 2000, the Company's
outstanding debt obligations consisted principally of $572.5 million of
convertible notes and $10.4 million of other short-term and long-term debt.

  In addition to normal operating expenses, cash requirements are anticipated
for financing anticipated growth, payment of outstanding debt obligations and
the acquisition or licensing of products and technologies complementary to the
Company's business. The Company believes that its existing cash, cash
equivalents, short-term investments and cash generated from operations, if
any, will be sufficient to satisfy its currently anticipated cash requirements
through July 31, 2001. However, the Company expects to make additional
acquisitions and may need to raise additional capital through future debt or
equity financing to the extent necessary to fund any such acquisitions. There
can be no assurance that additional financing will be available, at all, or on
terms favorable to the Company.

                                      15
<PAGE>

Effect of New Accounting Pronouncements

  In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB 101") and amended it in March 2000. BEA is required to adopt the
provisions of SAB 101 in its fourth fiscal quarter of 2001. The Company is
currently reviewing the provisions of SAB 101 and has not fully assessed the
impact of its adoption; however, the Company does not currently expect that
the adoption of SAB 101 will have a material impact to its financial position
or results of operations.

  In June 1998, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("FAS 133"). FAS 133 establishes the accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In July 1999, FAS No.
137, Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Data of FASB Statement 133 ("FAS 137") was issued. FAS 137
deferred the effective date of FAS 133 until the first fiscal quarter of
fiscal years beginning after June 15, 2000. The Company expects to adopt FAS
133 effective February 1, 2001. The Company does not currently expect that the
adoption of FAS 133 will have a material impact to its financial position or
results of operations.

  In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation--an Interpretation of APB Opinion No. 25, ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and, among other issues
clarifies the following: the definition of an employee for purposes of
applying APB Opinion No. 25; the criteria for determining whether a plan
qualifies as a noncompensatory plan; the accounting consequence of various
modifications to the terms of the previously fixed stock options or awards;
and the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN
44 cover specific events that occurred after either December 15, 1998 or
January 12, 2000. The application of FIN 44 has not had a material impact on
the Company's financial position or results of operations.

Factors That May Impact Future Operating Results

  BEA Systems, Inc. operates in a rapidly changing environment that involves
numerous risks and uncertainties. The following section lists some, but not
all, of these risks and uncertainties which may have a material adverse effect
on the Company's business, financial condition or results of operations.

 Significant unanticipated fluctuations in our actual or anticipated quarterly
revenues and operating results may cause us not to meet securities analysts'
or investors' expectations and may result in a decline in our stock price.

  Although we have had significant revenue growth in recent quarters, our
growth rates may not be sustainable. If our revenues, operating results,
earnings or future projections are below the levels expected by investors or
securities analysts, our stock price is likely to decline. Our stock price is
also subject to the volatility generally associated with Internet, software
and technology stocks and may also be affected by broader market trends
unrelated to our performance, such as the declines in the prices of many such
stocks in March and April 2000.

  We expect to experience significant fluctuations in our future quarterly
revenues and operating results as a result of many factors, including:

  .  difficulty predicting the size and timing of customer orders

  .  the mix of our products and services sold

  .  mix of distribution channels

                                      16
<PAGE>

  .  whether our strategy to further establish and expand our relationships
     with distributors is successful

  .  introduction or enhancement of our products or our competitors' products

  .  general economic conditions, which can affect our customers' capital
     investment levels and the length of our sales cycle

  .  changes in our competitors' product offerings and pricing policies, and
     customer order deferrals in anticipation of new products and product
     enhancements from BEA or competitors

  .  whether we are able to develop, introduce and market new products on a
     timely basis and whether any new products are accepted in the market

  .  any slowdown in use of the Internet for commerce

  .  recent hiring may prove excessive if growth rates are not maintained

  .  the structure, timing and integration of acquisitions of businesses,
     products and technologies

  .  the terms and timing of financing activities

  .  potential fluctuations in demand or prices of our products and services

  .  the lengthy sales cycle for our products

  .  technological changes in computer systems and environments

  .  whether we are able to successfully expand our sales and marketing
     programs

  .  whether we are able to meet our customers' service requirements

  .  costs associated with acquisitions

  .  loss of key personnel

  .  fluctuations in foreign currency exchange rates

  As a result of all of these factors, we believe that quarterly revenues and
operating results are difficult to forecast and period-to-period comparisons
of our results of operations are not necessarily meaningful and should not be
relied upon as indications of trends or future performance.

