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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_________________

FORM 10-Q
_________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

COMMISSION FILE NUMBER: 000-24539

ECLIPSYS CORPORATION
(Exact name of registrant as specified in its charter)

|                         |  |                                     
|------------------------ |  | ------------------------------------
|DELAWARE                 |  | 65-0632092                          
|(State of Incorporation) |  | (IRS Employer Identification Number)

777 East Atlantic Avenue
Suite 200
Delray Beach, Florida
33483
(Address of principal executive offices)

(561) 243-1440
(Telephone number of registrant)

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 for the past 90 days. Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuers classes
of common stock as of the latest practicable date.

|                             |  |                                           |            | 
|---------------------------- |  | ----------------------------------------- | ---------- | 
|Class                        |  | Shares outstanding as of November 9, 2001
|                             |  |                                          
|Common Stock, $.01 par value |  |                                           | 44,331,102 | 



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ECLIPSYS CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2001

INDEX

|         |  |                                                                                                   
|-------- |  | --------------------------------------------------------------------------------------------------
|PART I.  |  | Financial Information                                                                             
|        
|Item 1.  |  | Condensed Consolidated Balance Sheets (unaudited)  As of September 30, 2001 and December 31, 2000
|        
|         |  | Condensed Consolidated Statements of Operations (unaudited)  For the Three and Nine Months ended 
|         |  | September 30, 2001 and 2000                                                                       
|        
|         |  | Condensed Consolidated Statements of Cash Flows (unaudited)  For the Nine Months ended           
|         |  | September 30, 2001 and 2000                                                                       
|        
|         |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                  
|        
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations             
|        
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                        
|        
|PART II. |  | Other Information                                                                                 
|        
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                  

2



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PART I.

ITEM 1.

ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
(IN THOUSANDS)

|                                            |                                      |                                      |         |          |                    |   |                   |          |   |  | 
|------------------------------------------- | ------------------------------------ | ------------------------------------ | ------- | -------- | ------------------ | - | ----------------- | -------- | - |  | 
|                                            |                                      |                                      |         |          | SEPTEMBER 30, 2001 |   | DECEMBER 31, 2000
|                                            |                                      |                                      |         |          |                    |   |                  
|                                            |                                      |                                      | ASSETS  |          |                    |   |                   |          |   |  | 
|Current assets:                             |                                      |                                      |         |          |                    |   |                   |         
|                                            | Cash and cash equivalents            |                                      | $       | 113,069  |                    |   | $                 | 20,799   |  
|                                            | Marketable securities                |                                      |         | 51,014   |                    |   |                   |         |  
|                                            | Accounts receivable, net             |                                      |         | 66,729   |                    |   |                   | 63,912   |  
|                                            | Inventory                            |                                      |         | 559      |                    |   |                   | 1,065    |  
|                                            | Other current assets                 |                                      |         | 11,789   |                    |   |                   | 6,854    |  
|                                            |                                      |                                      |         |          |                    |   |                   |         
|Total current assets                        |                                      |                                      | 243,160 |          |                    |   | 92,630            |         
|                                            |                                      |                                      |         |          |                    |   |                   |          |   |  | 
|Property and equipment, net                 |                                      |                                      | 21,504  |          |                    |   | 16,801            |         
|Capitalized software development costs, net |                                      |                                      | 13,210  |          |                    |   | 11,469            |         
|Acquired technology, net                    |                                      |                                      | 6,875   |          |                    |   | 19,714            |         
|Intangible assets, net                      |                                      |                                      | 2,055   |          |                    |   | 7,831             |         
|Other assets                                |                                      |                                      | 8,661   |          |                    |   | 7,667             |         
|                                            |                                      |                                      |         |          |                    |   |                   |         
|TOTAL ASSETS                                |                                      | $                                    | 295,465 |          |                    | $ | 156,112           |         
|                                            |                                      |                                      |         |          |                    |   |                   |          |  
|                                            |                                      | LIABILITIES AND STOCKHOLDERS EQUITY |         |          |                    |   |                   |          |   | 
|Current liabilities:                        |                                      |                                      |         |          |                    |   |                   |         
|                                            | Deferred revenue                     |                                      | $       | 54,235   |                    |   | $                 | 45,970   |  
|                                            | Current portion of long-term debt    |                                      |         |         |                    |   |                   | 314      |  
|                                            | Other current liabilities            |                                      |         | 21,897   |                    |   |                   | 28,361   |  
|                                            |                                      |                                      |         |          |                    |   |                   |         
|Total current liabilities                   |                                      |                                      | 76,132  |          |                    |   | 74,645            |         
|                                           
|Deferred revenue                            |                                      |                                      | 2,836   |          |                    |   | 5,258             |         
|Long-term debt                              |                                      |                                      |        |          |                    |   | 1,177             |         
|Other long-term liabilities                 |                                      |                                      | 1,243   |          |                    |   | 1,628             |         
|                                           
|Stockholders equity:                       |                                      |                                      |         |          |                    |   |                   |         
|                                            | Common stock                         |                                      |         | 443      |                    |   |                   | 371      |  
|                                            | Unearned stock compensation          |                                      |         | (68      | )                  |   |                   | (176     | )
|                                            | Additional paid-in capital           |                                      |         | 399,143  |                    |   |                   | 259,903  |  
|                                            | Accumulated deficit                  |                                      |         | (184,179 | )                  |   |                   | (186,459 | )
|                                            | Accumulated other comprehensive loss |                                      |         | (85      | )                  |   |                   | (235     | )
|                                            |                                      |                                      |         |          |                    |   |                   |         
|Total stockholders equity                  |                                      |                                      | 215,254 |          |                    |   | 73,404            |         
|                                            |                                      |                                      |         |          |                    |   |                   |          |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY  |                                      | $                                    | 295,465 |          |                    | $ | 156,112           |         
|                                            |                                      |                                      |         |          |                    |   |                   |          |  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3



