<PAGE>
 
================================================================================

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

                                   FORM 10-Q


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

                 For the quarterly period ended March 31, 1999

                                       or

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

              For the transition period from _________ to ________



                         Commission File Number 0-24720
                                        
                             Business Objects S.A.
             (Exact name of registrant as specified in its charter)

          Republic of France                          None
      (State or other jurisdiction of            (I.R.S. Employer
       incorporation or organization)            Identification No.)

               1, Square Chaptal, 92309 Levallois-Perret, France
                    (Address of principal executive offices)

                                 (408) 953-6000
              (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 
               ------------                     -----------



The number of outstanding shares of each of the issuer's classes of capital or
common stock as of April 30, 1999 was 17,724,890 Ordinary Shares of 1 French
franc nominal value, including 16,280,961 American Depositary Shares (as
evidenced by American Depositary Receipts), each corresponding to one Ordinary
Share.
 
<PAGE>
 
                             Business Objects S.A.
                               Table of Contents

 
                                                                   
PART I.  FINANCIAL INFORMATION                                           Page   
                                                                        Number  
                                                                              
Item 1.   Consolidated Financial Statements:                                  
                                                                              
          Condensed Consolidated Balance Sheets at                            
          March 31, 1999 and December 31, 1998                             3  
                                                                              
          Condensed Consolidated Statements of Income for the                 
          quarters ended March 31, 1999 and 1998                           4  
                                                                              
          Condensed Consolidated Statements of Cash Flows for the             
          quarters ended March 31, 1999 and 1998                           5  
                                                                              
          Notes to Condensed Consolidated Financial Statements             6  
                                                                              
Item 2.   Management's Discussion and Analysis of Financial                   
          Condition and Results of Operations                             10  

PART II.  OTHER INFORMATION                                               24  
                                                                              
          Signatures                                                      25  
 

                                      -2-
<PAGE>
 
                             BUSINESS OBJECTS S.A.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
               (In thousands, except per ordinary share amounts)

<TABLE> 
<CAPTION> 

                                                                                     March 31, 1999       December 31, 1998
                                                                                   ------------------    --------------------- 
                                                                                       (Unaudited)       (Derived from Audited      
                                                                                                         Financial Statements)
<S>                                                                                <C>                   <C> 
ASSETS
Current assets:
    Cash and cash equivalents                                                       $        80,898        $        71,713
    Accounts receivable, net                                                                 31,258                 42,236
    Other current assets                                                                     10,909                  7,993
                                                                                   ------------------    --------------------- 
        Total current assets                                                                123,065                121,942



Property and equipment, net                                                                  13,629                 13,804
Goodwill, net                                                                                 1,845                  1,460
Other assets                                                                                  1,594                    879
                                                                                   ------------------    --------------------- 
        Total assets                                                                $       140,133        $       138,085
                                                                                   ==================    ===================== 

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
   Accounts payable                                                                 $        10,946        $        10,439
   Accrued payroll and related expenses                                                      15,166                 16,597
   Deferred revenue                                                                          23,276                 21,684
   Other current liabilities                                                                 19,121                 22,118
                                                                                   ------------------    --------------------- 
        Total current liabilities                                                            68,509                 70,838


Shareholders' equity
   Ordinary shares, FRF 1 nominal value ($0.16 U.S. as of March 31, 1999):
     Authorized 36,243; Issued and outstanding - 17,636 and 17,255 at
     March 31, 1999 and December 31, 1998, respectively                                       3,267                  3,166
   Additional paid-in capital                                                                43,626                 38,705
   Retained earnings                                                                         31,560                 28,394
   Accumulated other comprehensive income                                                    (6,829)                (3,018)
                                                                                   ------------------    --------------------- 
        Total shareholders' equity                                                           71,624                 67,247
                                                                                   ------------------    --------------------- 
          Total liabilities and shareholders' equity                                $       140,133        $       138,085        
                                                                                   ==================    ===================== 
</TABLE> 

See accompanying Notes to Condensed Consolidated Financial Statements.


                                      -3-
<PAGE>
 
                             BUSINESS OBJECTS S.A.
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
         (In thousands, except per ADS and per share data; unaudited)



                                                         Three Months Ended
                                                               March 31,
                                                          1999         1998
                                                        ---------   -------- 
Revenues:
   License fees                                         $ 31,534    $ 23,422
   Services                                               17,974      11,144
                                                        ---------   -------- 
        Total revenues                                    49,508      34,566

Cost of revenues:
   License fees                                              815         687
   Services                                                8,276       4,788
                                                        ---------   -------- 
        Total cost of revenues                             9,091       5,475
                                                        ---------   -------- 
Gross margin                                              40,417      29,091
Operating expenses:
   Sales and marketing                                    25,348      19,796
   Research and development                                5,996       4,134
   General and administrative                              4,198       3,216
                                                        ---------   -------- 
        Total operating expenses                          35,542      27,146
                                                        ---------   --------  
Income from operations                                     4,875       1,945
Interest and other income, net                               571         387
                                                        ---------   --------  
Income before provision for income taxes                   5,446       2,332
Provision for income taxes                                (2,233)       (952)
                                                        ---------   -------- 
Net income                                              $  3,213    $  1,380    
                                                        =========   ======== 
Basic net income per ADS and per share                  $   0.18    $   0.08
                                                        =========   ========  
ADSs and shares used in computing basic
   net income per ADS and per share                       17,427      16,782
                                                        =========   ========  
Diluted net income per ADS and per share                $   0.17    $   0.08
                                                        =========   ========   
ADS and shares used in computing diluted
   net income per ADS and per share                       19,070      17,439
                                                        =========   ========   



     See accompanying Notes to Condensed Consolidated Financial Statements


                                      -4-
<PAGE>
 
                             BUSINESS OBJECTS S.A.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In thousands; unaudited)
<TABLE> 
<CAPTION> 

                                                                       Three Months Ended
                                                                            March 31,
<S>                                                           <C>                       <C> 
                                                                    1999                   1998
                                                              ---------------          ------------- 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                     $      3,213              $    1,380
Adjustments to reconcile net income to net
   cash provided by operating activities:
      Depreciation and amortization                                   2,728                   1,217
      Amortization of goodwill                                          301                     310
      Deferred income taxes                                               4                       -
      Changes in operating assets and liabilities:
         Accounts receivable                                          8,860                   3,748
         Inventories                                                     23                       -
         Other assets                                                (3,046)                 (1,394)
         Accounts payable                                             1,150                  (1,221)
         Accrued payroll and related expenses                        (1,540)                    831
         Deferred revenue                                             2,452                    (377)
         Other current liabilities                                   (1,362)                  3,180
                                                              ---------------          ------------- 
Net cash provided by operating activities                            12,783                   7,674