  A material portion of our revenues has been derived from large orders, as
customers deployed our products. Increases in the dollar size of individual
license transactions have also increased the risk of fluctuation in future
quarterly results. The majority of our revenue is derived from a large number
of small development orders with the potential to turn into large deployments.
If we cannot generate large customer orders, turn development orders into
large deployments or customers delay or cancel such orders in a particular
quarter, it may have a material adverse effect on our revenues and, more
significantly on a percentage basis, our net income or loss in that quarter.
Moreover, we typically receive and fulfill a majority of our orders within the
quarter, with the substantial majority of our orders received in the last
month of each fiscal quarter. As a result, we may not learn of revenue
shortfalls until late in a fiscal quarter, after it is too late to adjust
expenses for that quarter. Additionally, our operating expenses are based in
part on our expectations for future revenues and are difficult to adjust in
the short term. Any revenue shortfall below our expectations could have an
immediate and significant adverse effect on our results of operations.

  We are subject to employer payroll taxes when our employees exercise their
stock options. The employer payroll taxes are assessed on each employee's
gain, which is the difference between the price of our common stock on the
date of exercise and the exercise price. During a particular period, these
payroll taxes could be material. These employer payroll taxes would be
recorded as an expense and are assessed at tax rates that varies depending
upon the employee's taxing jurisdiction in the period such options are
exercised based on actual gains realized by employees. However, because we are
unable to predict how many stock options will be exercised, at what price and
in which country during any particular period, we cannot predict, the amount,
if any, of employer payroll expense will be recorded in a future period or the
impact on our future financial results.

                                      17
<PAGE>

  As is common in the software industry, we believe that our fourth quarter
orders are favorably impacted by a variety of factors including year-end
capital purchases by larger corporate customers and the commission structure
for our sales force. This increase typically results in first quarter customer
orders being lower than orders received in the immediately preceding fourth
quarter. BEA anticipates that this seasonal impact is likely to continue.

  Although we use a standard license agreement, which meets the revenue
recognition criteria under generally accepted accounting principles, we must
often negotiate and revise terms and conditions of this standard agreement,
particularly in larger license transactions. Negotiation of mutually
acceptable terms and conditions can extend the sales cycle and, in certain
situations, may require us to defer recognition of revenue on the license.
While we believe that we are in compliance with Statement of Position 97-2,
Software Revenues Recognition, ("SOP 97-2") and SOP 98-4 and SOP 98-9, which
amend certain provisions of SOP 97-2, the American Institute of Certified
Public Accountants continues to issue some implementation guidelines for these
standards and the accounting profession continues to discuss a wide range of
potential interpretations. In addition, the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements ("SAB 101"). BEA is required to adopt the provisions of
SAB 101 in its fourth fiscal quarter of 2001. Additional implementation
guidelines could lead to unanticipated changes in our current revenue
accounting practices that could cause us to recognize lower revenue and
profits.

 Our limited operating history and need to continue to integrate our
acquisitions makes it difficult to predict our future results

  We were incorporated in January 1995 and therefore have a limited operating
history. We have generated revenues to date primarily from sales of BEA
WebLogic(TM), a software product which we acquired in September 1998, and from
BEA TUXEDO(TM), a software product to which we acquired worldwide distribution
rights in February 1996, and fees for software products and services related
to WebLogic and TUXEDO. We have also acquired a number of additional
businesses, technologies and products. Our limited operating history and the
need to integrate a number of separate and independent business operations
subject our business to numerous risks. At July 31, 2000, we had an
accumulated deficit of approximately $213.1 million. In addition, in
connection with certain acquisitions completed prior to July 31, 2000, we
recorded approximately $479.8 million as intangible assets and goodwill. Under
Generally Accepted Accounting Principles, intangible assets and goodwill are
required to be amortized in future periods. Approximately $268.1 million of
these assets have been amortized as of July 31, 2000 and we expect to amortize
the remaining amount of approximately $211.7 million in future periods through
our fiscal year ending January 31, 2005. We expect to amortize $46.2 million
of such intangible assets and goodwill over the remaining quarters of fiscal
2001. If we acquire additional businesses, products and technologies in the
future, we may report additional, potentially significant expenses. If future
events cause the impairment of any intangible assets acquired in our past or
future acquisitions, we may have to expense such assets sooner than we expect.
Because of our limited operating history and ongoing expenses associated with
our prior acquisitions, there can be no assurance that we will be profitable
in any future period and recent operating results should not be considered
indicative of future financial performance.