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ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |         | 
|-------------------------------------------------- | ------------------------------------- | - | ------------------ | ------ | ----------------- | - | ------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | 
|                                                   |                                       |   | THREE MONTHS ENDED |        | NINE MONTHS ENDED
|                                                   |                                       |   | SEPTEMBER 30,      |        | SEPTEMBER 30,    
|                                                   |                                       |   |                    |        |                  
|                                                   |                                       |   | 2001               |        | 2000              |   | 2001    |        | 2000
|                                                   |                                       |   |                    |        |                   |   |         |        |     
|REVENUES                                           |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|                                                   | Systems and services                  |   | $                  | 59,302 |                   |   | $       | 47,882 |      |   | $       | 166,288 |   |   | $       | 153,697 | 
|                                                   | Hardware                              |   |                    | 3,140  |                   |   |         | 2,731  |      |   |         | 10,025  |   |   |         | 8,736   | 
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|TOTAL REVENUES                                     |                                       |   | 62,442             |        |                   |   | 50,613  |        |      |   | 176,313 |         |   |   | 162,433 |        
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |         | 
|COSTS AND EXPENSES                                 |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|                                                   | Cost of systems and services revenues |   |                    | 30,915 |                   |   |         | 40,707 |      |   |         | 91,717  |   |   |         | 108,799 | 
|                                                   | Cost of hardware revenues             |   |                    | 2,701  |                   |   |         | 2,167  |      |   |         | 8,294   |   |   |         | 6,968   | 
|                                                   | Sales and marketing                   |   |                    | 10,746 |                   |   |         | 9,947  |      |   |         | 31,890  |   |   |         | 29,143  | 
|                                                   | Research and development              |   |                    | 9,248  |                   |   |         | 9,208  |      |   |         | 27,823  |   |   |         | 28,102  | 
|                                                   | General and administrative            |   |                    | 2,465  |                   |   |         | 3,316  |      |   |         | 7,862   |   |   |         | 8,231   | 
|                                                   | Depreciation and amortization         |   |                    | 4,000  |                   |   |         | 3,781  |      |   |         | 11,593  |   |   |         | 11,107  | 
|                                                   | Restructuring charge                  |   |                    |       |                   |   |         | 1,198  |      |   |         |        |   |   |         | 1,198   | 
|                                                   | Transaction costs                     |   |                    |       |                   |   |         | (1,200 | )    |   |         | (472    | ) |   |         | 1,900   | 
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|TOTAL COSTS AND EXPENSES                           |                                       |   | 60,075             |        |                   |   | 69,124  |        |      |   | 178,707 |         |   |   | 195,448 |        
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|INCOME (LOSS) FROM OPERATIONS                      |                                       |   | 2,367              |        |                   |   | (18,511 | )      |      |   | (2,394  | )       |   |   | (33,015 | )      
|Interest income, net                               |                                       |   | 1,598              |        |                   |   | 223     |        |      |   | 4,674   |         |   |   | 891     |        
|Other income, net                                  |                                       |   |                   |        |                   |   |        |        |      |   |        |         |   |   | 3,596   |        
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|NET INCOME (LOSS)                                  |                                       | $ | 3,965              |        |                   | $ | (18,288 | )      |      | $ | 2,280   |         |   | $ | (28,528 | )      
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|BASIC NET INCOME (LOSS) PER COMMON SHARE           |                                       | $ | 0.09               |        |                   | $ | (0.50   | )      |      | $ | 0.05    |         |   | $ | (0.78   | )      
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|DILUTED NET INCOME (LOSS) PER COMMON SHARE         |                                       | $ | 0.08               |        |                   | $ | (0.50   | )      |      | $ | 0.05    |         |   | $ | (0.78   | )      
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|BASIC WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING   |                                       |   | 43,961             |        |                   |   | 36,829  |        |      |   | 42,874  |         |   |   | 36,672  |        
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        
|DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING |                                       |   | 47,640             |        |                   |   | 36,829  |        |      |   | 46,833  |         |   |   | 36,672  |        
|                                                   |                                       |   |                    |        |                   |   |         |        |      |   |         |         |   |   |         |        