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment                                  (2,007)                 (1,493)
Purchases of intangible assets                                       (1,024)                      -
Purchases of short-term investments                                       -                 (14,610)
Proceeds from sales of short-term investments                             -                   7,327
Intercompany assets                                                     864                       -
                                                              ---------------          ------------- 
Net cash used for investing activities                               (2,167)                 (8,776)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations                           -                     (16)
Issuance of ordinary shares                                           5,022                     577
                                                              ---------------          ------------- 
Net cash provided by financing activities                             5,022                     561
Effect of foreign exchange rate changes on cash and
   cash equivalents                                                  (6,453)                   (729)
                                                              ---------------          ------------- 
Net increase in cash and cash equivalents                             9,185                  (1,270)
Cash and cash equivalents at the beginning of the period             71,713                  36,508
                                                              ---------------          ------------- 
Cash and cash equivalents at end of the period                 $     80,898              $   35,238
                                                              ===============          ============= 
</TABLE> 







    See accompanying Notes to Condensed Consolidated Financial Statements.

                                      -5-
<PAGE>
 
                             Business Objects S.A.
             Notes to Condensed Consolidated Financial Statements
                                March 31, 1999

1.  Basis of Presentation

    The unaudited condensed consolidated financial statements included herein
    have been prepared in accordance with U.S. generally accepted accounting
    principles. As permitted by Form 10-Q, certain information and footnote
    disclosures normally included in financial statements prepared in accordance
    with generally accepted accounting principles have been condensed or
    omitted. In the opinion of management, all adjustments, consisting only of
    normal recurring adjustments necessary for a fair presentation of our
    financial position, results of operations, and cash flows for the interim
    periods presented have been made. Operating results for the quarter ended
    March 31, 1999 are not necessarily indicative of the results that may be
    expected for the year ending December 31, 1999. These financial statements
    should be read in conjunction with our audited consolidated financial
    statements and footnotes as included in our Annual Report or Form 10-K for
    the year ended December 31, 1998.

2.  Use of Estimates

    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the amounts reported in the financial statements and
    accompanying footnotes. Actual results could differ from those estimates.

3.  Accounts Receivable

    Accounts receivable are stated net of allowances for sales returns and
    doubtful accounts of $1,682,000 and $1,672,000 at March 31, 1999 and
    December 31, 1998, respectively.

4.  Revenue Recognition

    Statement of Position 98-9, "Modification of SOP 97-2, Software Revenue
    Recognition, With Respect to Certain Transactions" (SOP 98-9) was issued in
    December 1998 and addresses software revenue recognition as it applies to
    certain multiple-element arrangements. SOP 98-9 also amends Statement of
    Position 98-4, "Deferral of the Effective Date of a Provision of SOP 97-2",
    to extend the deferral of application of certain passages of Statement of
    Position 97-2 through fiscal years beginning on or before March 15, 1999.
    All other provisions of SOP 98-9 are effective for transactions entered into
    in fiscal years beginning after March 15, 1999. We will comply with the
    requirements of SOP 98-9 as they become effective and this is not expected
    to have a significant effect on our revenue recognition.

    In accordance with SOP 98-9, revenue from product licensing fees is
    recognized when the product is delivered, all significant contractual
    obligations have been satisfied and the resulting receivable is deemed
    collectible by management. Service revenue from software maintenance
    agreements is recognized ratably over the maintenance period, which in most
    instances is one year. Other service revenues, primarily training and
    consulting, are generally recognized at the time the service is performed.

                                      -6-
<PAGE>
 
5.  Sales Returns and Warranties

    Our distributors do not have the right to return merchandise for credit or
    refund. Any other potential sales returns are covered by our allowances for
    sales returns and doubtful accounts. We provide for the costs of warranty
    when specific problems are identified. We have not experienced any
    significant warranty claims to date.

6.  Net Income per ADS and per Share

    Our ordinary shares are traded in the United States in the form of American
    Depositary Shares ("ADSs"), with each ADS representing one ordinary share.
    Basic net income per ADS and per share is computed using the weighted-
    average number of ADSs and ordinary shares outstanding. Diluted net income
    per ADS and per share is computed using the weighted-average number of ADSs
    and ordinary shares outstanding and dilutive options and warrants calculated
    under the treasury stock method.

    The following table sets forth the computation of basic and diluted net
    income per ADS and per share (in thousands, except per ADS and per share
    amounts):

<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                                           March 31,
                                                                      1999             1998
                                                              --------------   --------------
 
<S>                                                             <C>              <C>
  Net income..................................................       $ 3,213          $ 1,380
                                                                     =======          =======
  Basic-weighted average ADSs and shares outstanding..........        17,427           16,782
                                                                     -------          -------
  Incremental ordinary shares attributable to shares issuable 
   under employee stock plans and warrants....................         1,643              657
                                                                     -------          -------
  Diluted-weighted average ADSs and shares outstanding........        19,070           17,439
                                                                     =======          =======
  Basic-net income per ADS and per share......................       $  0.18          $  0.08
                                                                     =======          =======
  Diluted-net income per ADS and per share....................       $  0.17          $  0.08
                                                                     =======          =======
</TABLE>
                                                                                

7.  Comprehensive Income

    As of January 1, 1998, we adopted Financial Accounting Standards Board
    Statement No. 130, "Reporting Comprehensive Income" (FAS 130). FAS 130
    establishes new rules for the reporting and the display of comprehensive
    income and its components. FAS 130 also requires unrealized gains or losses
    on our available-for-sale securities and foreign currency translation
    adjustments, which prior to adoption were reported separately in
    shareholders' equity, to be included in other comprehensive income. The
    adoption of this Statement had no impact on our net income or shareholders'
    equity.

    We had total comprehensive loss of $598,000 for the quarter ended March 31,
    1999, and total comprehensive income of $172,000 for the quarter ended March
    31, 1998. The difference between total comprehensive income (loss) and net
    income is caused by the change in the 

                                      -7-
<PAGE>
 
    cumulative translation adjustment account during the quarters ended March
    31, 1999 and 1998.

8.   Recent Pronouncements

    In June 1998, the Financial Accounting Standards Board issued Statement No.
    133, "Accounting for Derivative Instruments and Hedging Activities," which
    is required to be adopted in years beginning after June 15, 1999. We do not
    anticipate that the adoption of the new Statement will have a significant
    effect on our earnings or financial position.