 Our revenues are derived primarily from two main product and services lines,
and a decline in demand or prices for either could substantially adversely
affect our operating results

  We currently derive the majority of our license and service revenues from
BEA WebLogic(TM), BEA TUXEDO(TM) and from related products and services. We
expect these products and services to continue to account for the majority of
our revenues in the immediate future. As a result, factors adversely affecting
the pricing of or demand for BEA WebLogic(TM) and BEA TUXEDO(TM), such as
competition, product performance or technological change, could have a
material adverse effect on our business and consolidated results of operations
and financial condition.

                                      18
<PAGE>

 Our failure to maintain ongoing sales through distribution channels will
result in lower revenues

  To date, we have sold our products principally through our direct sales
force, as well as through indirect sales channels, such as computer hardware
companies, packaged application software developers (ISVs), systems
integrators and independent consultants (SIs), independent software tool
vendors and distributors. Our ability to achieve revenue growth in the future
will depend in large part on our success in expanding our direct sales force
and in further establishing and expanding relationships with distributors,
ISVs, OEMs and systems integrators. In particular, in August 2000, we
announced a significant initiative to further establish and expand
relationships with our distributors through these sales channels, especially
ISVs and SIs. A significant part of this initiative is to recruit and train a
large number of consultants employed by SIs and induce these SIs to more
broadly use our products in their consulting practices, as well as to embed
our technology in products our ISV customers offer. We intend to seek
distribution arrangements with additional ISVs to embed our Web application
servers in their products. It is possible that we will not be able to
successfully expand our direct sales force or other distribution channels,
secure agreements with additional SIs and ISVs on commercially reasonable
terms or at all, and otherwise further develop our relationships with indirect
distribution channels. Moreover, even if we succeed in these endeavors, it
still may not increase our revenues. If we invest resources in these types of
expansion and our revenues do not correspondingly increase, our business,
results of operations and financial condition will be materially and adversely
affected.

  In addition, we already rely on informal relationships with a number of
consulting and systems integration firms to enhance our sales, support,
service and marketing efforts, particularly with respect to implementation and
support of our products as well as lead generation and assistance in the sales
process. We will need to expand our relationships with third parties in order
to support license revenue growth. Many such firms have similar, and often
more established, relationships with our principal competitors. It is possible
that these and other third parties will not provide the level and quality of
service required to meet the needs of our customers, that we will not be able
to maintain an effective, long term relationship with these third parties, and
that these third parties will not successfully meet the needs of our
customers.

 If we do not develop and enhance new and existing products to keep pace with
technological, market and industry changes, our revenues may decline

  The market for our products is highly fragmented, competitive with
alternative computing architectures, and characterized by continuing
technological developments, evolving industry standards and changing customer
requirements. The introduction of products embodying new technologies, the
emergence of new industry standards or changes in customer requirements could
render our existing products obsolete and unmarketable. As a result, our
success depends upon our ability to enhance existing products, respond to
changing customer requirements and develop and introduce in a timely manner
new products that keep pace with technological developments and emerging
industry standards. It is possible that our products will not adequately
address the changing needs of the marketplace and that we will not be
successful in developing and marketing enhancements to our existing products
or products incorporating new technology on a timely basis. Failure to develop
and introduce new products, or enhancements to existing products, in a timely
manner in response to changing market conditions or customer requirements,
will materially and adversely affect our business, results of operations and
financial condition.