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4



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ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(IN THOUSANDS)

|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |        |    |        |         |  
|------------------------------------------------------ | ------------------------------------------- | ---------------- | -------------------------------------------- | --------------------------------------------------------------------------------------------------------- | ---- | ----------------- | ------- | ------ | -- | ------ | ------- | -
|                                                       |                                             |                  |                                              |                                                                                                           |      | NINE MONTHS ENDED
|                                                       |                                             |                  |                                              |                                                                                                           |      | SEPTEMBER 30,    
|                                                       |                                             |                  |                                              |                                                                                                           |      |                  
|                                                       |                                             |                  |                                              |                                                                                                           |      | 2001              |         | 2000  
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|OPERATING ACTIVITIES                                   |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|Net income (loss)                                      |                                             | $                | 2,280                                        |                                                                                                           |      | $                 | (28,528 | )     
|Adjustments to reconcile net income (loss) to net cash |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|                                                       | provided by (used in) operating activities: |                  |                                              |                                                                                                           |      |                   |         |        |   
|                                                       |                                             |                  | Depreciation and amortization                |                                                                                                           |      | 28,245            |         |        |    | 27,019 |        
|                                                       |                                             |                  | Provision for bad debts                      |                                                                                                           |      | 2,860             |         |        |    | 2,705  |        
|                                                       |                                             |                  | Write down of accounts receivable            |                                                                                                           |      |                  |         |        |    | 9,400  |        
|                                                       |                                             |                  | Gain on sale of investment                   |                                                                                                           |      |                  |         |        |    | (4,462 | )      
|                                                       |                                             |                  | Write down of investment                     |                                                                                                           |      |                  |         |        |    | 802    |        
|                                                       |                                             |                  | Stock compensation expense                   |                                                                                                           |      | 108               |         |        |    | 108    |        
|                                                       |                                             |                  | Changes in operating assets and liabilities: |                                                                                                           |      |                   |         |        |    |        |        
|                                                       |                                             |                  |                                              | Accounts receivable                                                                                       |      |                   | (5,677  | )      |    |        | 262     |  
|                                                       |                                             |                  |                                              | Inventory                                                                                                 |      |                   | 310     |        |    |        | (102    | )
|                                                       |                                             |                  |                                              | Other current assets                                                                                      |      |                   | (4,935  | )      |    |        | 2,900   |  
|                                                       |                                             |                  |                                              | Other assets                                                                                              |      |                   | (2,127  | )      |    |        | (2,444  | )
|                                                       |                                             |                  |                                              | Deferred revenue                                                                                          |      |                   | 5,841   |        |    |        | (8,762  | )
|                                                       |                                             |                  |                                              | Other current liabilities                                                                                 |      |                   | (6,464  | )      |    |        | (13,679 | )
|                                                       |                                             |                  |                                              | Other liabilities                                                                                         |      |                   | (384    | )      |    |        | (394    | )
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|                                                       |                                             |                  |                                              | Total adjustments to reconcile net income (loss) to net
  cash provided by (used in) operating activities |      |                   | 17,777  |        |    |        | 13,353  |  