    In March 1998, the Accounting Standards Board issued Statement of Position
    98-1, "Accounting for the Costs of Computer Software Developed or Obtained
    for Internal Use" (SOP 98-1). SOP 98-1 is effective for years beginning
    after December 15, 1998. SOP 98-1 will require the capitalization of certain
    costs incurred after the date of adoption in connection with developing or
    obtaining software for internal use. We do not believe that SOP 98-1 will
    have a significant impact on our consolidated financial position, results of
    operations, or cash flow.

9.  Additional Investment in Subsidiary

    During March 1999 we exercised our option to acquire the remaining 20% of
    the outstanding shares of our Italian distributor, in exchange for $1.0
    million in cash. The cost of the additional shares has been fully allocated
    to goodwill, and is being amortized over a three-year period that began in
    April 1997, the date of the initial investment.

    During March 1999 we invested $864,000 cash, representing a 9.5% investment
    in our Norwegian distributor, Component Software A/S. This investment will
    be accounted for under the cost method of accounting.

10. Introduction of the European Economic and Monetary Union (EMU)

    On January 1, 1999, 11 of the 15 member countries of the European Union
    established a fixed conversion rate between their sovereign currencies and
    adopted the Euro as their common legal currency. As a result, the Euro now
    trades on currency exchanges and will be available for non-cash
    transactions. We expended resources, reviewed and modified pricing policies
    in the new economic environment, analyzed the legal and contractual
    implications for contracts, evaluated system capabilities, and ensured that
    banking vendors support our operations in Euro-related transactions. We have
    modified our business operations and systems to accommodate the Euro
    conversion, and as of March 31, 1999, the cost of these modifications have
    not significantly affected our operating results.

11. Subsequent Events

    During April 1999 we acquired 100% of the outstanding shares in Prophecy
    Holding B.V., which owns 100% of Prophecy Automatisering B.V. ("Prophecy").
    Of the total purchase price, $3.0 million was paid in cash at closing and
    the remaining $3.0 million is payable over the next two years, with $2.0
    million payable in 2000 and $1.0 million payable in 2001, subject to certain
    contingencies relating to continuing employment of the principals of
    Prophecy. Since 1996, Prophecy, a Utrecht-based Dutch consulting firm, has
    predominately 

                                      -8-
<PAGE>
 
    focused on Decision Support Solutions as they relate to packaged
    applications. Results of this acquisition will be consolidated with our
    continuing operations beginning the quarter ending June 30, 1999.

                                      -9-
<PAGE>
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

        The following discussion 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. Actual results could
differ materially from those projected in the forward-looking statements as a
result of certain factors including those described in the line item discussion
of our financial statements set forth below and in the section titled "Business
Factors". We assume no obligation to update the forward-looking information or
such factors.

Overview

        Business Objects develops, markets and supports decision support
software tools for the client/server and Internet markets. Our revenues are
derived from license fees and charges for services, including consulting,
training and maintenance. Revenues from product licensing fees are recognized
when the product is delivered, all significant contractual obligations have been
satisfied and the resulting receivable is deemed collectible by management.
Service revenues from software maintenance agreements are recognized ratably
over the maintenance period, which in most instances is one year. Other service
revenues, primarily training and consulting, are generally recognized at the
time the service is performed.

        We operate on a multinational basis and a significant portion of our
business is conducted in currencies other than the U.S. dollar (mainly the Euro,
the British pound sterling, and the Japanese yen). Fluctuations in the value of
currencies in relation to the U.S. dollar have caused and will continue to cause
dollar-translated amounts to vary from one period to another. Due to the number
of currencies involved, the constantly changing currency exposures, and the
substantial volatility of currency exchange rates, we cannot predict the effect
of exchange rate fluctuations upon future operating results. To date, we have
not undertaken hedging transactions to cover our currency translation exposure.

        Although we have increased the volume of our sales through indirect
channels, revenues from such sales channels currently represent a smaller
portion of our total revenues than revenues generated from our direct sales
efforts. There can be no assurance that we will be able to continue to attract
indirect channels that will be able to market and support our products
effectively. Indirect sales represented 44% of total sales for the quarter ended
March 31, 1999 and 38% of total sales for the quarter ended March 31, 1998. The
increase in indirect sales for the quarter ended March 31, 1999 is due to the
higher growth rate in our indirect sales channels as compared to our direct
sales channels.

                                      -10-
<PAGE>
 
Results of Operations

  The following table sets forth certain items from our condensed consolidated
statements of income as a percentage of total revenues for the periods
indicated:

<TABLE>
<CAPTION>
 
                                                            Three Months Ended
                                                                March 31,
                                                 -------------------------------------
                                                         1999                 1998
                                                 -----------------      --------------
<S>                                                <C>                    <C>
Revenues:
   License fees ...........................                   63.7%               67.8%
   Services................................                   36.3                32.2
                                                 -----------------      -------------- 
   Total revenue...........................                  100.0               100.0
                                                 -----------------      -------------- 
Cost of revenues:                                
   License fees ...........................                    1.7                 2.0
   Services ...............................                   16.7                13.8
                                                 -----------------      -------------- 
         Total cost of revenues ...........                   18.4                15.8
                                                 -----------------      -------------- 
Gross margin...............................                   81.6                84.2
                                                 -----------------      --------------
Operating expenses:                             
   Sales and marketing ....................                   51.2                57.2
   Research and development ...............                   12.1                12.0
   General and administrative .............                    8.5                 9.3
                                                 -----------------      -------------- 
         Total operating expenses .........                   71.8                78.5
                                                 -----------------      --------------
Income from operations ....................                    9.8                 5.7
Interest and other income, net ............                    1.2                 1.1
                                                 -----------------      --------------
Income before provision for income taxes ..                   11.0                 6.8
Provision for income taxes ................                   (4.5)               (2.8)
                                                 -----------------      --------------
Net income ................................                    6.5%                4.0%
                                                 =================      ==============
Gross margin:                                    
   License fees ...........................                   97.4%               97.1%
   Services ...............................                   54.0%               57.0%
</TABLE>

        The following table sets forth the geographic source of our revenues:

<TABLE>
<CAPTION>
 
                                                            Three Months Ended
                                                                March 31,
                                                 -------------------------------------
                                                         1999                 1998
                                                 -----------------      --------------
<S>                                                <C>                    <C>
Europe...........................................               66%                 67%
North America....................................               28                  26
Asia/Pacific.....................................                6                   7
                                                 -----------------      --------------
      Total......................................              100%                100%
                                                  ================      ==============
</TABLE>
                                                                                
  License Fees.  Revenues from license fees were $31.5 million and $23.4 million
for the quarters ended March 31, 1999 and 1998, respectively, representing a
period over period increase 

                                      -11-
<PAGE>
 
of $8.1 million or 35%. The increase in license fees were primarily due to
increased unit license sales of our software product and platforms, of which a
majority of license revenues consisted of licenses of BusinessObjects. Revenues
from the sale of WebIntelligence, our thin client platform, represented
approximately 16.2% and 3.4% of our total license revenues for the quarters
ended March 31, 1999 and 1998, respectively.