 The price of our common stock may fluctuate significantly

  The market price for our common stock may be affected by a number of
factors, including developments in the Internet, software or technology
industry, general market conditions and other factors, including factors
unrelated to our operating performance or our competitors' operating
performance. In addition, stock prices for BEA and many other companies in the
Internet, technology and emerging growth sectors have experienced wide
fluctuations including recent rapid rises and declines in their stock prices,
that have often been unrelated to the operating performance of such companies,
such as the declines in the stock prices of BEA and many such companies in
March and April 2000. Such factors and fluctuations, as well as general
economic, political and market conditions, such as recessions, may materially
adversely affect the market price of our common stock.

                                      19
<PAGE>

 If we cannot successfully integrate our past and future acquisitions, our
revenues may decline and expenses may increase

  From our inception in January 1995, we have made several strategic
acquisitions. Integration of acquired companies, divisions and products
involves the assimilation of potentially conflicting operations and products,
which divert the attention of our management team and may have a material
adverse effect on our operating results in future quarters. It is possible we
may not achieve any of the intended financial or strategic benefits of these
transactions. While we intend to make additional acquisitions in the future,
there may not be suitable companies, divisions or products available for
acquisition. Our acquisitions entail numerous risks, including the risk we
will not successfully assimilate the acquired operations and products, or
retain key employees of the acquired operations. There are also risks relating
to the diversion of our management's attention, and difficulties and
uncertainties in our ability to maintain the key business relationships the
acquired entities have established. In addition, if we undertake future
acquisitions, we may issue dilutive securities, assume or incur additional
debt obligations, incur large one-time expenses, and acquire intangible assets
that would result in significant future amortization expense. Any of these
events could have a material adverse effect on our business, operating results
and financial condition.

  Recently, the Financial Accounting Standards Board ("FASB") proposed to
eliminate pooling of interests accounting for acquisitions and the ability to
write-off in-process research and development has been limited by recent
pronouncements. The effect of these changes would be to increase the portion
of the purchase price for any future acquisitions that must be charged to
BEA's cost of revenues and operating expenses in the periods following any
such acquisitions. As a consequence, our results of operations in periods
following any such acquisitions could be materially adversely affected.
Although these changes would not directly affect the purchase price for any of
these acquisitions, they would have the effect of increasing the reported
expenses associated with any of these acquisitions. To that extent, these
changes may make it more difficult for us to acquire other companies, product
lines or technologies.

 The lengthy sales cycle for our products makes our revenues susceptible to
substantial fluctuations

  Our customers typically use our products to implement large, sophisticated
applications that are critical to their business, and their purchases are
often part of their implementation of a distributed or Web-based computing
environment. Customers evaluating our software products face complex decisions
regarding alternative approaches to the integration of enterprise
applications, competitive product offerings, rapidly changing software
technologies and limited internal resources due to other information systems
requirements. For these and other reasons, the sales cycle for our products is
lengthy and is subject to delays or cancellation over which we have little or
no control. We have experienced an increase in the number of million and
multi-million dollar license transactions. In some cases, this has resulted in
more extended customer evaluation and procurement processes, which in turn
have lengthened the overall sales cycle for our products.

 If we do not effectively compete with new and existing competitors, our
revenues and operating margins will decline

  The market for application server and integration software, and related
software components and services, is highly competitive. Our competitors are
diverse and offer a variety of solutions directed at various segments of this
marketplace. These competitors include operating system and hardware vendors
such as IBM, Sun Microsystems and database vendors such as Oracle. Microsoft
has released products that include certain application server functionality
and has announced that it intends to include application server and
integration functionality in future versions of its operating systems,
including future versions of Windows 2000. Oracle and IBM recently announced
plans to invest significant amounts of money, engineering resources and
marketing efforts in pursuing products that compete with ours. In addition,
there are companies offering and developing application server and integration
software products and related services that directly compete with products we
offer. Further, software development tool vendors typically emphasize the
broad versatility of their tool sets and, in some cases, offer complementary
software that supports these tools and performs basic application server and

                                      20
<PAGE>

integration functions. Last, internal development groups within prospective
customers' organizations may develop software and hardware systems that may
substitute for those we offer. A number of our competitors and potential
competitors have longer operating histories, significantly greater financial,
technical, marketing and other resources, greater name recognition and a
larger installed base of customers than us.