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|                                                       |                                             |                  |                                              | NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                                       |      |                   | 20,057  |        |    |        | (15,175 | )
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|INVESTING ACTIVITIES                                   |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|                                                       | Purchase of property and equipment          |                  |                                              | (9,671                                                                                                    | )    |                   |         | (5,571 | ) 
|                                                       | Purchase of marketable securities           |                  |                                              | (50,716                                                                                                   | )    |                   |         |       |   
|                                                       | Purchase of investments                     |                  |                                              |                                                                                                          |      |                   |         | (7,905 | ) 
|                                                       | Sale of investments                         |                  |                                              |                                                                                                          |      |                   |         | 12,432 |   
|                                                       | Capitalized software development costs      |                  |                                              | (5,073                                                                                                    | )    |                   |         | (4,905 | ) 
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|                                                       |                                             |                  |                                              | NET CASH USED IN INVESTING ACTIVITIES                                                                     |      |                   | (65,460 | )      |    |        | (5,949  | )
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|FINANCING ACTIVITIES                                   |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|                                                       | Issuance of common stock in public offering |                  |                                              | 123,215                                                                                                   |      |                   |         |       |   
|                                                       | Borrowings                                  |                  |                                              |                                                                                                          |      |                   |         | 2,012  |   
|                                                       | Payments on borrowings                      |                  |                                              | (1,491                                                                                                    | )    |                   |         | (284   | ) 
|                                                       | Exercise of stock options                   |                  |                                              | 14,299                                                                                                    |      |                   |         | 1,760  |   
|                                                       | Employee stock purchase plan                |                  |                                              | 1,798                                                                                                     |      |                   |         | 1,492  |   
|                                                       | Exercise of warrants                        |                  |                                              |                                                                                                          |      |                   |         | 4      |   
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|                                                       |                                             |                  |                                              | NET CASH PROVIDED BY FINANCING ACTIVITIES                                                                 |      |                   | 137,821 |        |    |        | 4,984   |  
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|EFFECT OF EXCHANGE RATES ON CASH AND                   |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|                                                       |                                             | CASH EQUIVALENTS |                                              |                                                                                                           | (148 | )                 |         |        | 84 |       
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   |                                             |                  | 92,270                                       |                                                                                                           |      |                   | (16,056 | )     
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |        |    |        |         |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD         |                                             |                  | 20,799                                       |                                                                                                           |      |                   | 33,956  |       
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       
|CASH AND CASH EQUIVALENTS, END OF PERIOD               |                                             | $                | 113,069                                      |                                                                                                           |      | $                 | 17,900  |       
|                                                       |                                             |                  |                                              |                                                                                                           |      |                   |         |       

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART TO THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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ECLIPSYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The condensed consolidated financial statements include all adjustments
that, in the opinion of management, are necessary for a fair presentation of
the results for the periods presented. All such adjustments are considered of a
normal recurring nature. Quarterly results of operations are not necessarily
indicative of annual results.

Certain financial information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Companys Annual Report on Form 10-K filed March 15, 2001.

2. MARKETABLE SECURITIES

Marketable securities consist of funds that are highly liquid and are
classified as available-for-sale. Marketable securities are recorded at fair
value and unrealized gains and losses are recorded, as a component of other
comprehensive income.