  We anticipate that license fees, which represented approximately 64% and 68%
of our total revenues for the quarters ended March 31, 1999 and 1998,
respectively, will continue to represent a majority of our revenue for the
foreseeable future.  The decrease in license revenue as a percent of total
revenues for the quarter ended March 31, 1999 as compared to the quarter ended
March 31, 1998 was primarily due to increased customer demand for consulting and
training services and an increase in our installed base, which resulted in an
increase in maintenance revenues.  It is expected that the percentage of total
revenues derived from license fees will continue to decrease in the future as
the growth in service revenues exceeds the growth in license revenues.  In
addition, we expect that the market penetration by, and the number of, our
competitors will increase, and as a result, the growth rate in our license fees
in the future may not be as high as the growth rate in such license fees
achieved in the past.

  Services.  Revenues from services consist of consulting, training and
maintenance revenues, and totaled $18.0 million and $11.1 million for the
quarters ended March 31, 1999 and 1998, respectively.  Revenues from services in
the quarter ended March 31, 1999 increased approximately $6.9 million, or 62%,
over the quarter ended March 31, 1998.  The increase in revenues from services
was due primarily to increases in consulting and training revenues, and from
increases in maintenance revenues related to increases in our installed customer
base and the renewal of support contracts.  As market penetration by, and the
number of, competitors increase, the growth rate of our installed base and,
consequently, the growth rate of our services revenues may not be as high as
growth rates achieved in the past.  We anticipate increasing our efforts in
selling consulting, training and maintenance services, and expect that service
revenues should continue to represent a significant portion of our total
revenues.

  Cost of License Fees.  Cost of license fees consists primarily of costs
incurred for materials, packaging, freight and royalties, and totaled $815,000
and $687,000 for the quarters ended March 31, 1999 and 1998, respectively.  Cost
of license fees as a percent of license fee revenues decreased from
approximately 2.9% for the quarter ended March 31, 1998 to approximately 2.6%
for the quarter ended March 31, 1999.

  Cost of Services.  Cost of services consists of the cost of providing
consulting, training and maintenance, and totaled $8.3 million and $4.8 million
for the quarters ended March 31, 1999 and 1998, respectively.  Cost of services
as a percent of service revenues increased from 43.0% for the quarter ended
March 31, 1998 to 46.0% for the quarter ended March 31, 1999.  The increase in
cost of services as a percent of the related revenues was primarily due to the
change in mix of services provided, with consulting services, which have a
higher cost than maintenance and training revenues, representing an increasing
portion of total service revenues.  The increase in expenses in absolute dollars
was primarily due to increases in headcount to support our service activities
and, to a lesser extent, to the subcontracting of consulting and training
activities.

                                      -12-
<PAGE>
 
Operating Expenses

  Sales and Marketing.  Sales and marketing expenses consist primarily of
salaries and other payroll related expenses such as commissions and amounts paid
for product promotion activities. Sales and marketing expenses totaled $25.3
million and $19.8 million for the quarters ended March 31, 1999 and 1998,
respectively.  Sales and marketing expenses decreased as a percent of total
revenues from 57.2% for the quarter ended March 31, 1998 to 51.2% for the
comparable quarter in 1999.  The decrease in sales and marketing expenses as a
percent of total revenue from the quarter ended March 31, 1998 to the comparable
period in 1999 was primarily due to revenues growing at a faster rate than
spending on sales and marketing activities and increased operational
efficiencies in the field sales organization. The increase in sales and
marketing expenses in absolute dollars for both periods is attributable to the
expansion of our sales and marketing organization.  Sales and marketing expenses
are expected to continue to increase in absolute dollars but may vary as a
percent of revenues in the future.

  Research and Development.  Research and development expenses consist primarily
of salaries, related benefits, third party consultant fees and other costs.
Research and development expenses totaled $6.0 million and $4.1 million for the
quarters ended March 31, 1999 and 1998, respectively.  Research and development
expenses increased slightly as a percent of total revenues from 12.0% for the
quarter ended March 31, 1998 to 12.1% for the comparable quarter in 1999.  The
increase in absolute dollars in research and development expenses from the
quarter ended March 31, 1998 to the comparable period in 1999 is due to
increased staffing and associated support required to expand and enhance our
product line.  As of March 31, 1999, we did not capitalize any software
development costs and all research and development costs were expensed as
incurred.  Research and development expenses are expected to continue to
increase in absolute dollars but may vary as a percent of revenues in the
future.

  General and Administrative.  General and administrative expenses consist
primarily of salaries, related benefits, fees for professional services,
including legal and accounting services, and amortization of goodwill arising
from the acquisition of companies and ownership interest in subsidiaries.
General and administrative expenses totaled $4.2 million and $3.2 million for
the quarters ended March 31, 1999 and 1998, respectively.  General and
administrative expenses decreased as a percent of total revenues from 9.3% for
the quarter ended March 31, 1998 to 8.5% for the comparable quarter in 1999. The
decrease in general and administrative expenses as a percent of total revenues
is primarily due to revenues growing at a faster rate than spending on general
and administrative expenses.  The increase in general and administrative
expenses in absolute dollars is primarily due to increased amortization of
goodwill and increases in staffing to support our growth.  Goodwill amortization
expense is included in general and administrative expenses and totaled $483,000
and $310,000 for the quarters ended March 31, 1999 and 1998, respectively.
General and administrative expenses are expected to continue to increase in
absolute dollars but may vary as a percent of revenues in the future.

Interest and Other Income, Net

  Interest and other income, net, totaled approximately $571,000 and $387,000
for the quarters ended March 31, 1999 and 1998, respectively.  Net interest
income increased from $294,000 for the quarter ended March 31, 1998 to $504,000
for the quarter ended March 31, 1999, primarily due to the increased interest
from the increase in cash and cash equivalents.  Cash and cash equivalents
increased from $35.2 million at March 31, 1998 to $80.9 million at March 31,
1999.  

                                      -13-
<PAGE>
 
Net foreign currency exchange gains totaled $69,000 for the quarter ended March
31, 1999 versus $93,000 for the comparable period during 1998. The gain
recognized in 1999 and 1998 was mainly due to realized gains on U.S. dollar
denominated intercompany receivables caused by the general strengthening of the
U.S. dollar against the French franc.

Income Taxes

  Our effective tax rate was 41% for the quarters ended March 31, 1999 and 1998.
We provide for income taxes for each interim period based on the estimated
annual effective tax rate for the full year.