  Our principal competitors currently include hardware vendors who bundle
their own application server and integration software products, or similar
products, with their computer systems and database vendors that advocate
client/server networks driven by the database server. IBM and Sun Microsystems
are the primary hardware vendors who offer a line of application server and
integration solutions for its customers. IBM's sale of application server and
integration functionality along with its IBM proprietary hardware systems
requires us to compete with IBM in its installed base, where IBM has certain
inherent advantages due to its significantly greater financial, technical,
marketing and other resources, greater name recognition and the integration of
its enterprise application server and integration functionality with its
proprietary hardware and database systems. These inherent advantages allow IBM
to bundle, at a discounted price, application functionality with computer
hardware and software sales. Due to these factors, if we do not differentiate
our products based on functionality, interoperability with non-IBM systems,
performance and reliability, and establish our products as more effective
solutions to customers' needs our revenues and operating results will suffer.

  Microsoft has announced that it intends to include certain application
server and integration functionality in future versions of its Windows 2000
operating system. Microsoft has also introduced a product that includes
certain basic application server functionality. The bundling of competing
functionality in versions of Windows requires us to compete with Microsoft in
the Windows marketplace, where Microsoft has certain inherent advantages due
to its significantly greater financial, technical, marketing and other
resources, its greater name recognition, its substantial installed base and
the integration of its application server and integration functionality with
Windows. We need to differentiate our products from Microsoft's based on a
number of criteria including scalability, functionality, interoperability with
non-Microsoft platforms, performance and reliability, and need to establish
our products as more effective solutions to customers' needs. We may not be
able to successfully differentiate our products from those offered by
Microsoft, and Microsoft's entry into the application server and integration
market could materially adversely affect our business, operating results and
financial condition.

  In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties, thereby increasing the ability of their products to address the
needs of our current and prospective customers. Accordingly, it is possible
that new competitors or alliances among current and new competitors may emerge
and rapidly gain significant market share. Such competition could materially
adversely affect our ability to sell additional software licenses and
maintenance, consulting and support services on terms favorable to us.
Further, competitive pressures could require us to reduce the price of our
products and related services, which could materially adversely affect our
business, operating results and financial condition. We may not be able to
compete successfully against current and future competitors and any failure to
do so would have a material adverse effect upon our business, operating
results and financial condition.

 If we fail to adequately protect our intellectual property rights,
competitors may use our technology and trademarks, which could weaken our
competitive position, reduce our revenues and increase our costs

  Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. It is possible that other companies could successfully
challenge the validity or scope of our patents and that our patents may not
provide a competitive advantage to us.

  As part of our confidentiality procedures, we generally enter into non-
disclosure agreements with our employees, distributors and corporate partners
and into license agreements with respect to our software, documentation and
other proprietary information. Despite these precautions, third parties could
copy or otherwise obtain and use our products or technology without
authorization, or develop similar technology independently. In particular, we
have, in the past, provided certain hardware OEMs with access to our source
code, and any

                                      21
<PAGE>

unauthorized publication or proliferation of this source code could materially
adversely affect our business, operating results and financial condition. It
is difficult for us to police unauthorized use of our products, and although
we are unable to determine the extent to which piracy of our software products
exists, software piracy is a persistent problem. Effective protection of
intellectual property rights is unavailable or limited in certain foreign
countries. The protection of our proprietary rights may not be adequate and
our competitors could independently develop similar technology, duplicate our
products, or design around patents and other intellectual property rights we
hold.

 Third parties could assert that our software products and services infringe
their intellectual property rights, which could expose us to increased costs
and litigation

  It is possible that third parties could claim our current or future products
infringe their rights including their patent rights. Any such claims, with or
without merit, could cause costly litigation that could absorb significant
management time, which could materially adversely effect our business,
operating results and financial condition. These types of claims could cause
us to pay substantial damages on settlement amounts, cease offering any
subject technology and require us to enter into royalty or license agreements.
If required, we may not be able to obtain such royalty or license agreements,
or obtain them on terms acceptable to us, which could have a material adverse
effect upon our business, operating results and financial condition.