3. ACCOUNTS RECEIVABLE

The current portion of unbilled accounts receivable was $12.3 million and
$12.5 million as of September 30, 2001 and December 31, 2000, respectively, and
is included in accounts receivable in the accompanying condensed consolidated
balance sheets. The non-current portion of unbilled accounts receivable was
$3.1 million and $3.3 million as of September 30, 2001 and December 31, 2000,
respectively, and is included in other assets in the accompanying condensed
consolidated balance sheets.

4. OTHER COMPREHENSIVE INCOME

The components of comprehensive income (loss) were as follows (in
thousands):

|                                                                                     |  |                    |       |                   |  |      |         |      |  |   |       |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | ------------------ | ----- | ----------------- |  | ---- | ------- | ---- |  | - | ----- | - |  | - | ------- | -
|                                                                                     |  | Three Months Ended |       | Nine Months Ended
|                                                                                     |  | September 30,      |       | September 30,    
|                                                                                     |  | 2001               |       | 2000              |  | 2001 |         | 2000
|                                                                                     |  |                    |       |                   |  |      |         |      |  |   |       |   |  |   |         |  
|                                                                                     |  |                    |       |                  
|Net income (loss)                                                                    |  | $                  | 3,965 |                   |  | $    | (18,288 | )    |  | $ | 2,280 |   |  | $ | (28,528 | )
|Unrealized gain on available-for-sale marketable securitiesarising during the period |  |                    | 396   |                   |  |      |         |      |  |   | 298   |   |  |   |         |  
|Foreign currency translation adjustment                                              |  |                    | (69   | )                 |  |      | (37     | )    |  |   | (148  | ) |  |   | 84      |  
|                                                                                     |  |                    |       |                   |  |      |         |      |  |   |       |   |  |   |         |  
|Total comprehensive income (loss)                                                    |  | $                  | 4,292 |                   |  | $    | (18,325 | )    |  | $ | 2,430 |   |  | $ | (28,444 | )
|                                                                                     |  |                    |       |                   |  |      |         |      |  |   |       |   |  |   |         |  

5. PUBLIC OFFERING

During the quarter ended March 31, 2001, the Company completed a follow-on
public offering for 5,750,000 shares of its common stock. Net proceeds from
the offering were approximately $123.2 million.

6



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6. NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142 Goodwill and
other Intangibles. Under this new standard the FASB eliminated amortization
of goodwill and created indefinite life intangible assets and established new
impairment measurement procedures for goodwill. For calendar-year reporting
companies, this standard becomes effective January 1, 2002. The Company is
currently assessing the impact of implementing this standard.

In June of 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. The statement provides accounting and reporting
standards for recognizing obligations related to asset retirement costs
associated with the retirement of tangible long-lived assets. Under this
statement, legal obligations associated with the retirement of long-lived
assets are to be recognized at their fair value in the period in which they are
incurred if a reasonable estimate of fair value can be made. The fair value of
the asset retirement costs is capitalized as part of the carrying amount of the
long-lived asset and subsequently allocated to expense using a systematic and
rational method over the assets useful life. Any subsequent changes to the
fair value of the liability due to passage of time or changes in the amount or
timing of estimated cash flows is recognized as an accretion expense. For
calendar-year reporting companies, this standard becomes effective January 1,
2002. The Company is currently assessing the impact of implementing this
standard.

In October of 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which is effective for fiscal
years beginning after Dec 15, 2001. This statement supercedes FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. However, it retains the fundamental provisions of
SFAS No. 121 for the recognition and measurement of the impairment of
long-lived assets to be held and used and the measurement of long-lived assets
to be disposed of by sale. Impairment on Goodwill is not included in the scope
of SFAS No. 144 and will be treated in accordance with the accounting standards
established in SFAS No. 142, Goodwill and Other Intangible Assets. According
to SFAS No. 144, long-lived assets are to be measured at the lower of carrying
amount or fair value less cost to sell. For calendar-year reporting companies,
this standard becomes effective January 1, 2002. The Company is currently
assessing the impact of implementing this standard.

7



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PART I.

ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

This report contains forward-looking statements. Any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
believes, anticipates, plans, expects, intends and similar
expressions are intended to identify forward-looking statements. All
forward-looking statements included in this document are based upon information
available to Eclipsys as of the date hereof and Eclipsys assumes no obligation
to update any such forward-looking statements. Because such statements involve
risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. These risks include
potential financial constraints and other factors faced by the healthcare
industry, changing customer requirements and other risks described in the
Companys Annual Report on Form 10-K for the year ended Dec. 31, 2000 filed
with the Securities and Exchange Commission on March 15, 2001.

OVERVIEW

We are a healthcare information technology company. Our solutions assist
healthcare organizations in achieving balanced outcomes through an appropriate
and sustainable combination of clinical quality, efficient use of resources and
patient satisfaction. We have designed our solutions to help our customers
deliver better healthcare through knowledge. Our solutions consist of a
comprehensive service offering and seven integrated software suites that we
market under the Sunrise brand name.

Our software applications consist of individual integrated product
components that can be implemented in any combination and integrated with our
customers existing information technology systems. We believe the open,
modular and component-based nature of our software architecture reduces the
overall cost of ownership and reduces the time to productive use because our
solutions do not require the initial investment and disruption associated with
a complete replacement of a customers existing legacy systems. To facilitate
rapid adoption by our customers, we have engineered our solutions to take
advantage of Web-based technologies. Our software applications are available to
our customers for implementation in-house or through our remote hosting
service, and are designed to work in a variety of healthcare settings.

In addition, we provide a range of services to our customers, including
implementation, integration, support, maintenance and training. We also provide
outsourcing, remote hosting, networking services and business solutions
consulting to assist customers in meeting their healthcare information
technology requirements. Through this comprehensive service offering and our
integrated software suites, we provide our customers with an end-to-end
solution for their clinical, financial and administrative information needs.

We market our solutions primarily to healthcare organizations,
particularly academic medical centers. We have one or more of our products
installed or being installed in over 1,450 facilities in the United States and
other countries. We maintain decentralized sales and customer support teams in
each of our five North American regions to provide direct sustained customer
contact.

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RESULTS OF OPERATIONS

Systems and services revenues increased $11.4 million, or 23.9%, to $59.3
million for the quarter ended September 30, 2001, compared with $47.9 million
for the same period in 2000. For the nine months ended September 30, 2001,
systems and services revenues increased $12.6 million, or 8.2%, to $166.3
million, compared to $153.7 million for the same period in 2000. The increase
in systems and services revenues for the quarter and nine months ended
September 30, 2001 was primarily attributable to revenues generated under the
Companys comprehensive solutions offerings which were entered into during the
second quarter of 2000 and in subsequent periods and other new contracted
business. These offerings bundle the software license fees (including the
right to future products within the suite sold), implementation, maintenance,
outsourcing, remote hosting, networking services and other related services
into comprehensive contracts that generally provide for monthly or annual
payments over the term of the contracts. Revenues under these arrangements are
recognized on a monthly basis over the term of the contract, which typically
ranges from seven to ten years.

Hardware revenues increased $0.4 million, or 15.0%, to $3.1 million for
the quarter ended September 30, 2001, compared with $2.7 million for the same
period in 2000. For the nine months ended September 30, 2001, hardware
revenues increased $1.3 million, or 14.8%, to $10.0 million, compared to $8.7
million for the same period in 2000. The increase in hardware revenues in the
quarter and nine months ended September 30, 2001 was primarily due to increased
shipments under contracts entered into over the last several quarters.

Cost of systems and services revenues decreased $9.8 million, or 24.1%, to
$30.9 million, or 52.1% of systems and services revenues, for the quarter ended
September 30, 2001, compared to $40.7 million, or 85.0% of systems and services
revenues, for the same period in 2000. For the nine months ended September 30,
2001, cost of systems and services revenues decreased $17.1 million, or 15.7%,
to $91.7 million, or 55.2% of systems and services revenues, compared to $108.8
million, or 70.8% of systems and services revenues, for the same period in
2000. The decrease in cost of systems and services revenues for the quarter
and nine months ended September 30, 2001 was due to several factors. The most
significant factor was an $8.7 million charge recorded in the third quarter of
2000 to write-down certain receivables related to contracts assumed in
acquisitions. Also in the third quarter of 2000, the Company recorded a charge
of $0.7 million for other costs related to completing the integration of its
acquisitions. Other factors contributing to the decrease were the realization
of integration synergies and restructuring, which resulted in lower salaries
and payroll related expenses, including medical insurance and travel.
Additionally the Company reduced the usage of outside consultants, relying more
on internal resources. These cost savings were partially offset by higher
amortization of capitalized software development costs.