Liquidity and Capital Resources

  As of March 31, 1999, we had cash and cash equivalents of $80.9 million, an
increase of $9.2 million from December 31, 1998. We generated cash from
operations of $12.8 million for the quarter ended March 31, 1999, as compared to
$7.7 million for the comparable period in 1998. Net cash generated in 1999
resulted primarily from increases in net income and non-cash charges for
depreciation and amortization, changes in accounts receivable, other assets,
deferred revenue and other current liabilities. Our investing activities
consisted primarily of the purchase of $2.0 million of property and equipment,
the exercise of an option to acquire an additional 20% of the outstanding shares
of our Italian distributor in exchange for $1.0 million, and a 9.5% investment
in our Norwegian distributor for $864,000. We also generated cash of $5.0
million from the issuance of ordinary shares under employee stock plans during
the quarter ended March 31, 1999.

  We believe that cash from operations together with existing cash and cash
equivalents will be sufficient to meet our cash requirements for at least the
next 12 months.

Business Factors

  Statements contained in this Management's Discussion and Financial Analysis of
Financial Condition and Results of Operations and elsewhere in this Quarterly
Report on Form 10-Q include forward looking statements that involve a number of
risks and uncertainties. Among the factors that could cause actual results to
differ materially are the following:

     Our operating results may fluctuate from quarter to quarter. In the past,
our revenues and operating results have varied, sometimes substantially, from
quarter to quarter. We expect our revenues and operating results to continue to
fluctuate from quarter to quarter in the future and we may even experience
losses in any particular quarter. Accordingly, quarter to quarter comparisons of
our revenues and operating results may not be meaningful and you should not rely
on them as indicative of our future performance. In general, because license
fees comprise a substantial majority of our revenues, fluctuations in the amount
of license fees generated in any one quarter can cause variations in our
quarterly revenues and operating results. Our license fees tend to fluctuate as
a result of a number of factors, including:

     .  the variability of our sales cycle;
     .  the size and timing of individual license transactions;
     .  the timing of our new product or product enhancement releases and of
        competitors' new product or product enhancement releases;

                                      -14-
<PAGE>
 
     .  customer delays in purchases of our products in anticipation of new
        releases or enhancements to our existing products;
     .  customer delays in purchases of our products because of our customers'
        own budgeting decisions;
     .  the ability of our competitors to offer new products that successfully
        compete with our products; and
     .  reductions in the prices of our products, or the prices of our
        competitors' products relative to the prices of our products.
 
     Our license fees may vary substantially from one quarter to the next if we
experience significant delays in customer orders at the end of a quarter.  We
typically ship our products upon receipt of customer orders, and recognize
license revenues in the quarter such products are shipped to the customer.  In
the past, we have often shipped the most product, and recognized the largest
amount of our licensing revenues, in the last weeks of the last month of each
quarter.  However, each quarter we incur operating expenses based in part on
anticipated revenue levels, and a high percentage of our expenses are relatively
fixed.  As a result, if a significant number of our customers delay their
product orders at the end of any particular quarter until the following quarter,
we may experience significant fluctuations in our revenues and operating results
from one quarter to the next and we may even experience losses in the preceding
quarter.

     In addition, we currently plan to continue to increase our expenditures to
fund: greater levels of research and development; an increase in our direct
sales and marketing staff; the development of new distribution and resale
channels; broader customer support capabilities; and additional general and
administrative staffing necessary to support these functions.

     We anticipate that such expenses will be relatively fixed and consistent
from quarter to quarter.  As a result, these expense increases could result in
more significant quarter to quarter fluctuations in our operating results if
revenues earned in any particular quarter fall short because a significant
number of our customers delay their product orders from one quarter to the next,
or because we are unable to ship additional product to our customers
consistently throughout each quarter during which we make these expenditures.

     Our revenues and operating results may also fluctuate from quarter to
quarter due to various seasonality factors.  In other words, our revenue growth
generally slows, and our revenues may even decline, in the first quarter of each
calendar year as compared to the immediately preceding quarter.  Seasonality
like this is typical in the computer software industry.  We believe that this
seasonality is a result of two principal factors:

     .    due to spending and budgeting considerations, many of our customers
          make their larger capital purchases in the fourth quarter of each
          calendar year, and their lower capital purchases during the following
          quarter;

     .    because there is typically lower economic activity throughout Europe
          during the summer months, relative to other times during the year,
          many European customers do not place orders during the third quarter
          of the calendar year.

     These two factors typically result in a higher level of revenues for the
fourth quarter of the calendar year, relative to other fiscal quarters.  We
anticipate that this pattern of revenue seasonality will continue.

                                      -15-
<PAGE>
 
     We depend on sales of one product for a majority of our revenues. We
generate a substantial majority of our total revenues from licensing fees
generated from the sale of the BusinessObjects product.  We expect that for the
foreseeable future we will continue to derive a substantial majority of our
revenues from the sale of the BusinessObjects product.  We derive our remaining
revenues from the sale of our other licensed products and services which are
related to the BusinessObjects product.  As a result, if our sales of
BusinessObjects decrease for any reason, our financial condition and operating
results would be severely impacted.  Our future revenues and profits also depend
significantly on our ability to successfully develop and introduce new and
enhanced versions of our BusinessObjects product, and on customer acceptance of
these new and enhanced versions of our BusinessObjects product.  Moreover, if we
are required to reduce the prices for our products, including BusinessObjects,
due to competitive pressures, or if any other factors significantly erode the
price that we are able to charge for our BusinessObjects product, our financial
condition and operating results could suffer.

     We face substantial competition from many companies that are larger than
us. We specifically design and target our products for the decision support
software tools market.  We believe that the principal competitive factors that
impact this market include: ease of use; functionality; product architecture;
price; product quality; breadth of distribution; customer support; and name
recognition.

     Although we believe that we compete effectively with respect to these
factors, we may be unable to continue to do so in the future.
 
     Within our target market, we offer products that compete in four
subsectors: the query and reporting market;   the multidimensional analysis or
OLAP market; the emerging desktop data mining market; and the market for
integrated products or product suites that provide query, reporting, and
analysis support on client/server and internet platforms.

     Some of our competitors have been in business longer than us and have
significantly greater financial, technical, sales, marketing, and other
resources than we do.  In addition, some of our competitors enjoy greater name
recognition and a larger installed customer base than we do.  Moreover, some of
our competitors, particularly companies that offer relational database
management software systems and enterprise resource planning software systems,
have well-established relationships with some of our existing and targeted
customers.