 Our international operations expose us to greater management, collections,
currency, intellectual property, regulatory and other risks

  International revenues accounted for 41.8 percent and 40.6 percent of our
consolidated revenues for the six months ended July 31, 2000 and 1999,
respectively. We sell our products and services through a network of branches
and subsidiaries located in 28 countries worldwide. In addition, we also
market through distributors. We believe that our success depends upon
continued expansion of our international operations. Our international
business is subject to a number of risks, including unexpected changes in
regulatory practices and tariffs, greater difficulties in staffing and
managing foreign operations, longer collection cycles, seasonality, potential
changes in tax laws, greater difficulty in protecting intellectual property
and the impact of fluctuating exchange rates between the US dollar and foreign
currencies in markets where we do business.

  General economic and political conditions in these foreign markets may also
impact our international revenues. There can be no assurances that these
factors and other factors will not have a material adverse effect on our
future international revenues and consequently on our business and
consolidated financial condition and results of operations.

 If we are unable to manage our growth, our business will suffer

  We have continued to experience a period of rapid and substantial growth
that has placed, and if such growth continues would continue to place, a
strain on the Company's administrative and operational infrastructure. We have
increased the number of our employees from 120 employees in three offices in
the United States at January 31, 1996 to over 2,400 employees in over 75
offices in 28 countries at July 31, 2000. Our ability to manage our staff and
growth effectively requires us to continue to improve our operational,
financial and management controls, reporting systems and procedures. In this
regard, we are currently updating our management information systems to
integrate financial and other reporting among our multiple domestic and
foreign offices. In addition, we intend to continue to increase our staff
worldwide and to continue to improve the financial reporting and controls for
our global operations. It is possible we will not be able to successfully
implement improvements to our management information and control systems in an
efficient or timely manner and that, during the course of this implementation,
we could discover deficiencies in existing systems and controls. If we are
unable to manage growth effectively, our business, results of operations and
financial condition will be materially adversely affected.

                                      22
<PAGE>

 If the market for application servers, application integration and
application component software does not grow as quickly as we expect, our
revenues will be harmed

  We sell our products and services in the application server, application
integration and application component markets. These markets are emerging and
are characterized by continuing technological developments, evolving industry
standards and changing customer requirements. Our success is dependent in
large part on acceptance of our products by large customers with substantial
legacy mainframe systems, customers establishing a presence on the Web for
commerce, and developers of web-based commerce applications. Our future
financial performance will depend in large part on continued growth in the
number of companies extending their mainframe-based, mission-critical
applications to an enterprise-wide distributed computing environment and to
the Internet through the use of application server and integration technology.
There can be no assurance that the markets for application server and
integration technology and related services will continue to grow. If these
markets fail to grow or grow more slowly than we currently anticipate, or if
we experience increased competition in these markets, our business, results of
operations and financial condition will be adversely affected.

 If we lose key personnel or cannot hire enough qualified personnel, it will
adversely affect our ability to manage our business, develop new products and
increase revenue

  We believe our future success will depend upon our ability to attract and
retain highly skilled personnel including our founders, Messrs. William T.
Coleman III and Alfred S. Chuang, and other key members of management.
Competition for these types of employees is intense, and it is possible that
we will not be able to retain our key employees and that we will not be
successful in attracting, assimilating and retaining qualified candidates in
the future. As we seek to expand our global organization, the hiring of
qualified sales, technical and support personnel will be difficult due to the
limited number of qualified professionals. Failure to attract, assimilate and
retain key personnel would have a material adverse effect on our business,
results of operations and financial condition.

 If our products contain software defects, it could harm our revenues and
expose us to litigation

  The software products we offer are internally complex and, despite extensive
testing and quality control, may contain errors or defects, especially when we
first introduce them. We may need to issue corrective releases of our software
products to fix any defects or errors. Any defects or errors could also cause
damage to our reputation, loss of revenues, product returns or order
cancellations, or lack of market acceptance of our products. Accordingly, any
defects or errors could have a material and adverse effect on our business,
results of operations and financial condition.

  Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in
our license agreements may not be effective as a result of existing or future
federal, state or local laws or ordinances or unfavorable judicial decisions.
Although we have not experienced any product liability claims to date, sale
and support of our products entails the risk of such claims, which could be
substantial in light of customers' use of such products in mission-critical
applications. If a claimant brings a product liability claim against us, it
could have a material adverse effect on our business, results of operations
and financial condition.

  Our products interoperate with many parts of complicated computer systems,
such as mainframes, servers, personal computers, application software,
databases, operating systems and data transformation software. Failure of
anyone of these parts could cause all or large parts of computer systems to
fail. In such circumstances, it may be difficult to determine which part
failed, and it is likely that customers will bring a lawsuit against several
suppliers. Even if our software is not at fault, we could suffer material
expense and material diversion of management time in defending any such
lawsuits.

                                      23
<PAGE>

 We have a high debt balance and large interest obligations

  At July 31, 2000, we had approximately $561.9 million of long-term
indebtedness in the form of convertible notes. As a result of this
indebtedness, we have substantial principal and interest payment obligations.
The degree to which we are leveraged could significantly harm our ability to
obtain financing for working capital, acquisitions or other purposes and could
make us more vulnerable to industry downturns and competitive pressures. Our
ability to meet our debt service obligations will be dependent upon our future
performance, which will be subject to financial, business and other factors
affecting our operations, many of which are beyond our control. In addition,
our earnings are insufficient to cover our fixed charges.

  We will require substantial amounts of cash to fund scheduled payments of
interest on the notes, payment of the principal amount of the notes, payment
of principal and interest on our other indebtedness, future capital
expenditures and any increased working capital requirements. If we are unable
to meet our cash requirements out of cash flow from operations, there can be
no assurance that we will be able to obtain alternative financing. In the
absence of such financing, our ability to respond to changing business and
economic conditions, to make future acquisitions, to absorb adverse operating
results or to fund capital expenditures or increased working capital
requirements would be significantly reduced. If we do not generate sufficient
cash flow from operations to repay the notes at maturity, we could attempt to
refinance the notes; however, no assurance can be given that such a
refinancing would be available on terms acceptable to us, if at all. Any
failure by us to satisfy our obligations with respect to the notes at maturity
(with respect to payments of principal) or prior thereto (with respect to
payments of interest or required repurchases) would constitute a default under
the indenture and could cause a default under agreements governing our other
indebtedness.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

  For financial market risks related to changes in interest rates and foreign
currency exchange rates, refer to Part II: Item 7a, "Quantitative and
Qualitative Disclosure About Market Risks," in the Company's Annual Report on
Form 10-K for the year ended January 31, 2000.

PART II. OTHER INFORMATION

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

  At the Company's Annual Meeting of Stockholders held on July 28, 2000, the
following individuals were elected to the Board of Directors:

<TABLE>
<CAPTION>
                                                                         Votes
                                                             Votes For  Withheld
                                                            ----------- --------
      <S>                                                   <C>         <C>
      William T. Coleman, III.............................. 335,369,929 489,562
      William H. Janeway................................... 335,333,813 525,678
</TABLE>

The following proposals were approved at the Company's Annual Meeting:

<TABLE>
<CAPTION>
                                                   Affirmative Negative  Votes
                                                      Votes     Votes   Withheld
                                                   ----------- -------- --------
      <S>                                          <C>         <C>      <C>
      1. Election of Directors...................  335,333,813 489,562   36,116
      2. Ratify the appointment of Ernst & Young,
       LLP as independent auditors for the fiscal
       year ending January 31, 2001..............  335,630,675 107,755  121,061
</TABLE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

  (a) Exhibits:

    27  Financial Data Schedule

  (b) Reports on Form 8-K:

    None

                                      24
<PAGE>

                                  SIGNATURES

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

                                          BEA SYSTEMS, INC.
                                          (Registrant)

                                          /s/ William M. Klein
                                          -------------------------------
                                          William M. Klein
                                          Chief Financial Officer and
                                          Executive Vice President--
                                           Administration
                                          (Duly Authorized Officer and
                                          Principal Financial Officer or Chief
                                          Accounting Officer)

Dated: September 14, 2000

                                      25