Cost of hardware revenues increased $0.5 million, or 24.6%, to $2.7
million, or 86.0% of hardware revenues, for the quarter ended September 30,
2001, compared to $2.2 million, or 79.3% of hardware revenues, for the same
period in 2000. For the nine months ended September 30, 2001, cost of hardware
revenues increased $1.3 million, or 19.0%, to $8.3 million, or 82.7% of
hardware revenues, compared to $7.0 million, or 79.8% of hardware revenues, for
the same period in 2000. The increase in cost of hardware revenues for the
quarter and nine months ended September 30, 2001 was directly attributable to
higher hardware revenues and lower margins due to pricing pressure in the
hardware sector.

Sales and marketing expenses increased $0.8 million, or 8.0%, to $10.7
million, or 17.2% of total revenues, for the quarter ended September 30, 2001,
compared to $9.9 million, or 19.7% of total revenues, for the third quarter in
2000. For the nine months ended September 30, 2001, sales and marketing
expenses increased $2.7 million, or 9.4%, to $31.9 million, or 18.1% of total
revenues, compared to $29.1 million, or 17.9% of total revenues, for the same
period in 2000. The increase in sales and marketing expenses for the quarter
and nine months ended September 30, 2001 was primarily due to an increase in
commissions resulting from an increase in new contracted business as well as
costs associated with newly implemented sales incentive programs.

Research and development expenses for the quarter ended September 30, 2001
were relatively unchanged from the third quarter of 2000 at $9.2 million. This
represented 14.8% of total revenues for the third quarter of 2001, compared to
18.2% of total revenues for the third quarter of 2000. For the nine months
ended September 30, 2001, research and development expenses decreased $0.3
million, or 1.0%, to $27.8 million, or 15.8% of total revenues, compared to
$28.1 million, or 17.3% of total revenues, for the same period in 2000. The
decrease in research and development expenses for the nine months ended
September 30, 2001, was due primarily to the realization of integration
synergies and restructuring. The percentage of research and development
expenditures capitalized for the nine months ended September 30, 2001 was of
15.4%, compared to 14.9% for the same period in 2000. As a result of certain
products becoming available for general release, amortization of capitalized
software development costs, which is included in cost of systems and services
revenues, increased by $1.3 million to $3.3 million for the nine months ended
September 30, 2001, compared to $2.0 million for the same period in 2000.

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General and administrative expenses decreased $0.8 million, or 25.7%, to
$2.5 million, or 3.9% of total revenues, for the quarter ended September 30,
2001, compared to $3.3 million, or 6.6% of total revenues, for the same period
in 2000. For the nine months ended September 30, 2001, general and
administrative expenses decreased $0.4 million, or 4.5%, to $7.9 million, or
4.5% of total revenues, compared to $8.2 million, or 5.1% of total revenues,
for the same period in 2000. General and administrative expenses were higher
for the quarter ended September 30, 2000 primarily as a result
of a bad debt provision of $0.7 million.

Depreciation and amortization increased $0.2 million, or 5.8%, to $4.0
million, or 6.4% of total revenues, for the quarter ended September 30, 2001,
compared to $3.8 million, or 7.5% of total revenues, for the same period in
2000. For the nine months ended September 30, 2001, depreciation and
amortization expenses increased $0.5 million, or 4.4%, to $11.6 million, or
6.6% of total revenues, compared to $11.1 million, or 6.8% of total revenues,
for the same period in 2000. The increase in depreciation and amortization for
the quarter and nine months ended September 30, 2001 was primarily the result
of purchases of computer equipment and the expansion of our Boston office.

During the quarter ended September 30, 2000 the Company initiated and
completed a restructuring of its operations. The restructuring rationalized
employee headcount following the completion of the integration of the Companys
acquisitions. Additionally, the Company consolidated its research and
development and implementation functions. Charges in connection with this
restructuring plan totaled $1.2 million.