     In the future, any of our competitors could introduce products with more
features at lower prices.  Some of these companies could also bundle existing or
new products with other more established products that they offer and compete
more effectively against our products.  Because our products are specifically
designed and targeted to the decision support software tools market, we may lose
sales to competitors offering a broader range of products.  Furthermore, other
companies larger than us could enter the market with products that cost less
than our products.  Such companies could also acquire or enter into a strategic
relationship with certain of our smaller competitors and provide such
competitors with additional resources or cause them to lower the price of their
product to be more competitive with our products.  We believe that the decision
support software tools market will continue to grow and develop, and that more
and more larger companies may find it a desirable market in which to compete.
To the extent that we 

                                      -16-
<PAGE>
 
are unable to effectively compete against our current and future competitors, as
a result of some or all of the factors stated above, our financial condition and
operating results would suffer.

     The software markets that we target are subject to rapid technological
change and new product introductions. The market for decision support software
tools is characterized by rapid technological advances, changes in customer
requirements, and frequent new product introductions and enhancements.

     As a result, existing products become obsolete and unmarketable when
companies introduce new products or enhancements to existing products that
incorporate new technologies and when new industry standards emerge.  For
example, some industry analysts believe that the recent emergence of the
internet and intranets, and in particular the world wide web, with its new mode
of user operation, could negatively impact the market for traditional
client/server tools.  To be successful, we must develop new products and
enhancements to our existing products that keep pace with technological
developments, emerging industry standards, and the increasingly sophisticated
requirements of our customers.  However, in the future we may be unable to
successfully develop new products or enhancements to our existing products in a
timely manner that adequately respond to technological changes, evolving
industry standards, or the requirements of our customers.  In addition, even if
we are able to develop new products or enhancements to our existing products,
these products and product enhancements may not be accepted in the marketplace.
Moreover, our customers may defer or forego purchases of our existing products
if we do not adequately time the introduction or the announcement of new
products or enhancement to our existing products, or if our competitors
introduce or announce new products and product enhancements.  Any of these
factors could severely harm our financial condition and operating results.


     Our products may have software defects and errors. Our BusinessObjects
product and WebIntelligence platform are internally complex and frequently
contain defects or errors, especially when first introduced or when new versions
or enhancements are released.  For example, when BusinessObjects 4.0 was first
introduced in 1996, it would not run on Windows 3.1, and we had to rework a
portion of the product to enable it to do so.  The revised product then took a
significantly longer period than expected to achieve operational stability, and
contained a number of "bugs" resulting from the significant rewriting and
rearchitecting of the product.  We resolved these problems by the end of 1996,
but our operating results for the second quarter of 1996 were severely impacted.

     In contrast to our previous products that are client-based, WebIntelligence
is server-based.  We have limited experience and technical expertise in
developing server software.  In addition, the success of WebIntelligence depends
on its availability on Unix, with which we have limited experience, and the
ability for the architecture to scale to large customer deployments.  In the
future, there can be no assurances that we will be successful in meeting these
requirements.

     Despite extensive testing, our new products and product enhancements may
contain defects and errors which we may not detect until after we have commenced
commercial shipments.  If defects and errors are discovered in our products and
product enhancements after commercial release: potential customers may delay or
forego purchases of these products and product enhancements; our reputation in
the marketplace may be damaged; we may incur 

                                      -17-
<PAGE>
 
additional service and warranty costs; and we may have to divert additional
development resources to correct the defects and errors.

     If any or all of the foregoing occur, we may lose revenues or incur higher
operating expenses, either of which could severely harm our financial condition
and operating results.

     We rely on third party suppliers for most of our manufacturing needs. We
rely upon third party suppliers to perform our CD duplication, print our user
manuals, package our products, and manufacture certain related materials
incorporated in our products.  If we were to experience delays or difficulties
with one or more of our third party suppliers, we may be unable to ship our
products on a timely basis, which could severely harm our revenues, financial
condition, and operating results.

     Our business may suffer if we cannot protect our intellectual property and
proprietary rights. Our success depends in part on our ability to protect our
proprietary rights in our intellectual property.  To protect our proprietary
rights, we use a combination of protections provided by patent, copyright, and
trademark laws; trade secret laws; confidentiality agreements; and licensing
arrangements, including confidentiality provisions.

     We cannot assure you that any of these methods of protection are adequate
to protect our technology from use or misappropriation by our competitors.
Despite our precautions, it may be possible for unauthorized third parties to
copy aspects of our current or future products or to obtain and use information
that we regard as proprietary.  Policing unauthorized use of software is
difficult and some foreign laws do not protect our proprietary rights to the
same extent as in the United States.  For example, under French law we are
unable to patent our proprietary rights in our software, but we are able to
protect these proprietary rights under copyright laws which enable us to enjoin
third party infringement.

     Litigation may be necessary to protect our proprietary rights in our
intellectual property.  For example, we currently have one patent issued in the
United States relating to a "Relational Database Access System Using
Semantically Dynamic Objects."  We believe that one of our competitors, Brio
Technology, Inc., is infringing upon our rights under this patent, and we are
currently litigating this claim against Brio Technology.  During January 1997,
we filed a lawsuit in the United States District Court for the Northern District
of California against Brio Technology alleging that it is infringing our patent
by making, using, and selling one of its products known as BrioQuery Enterprise.
We have requested that the court enjoin Brio Technology from further infringing
on our patent.  A trial date for this case has been set for Fall 1999.  We
cannot assure you that we will receive a favorable outcome in this litigation.
Litigating this claim, or other claims we may believe are necessary in the
future to protect our proprietary rights, can be very expensive in terms of
management time and resources.  Utilizing our resources on such litigation could
cause our financial condition and operating results to suffer.

     In addition, although our name, together with our logo, is registered as a
trademark in France, the United States, and a number of other countries, we may
have difficulty asserting our ownership rights in the name "Business Objects."
Similar to monitoring unauthorized use of our product by customers, we may be
unable to effectively police unauthorized use of our name or otherwise prevent
the name of our software from becoming a part of the public domain.

                                      -18-
<PAGE>
 
     Third parties could assert that our technology infringes on their
proprietary rights, which could adversely affect our ability to distribute our
products and result in costly litigation.  We do not believe that our products
infringe upon the proprietary rights of any third parties, and we are not aware
of any third party claims that our products do so.  However, we cannot be
certain and we cannot assure you that third parties will never make such claims.
We believe that software products offered in our target market increasingly will
be subject to such claims as the number of products and competitors in our
industry segment grows and product functionalities begin to overlap.  If a third
party were to bring an infringement claim against us, we would be forced to
commit management resources to resolve the claim and may incur substantial
litigation costs in defense of the claim.  We may also have to expend
significant development resources to redesign our product as a result of such
claims.  Finally, we may be required to enter into royalty and licensing
agreements with a third party bringing an infringement claim against us, and
these agreements may not contain terms that are favorable to us.

     We use "shrink wrap" licenses in connection with the sale of our products.
We often license our software products to customers through a "shrink-wrap"
license which becomes effective upon the opening of the product by the customer.
A "shrink-wrap" license agreement is a printed license agreement included within
packaged software that sets forth the terms and conditions under which the
purchaser may use the product.  For example, these license agreements typically
provide that the licensed product may be used solely for the customer's internal
operations for a specified number of named or concurrent users and are
nonexclusive and nontransferable.  "Shrink-wrap" license agreements are
difficult to monitor.  We cannot be certain, nor can we assure you, that our
customers will comply with all of the terms and conditions of the "shrink-wrap"
licenses under which they purchase our products.  For example, a customer may
permit more end users to use the product than the applicable "shrink-wrap"
license allows without paying for additional users.  To the extent that our
customers violate the "shrink-wrap" licenses that apply to our products, we may
be deprived of revenues and our financial condition and operating results may
suffer.

     We rely on software licensed to us by third parties.  We license certain
software from third parties, and sub-license this software to our customers.  In
addition, we license certain software programs from third parties and
incorporate these programs into our own software products.  Generally, the
license agreements under which we license third party software grant us a non-
exclusive, worldwide license to use the software for certain limited purposes.
By utilizing third party software in our business, however, we incur certain
risks that are not associated with developing software in-house.  For example,
these third party providers may discontinue or alter their operations, terminate
their relationship with us, or generally become unable to fulfill their
obligations to us.  If any of these circumstances were to occur, we may be
forced to seek alternative technology which may not be available on commercially
reasonable terms.  In the future, we may be forced to obtain additional third
party software licenses to enhance our product offerings and compete more
effectively.  We cannot be certain, nor can we assure you, that we will be able
to obtain and maintain licensing rights to desired or needed technology or
similar technology on commercially reasonable terms, or at all.

     Our source code arrangements may make it easier for a third party to
misappropriate our technology. We have entered into source code escrow
arrangements with a limited number of our distributors and end users that
require us to release some of our source code to these distributors and end
users under certain circumstances.  For example, generally these agreements
provide that these parties will obtain a limited, non-exclusive right to use our
source code if we 

                                      -19-
<PAGE>
 
become engaged in a bankruptcy proceeding, if we cease to do business, or if we
fail to meet our contractual obligations to these distributors and end users.
Using source code escrow arrangements may increase the likelihood that third
parties will misappropriate our source code contained in the escrow.

     There are a number of factors associated with international operations that
could adversely affect our business. We conduct a significant portion of our
business outside of North America and France.  For example, in 1998, sales in
France accounted for 18.3% of total revenues, sales in North America accounted
for 29.6% of total revenues, sales in the United Kingdom accounted for 22.7% of
total revenues, and sales in other European countries and in the Asia Pacific
region collectively accounted for 29.4% of total revenues.  We currently have
offices in over 15 countries throughout the world.  Sales in these various
markets subject us to a number of risks inherent in international business
activities which could severely harm our operations, financial condition and
operating results, including: general economic conditions in each such country;
difficulties in staffing and managing international operations; overlap of
inconsistent tax structures; managing an organization spread over various
jurisdictions; unexpected changes in regulatory requirements; compliance with a
variety of foreign laws and regulations; longer accounts receivables payment
cycles in Europe; import and export licensing requirements; trade restrictions;
and changes in tariff and freight rates.

     We have multinational operations that are subject to currency exchange rate
fluctuations.  conduct a significant portion of our business in currencies
other than the U.S. dollar, the currency in which we report our financial
statements.  Assets and liabilities of these subsidiaries are translated into
U.S. dollars at exchange rates in effect as of the applicable balance sheet
date, and any resulting translation adjustments are included as an adjustment to
retained earnings.  Revenues and expenses generated from these subsidiaries are
translated at average exchange rates during the month the transactions occur.
Gains and losses from these currency transactions are included in net earnings.
Historically, we have generated a significant portion of our revenues and
incurred a significant portion of our expenses in French francs, British pounds
sterling, and Italian lira.  As a result, the Company's operating results may be
adversely impacted by currency exchange rate fluctuations on the U.S. dollar
value of foreign currency-denominated revenues and expenses.  In the past, we
have experienced fluctuations in the value of these and other currencies
relative to the U.S. dollar, and we expect this pattern to continue.  These
fluctuations have caused certain U.S. dollar-translated amounts reported in our
financial statements to change in comparison with previous periods, and resulted
in currency transaction gains and losses which have been included in net
earnings.  Due to the number of currencies in which we conduct our business and
the substantial volatility of currency exchange rates, we cannot predict the
effect of exchange rate fluctuations upon our future operating results.  As of
December 31, 1998, we were not engaged in a foreign currency hedging program to
cover our currency transaction exposure.

     Weaknesses in the economies of countries in the Asia Pacific region could
negatively impact our revenues. Countries in the Asia Pacific region, including
Japan, have recently experienced weaknesses in their currency, banking, and
equity markets.  Although we generated only approximately 6.0% of our
consolidated revenues for the quarter ended March 31, 1999 in this region,
weaknesses in the Asia Pacific region could adversely affect demand for our
products.  Moreover, weaknesses in this region could adversely affect the U.S.
dollar value of our foreign currency-denominated sales in the Asia Pacific
region and ultimately our consolidated results of operations.

                                      -20-
<PAGE>
 
     We face risks related to the European monetary conversion.  On January 1,
1999, 11 of the 15 member countries of the European Union established a fixed
conversion rate between their sovereign currencies and the Euro and adopted the
Euro as their common legal currency.  As a result, the Euro now trades on
currency exchanges and will be available for non-cash transactions.  We expended
resources, reviewed and modified pricing policies in the new economic
environment, analyzed the legal and contractual implications for contracts,
evaluated system capabilities, and ensured that banking vendors support our
operations in Euro-related transactions.  We expect to modify our business
operations and systems to accommodate the Euro conversion on a timely basis, but
we do not believe that the cost of these modifications will significantly affect
our operating results.  We cannot be certain nor can we assure you that we will
be able to successfully complete these modifications in a manner that complies
with Euro requirements.  In addition, the costs of completing these
modifications could be higher than we currently anticipate, which could
negatively impact our financial condition and operating results.  For example,
we have not yet completed our evaluation of the impact of the Euro conversion
upon our functional currency designations.  In addition, our vendors and
suppliers may be unable to make appropriate modifications to their business
operations and systems to support Euro-related transactions.  While we cannot
predict what effect these various factors may have on our financial condition
and operating results, we believe that factors relating to the Euro conversion
could cause significant volatility in our future financial performance and stock
price.