The transaction costs recorded during the three and nine months ended
September 30, 2000, relate primarily to the proposed transactions with Shared
Medical Systems Corp. (SMS) and Neoforma.com, Inc. For the nine months ended
September 30, 2000, transaction costs were $1.9 million, inclusive of the
($1.2) million benefit for the third quarter of 2000, which was the result of
the Companys ability to negotiate favorable reductions in certain costs.
Transaction costs recorded during the nine month period in 2001 were ($0.5)
million as the result of the completion of certain activities related to prior
pooling of interest transactions which were completed for less than original
estimates.

Interest income increased $1.4 million, or 616.6%, to $1.6 million for the
quarter ended September 30, 2001 compared to $0.2 million for the same period
in 2000. For the nine months ended September 30, 2001, interest income
increased $3.8 million, or 424.6%, to $4.7 million, compared to $0.9 million
for the same period in 2000. The increase in interest income for the quarter
and nine months ended September 30, 2001 was primarily due to higher cash and
marketable securities balances as a result of the completion of a public
offering of the Companys common stock and additional cash provided from
operating activities.

Other income recorded during the first quarter of 2000 related to a gain
on the Companys investment in SMS.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2001, the Company had $164.1 million in cash and cash
equivalents and marketable securities. During the first nine months of 2001,
the Companys operations provided cash of $20.1 million. Investing activities
used cash of $65.5 million, of which $50.7 million was the purchase of
marketable securities. Cash was also used for the purchase of fixed assets and
the funding of development costs. Financing activities provided cash of $137.8
million, from issuance of common stock in a public offering, exercise of stock
options and the issuance of common stock under the employee stock purchase
plan, offset by the repayment of all outstanding debt.

Management believes that the available cash and cash equivalents,
marketable securities and anticipated cash generated from the Companys future
operations will be sufficient to meet its operating requirements for at least
the next twelve months.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not currently use derivative financial instruments. We generally
buy highly liquid investments with maturities of 90 days or less. Based upon
the nature of our investments, we do not expect any material loss from our
investments.

Investments in both fixed rate and floating rate interest earning
instruments carry a degree of interest rate risk. A rise in interest rates may
adversely impact the fair market value of fixed rate securities, while floating
rate securities may produce less income than expected if interest rates fall.
Due in part to these factors, our future investment income may fall short of
expectations due to changes in interest rates or in principal if we are forced
to sell securities that have declined in market value. Based upon a cash and
marketable securities balance of $165 million, a 10% increase or decrease in
interest rates, from a hypothetical rate of 4%, could result in a change in
interest income of approximately $660,000 over a one year period.

The Company accounts for cash equivalents and marketable securities in
accordance with Statement of Financial Accounting Standards (SFAS) No. 115.
Accounting for Certain Investments in Debt and Equity Securities. Cash
equivalents are short-term highly liquid investments with original maturity
dates of three months or less. Cash equivalents are carried at cost, which
approximates fair market value. Marketable securities consist of funds that
are highly liquid and are classified as available-for-sale. Marketable
securities are recorded at fair value and unrealized gains and losses are
recorded, as a component of other comprehensive income.

We do not currently enter into foreign currency hedge transactions.
Through September 30, 2001, foreign currency fluctuations have not had a
material impact on our financial position or results of operations.

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PART II.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits: None.

(b)  Reports on Form 8-K:



| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | (1)      No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended September 30, 2001.

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SIGNATURES

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

|                        |  |                                                  
|----------------------- |  | -------------------------------------------------
|                        |  | ECLIPSYS CORPORATION                             
|                       
|                       
|Date: November 13, 2001 |  | /s/ Robert J. Colletti                           
|                        |  |                                                  
|                        |  | Robert J. Colletti                               
|                        |  | Senior Vice President and Chief Financial Officer

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ECLIPSYS CORPORATION
EXHIBIT INDEX

|        |  |             |  | 
|------- |  | ----------- |  | 
|EXHIBIT |  |             |  | 
|NO.     |  | DESCRIPTION
|        |  |            
|None   



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