     We currently rely primarily on direct sales, but may become more dependent
upon product distribution and support from third parties.  We currently rely
primarily upon our direct sales efforts to distribute and market our products,
but we have been increasing our sales through indirect channels.  We expect to
continue to increase our sales through indirect channels, such as VARs, system
integrators, consulting partners, distributors, and resellers.  However, we may
be unable to successfully establish indirect sales channels that are capable of
marketing and supporting our products effectively.  Moreover, any VARs, system
integrators, consulting partners, distributors or resellers who market and
support our products may discontinue their relationship with us at any time.  If
we are unable to recruit or retain a significant number of VARs, system
integrators, consulting partners, distributors, or resellers to effectively
market and support our products, our operating results may suffer.
Additionally, our financial performance and operating results may suffer if we
are unable to: expand our own sales and marketing organization; implement new
indirect sales channels to penetrate different and broader markets than those
addressed by our existing direct sales force and international distributors; or
expand our support organization commensurate with our base of installed
products.

     We are susceptible to problems associated with the year 2000. Many computer
programs define references to applicable years by using two digits rather than
four. As a result, many computer programs or hardware that have date-sensitive
software or embedded chips may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations that disrupt our operations. For example, computer systems
failures resulting from improper date references may temporarily disrupt our
ability to process transactions, send invoices, or engage in similar normal
business activities.

     We have developed our current core product and platforms, BusinessObjects
4.1 and WebIntelligence 2.0, to comply with the year 2000 Conformity
Requirements developed by the British Standards Institute. We believe that it is
essential that we continue to design and test our products and platforms in
compliance with these standards. Based on our testing against the year 2000
standards, we believe BusinessObjects 4.1 and WebIntelligence 2.0 are compliant

                                      -21-
<PAGE>
 
with such standards. We have only identified a limitation for a specific
customer operation (exporting data in certain file formats) which is due to the
regional setting of the user's environment and can be changed by the user. We
believe this limitation is applicable to a limited number of customer
operations.

     Because our product and platforms are used in conjunction with underlying
operating systems, and other database, middleware, and other software programs,
they are subject to the limitations, including year 2000 related limitations, of
such third party software. In order to minimize potential year 2000 compliance
issues, we recommend to our customers that they use our current products and
platforms in conjunction with the most current releases of any third party
software. As new versions of the third party software used by our customers
become available, we intend to continue to design and test our products and
platforms as used with such third party software against the British Standards
Institute definition of year 2000 Conformity Requirements. However, because we
are dependent upon our customers' use of third party software in connection with
their use of our products and platforms, we cannot assure you that the
implementation of our products and platforms will not be affected in the future
by year 2000 issues related to modification or revisions in any such third party
software.

     Furthermore, some of our customers continue to operate older versions of
our products that may experience problems associated with the year 2000 issues.
We have been encouraging these customers to migrate to current versions of our
software, but some of them may not do so prior to January 1, 2000.

     We are currently using a four step process to address the year 2000 issues
associated with our internal management information systems: assessment,
remediation, testing, and implementation. We have completed the assessment phase
for our IT systems. The assessment phase of our IT systems indicated that some
of our critical IT systems may not be year 2000 compliant. We are reviewing
corrective actions and contingency plans to these critical IT systems, and have
retained external consultants to assist in this process.

     We are still in the process of completing the assessment phase of our non-
IT systems, which is expected to be completed by the end of our first calendar
quarter. Some of the suppliers and vendors that provide us with products,
services, and systems, and others with whom we transact business on a worldwide
basis, continue to operate business systems or offer products that will
experience problems associated with the year 2000. If any of these third parties
cannot timely provide us with products, services, or systems that have been
modified to operate in the year 2000 and beyond, our business may be disrupted
and our operations may suffer. We are currently assessing the year 2000
compliance plans of our major suppliers and vendors.

     We are in the process of evaluating the need for contingency plans with
respect to problems associated with the year 2000. We believe that the need for
contingency plans must be evaluated on a case-by-case basis, and will vary
considerably in nature depending on the year 2000 issue involved.

     We expect to complete our year 2000 remediation, testing, and
implementation processes for both our IT and non-IT systems by the end of 1999,
and to incur no more than $300,000 in connection with the entire process.
However, if we are unable to successfully complete this process before the end
of 1999, both our day-to-day business operations and operating results could be
significantly adversely affected. Furthermore, other factors relating to the
year 2000, 

                                      -22-
<PAGE>
 
including litigation, may materially and adversely affect our business,
financial condition, and operating results.

     Our executive officers and key personnel are critical to our business; we
may not be able to recruit and retain the personnel we need to succeed. Our
success depends to a significant extent upon a number of key management and
technical personnel, including Bernard Liautaud, our chief executive officer and
co-founder, the loss of whom could adversely affect our business.  We maintain a
key person life insurance policy on the life of Mr. Liautaud with proceeds
payable to Business Objects.  The loss of the services of key personnel could
have a material adverse effect on Business Objects.  In addition, we believe
that our future success will also depend in a large part on our ability to
attract and retain highly-skilled technical, management, sales, and marketing
personnel.  Competition for such personnel in the computer software industry is
intense, and we may be unable to successfully attract and retain such personnel.

     We may have difficulty managing our growth. Our business has grown rapidly
in recent years.  If we continue to grow at the same pace, this growth may place
a significant strain on our management and operations.  Our future operating
results depend in part on the ability of our officers and key employees to
continue to implement and improve our operational and financial control systems
and to hire, expand, train, and manage our employees.  If we are unable to
manage our growth effectively, our financial condition and operating results
could suffer.

     We are currently engaged in legal proceedings with third parties.  We are
involved in various legal proceedings that have arisen in the ordinary course of
our business, including the patent infringement lawsuit described earlier.  We
believe that the ultimate resolution of these matters will not have a material
adverse effect on our financial condition, operating results, or cash flows.
However, we may become involved in a significant lawsuit in the future which
could drain important resources and could materially and adversely harm our
financial condition and operating results.

                                      -23-
<PAGE>
 
                                    PART II.
                               OTHER INFORMATION
                                        
Item 6. Exhibits and Current Reports on Form 8-K

     a)  Exhibits
         27.1  Financial Data Schedule

     b)  Reports on Form 8-K
         None.

                                      -24-
<PAGE>
 
                                   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.

                             Business Objects S.A.

Date:  May 10, 1999           By:     /s/ Bernard Liautaud
                                 ---------------------------------
                                          Bernard Liautaud
                                      Chief Executive Officer


Date:  May 10, 1999           By:     /s/ Clifton T. Weatherford
                                 -------------------------------------
                                       Clifton T. Weatherford
                                       Chief Financial Officer

                                      -25-