<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 SEPTEMBER 30, 1998

                                      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 October 30, 1998 was 17,055,446 Ordinary Shares of 1 French
Franc nominal value, including 15,007,664 American Depositary Shares (as
evidenced by American Depositary Receipts), each corresponding to one Ordinary
Share.

================================================================================
<PAGE>
 
                             BUSINESS OBJECTS S.A.
                                     INDEX


<TABLE>
<CAPTION>
PART I.   FINANCIAL INFORMATION                                          PAGE
<S>       <C>                                                            <C>
Item 1.   Consolidated Financial Statements:

          Condensed Consolidated Balance Sheets at
          September 30, 1998 and December 31, 1997                         3 
 
          Condensed Consolidated Statements of Income for the
          three months ended September 30, 1998 and 1997 and the 
          nine months ended September 30, 1998 and 1997                    4
 
          Condensed Consolidated Statements of Cash Flows for the
          nine months ended September 30, 1998 and 1997                    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                                                22
 
SIGNATURES                                                                 23
 
</TABLE>

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

<TABLE>
<CAPTION>
                                                                    September 30, 1998               December 31, 1997
                                                                  -----------------------         ------------------------
                                                                       (Unaudited)                        (Note)
<S>                                                               <C>                             <C>
ASSETS
Current assets:
     Cash and cash equivalents                                                  $ 37,912                         $ 36,508
     Short-term investments                                                       25,982                            2,505
     Accounts receivable, net                                                     32,910                           35,113
     Other current assets                                                          6,085                            5,894
                                                                  -----------------------         ------------------------
          Total current assets                                                   102,889                           80,020



Property and equipment, net                                                       13,275                           12,020
Goodwill, net                                                                      1,694                            1,626
Other assets                                                                         802                              674
                                                                  -----------------------         ------------------------
          Total assets                                                         $ 118,660                         $ 94,340
                                                                  =======================         ========================


LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                           $ 10,521                          $ 8,089
     Accrued payroll and related expenses                                         12,820                            9,944
     Deferred revenue                                                             18,818                           16,825
     Other current liabilities                                                    15,321                            8,683
                                                                  -----------------------         ------------------------
          Total current liabilities                                               57,480                           43,541

Shareholders' equity
     Ordinary shares, FRF 1 nominal value ($0.18 U.S.):
        Authorized and outstanding- 17,056 and 16,778 at
        September 30, 1998 and December 31, 1997, respectively                     3,128                            3,084
     Additional paid-in capital                                                   36,529                           34,270
     Retained earnings                                                            23,775                           18,107
     Cumulative translation adjustment                                            (2,252)                          (4,662)
                                                                  -----------------------         ------------------------
          Total shareholders' equity                                              61,180                           50,799
                                                                  -----------------------         ------------------------
             Total liabilities and shareholders' equity                        $ 118,660                         $ 94,340
                                                                  =======================         ========================
</TABLE>

Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date.

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)


<TABLE> 
<CAPTION> 
                                                       Three Months Ended                           Nine Months Ended
                                                         September 30,                                September 30,
                                                     1998              1997                      1998               1997
                                                ---------------   ---------------           ---------------    ---------------
<S>                                             <C>               <C>                       <C>                <C>
Revenues:
     License fees                                     $ 26,232          $ 19,442                  $ 74,811           $ 54,213
     Services                                           15,025             9,060                    40,563             24,006
                                                ---------------   ---------------           ---------------    ---------------
          Total revenues                                41,257            28,502                   115,374             78,219

Cost of revenues:
     License fees                                          781               826                     2,357              2,386
     Services                                            6,253             3,505                    16,602              8,729
                                                ---------------   ---------------           ---------------    ---------------
          Total cost of revenues                         7,034             4,331                    18,959             11,115
                                                ---------------   ---------------           ---------------    ---------------
Gross margin                                            34,223            24,171                    96,415             67,104
Operating expenses:
     Sales and marketing                                22,214            17,095                    63,778             48,372
     Research and development                            4,956             3,503                    13,787              9,917
     General and administrative                          3,692             2,874                    10,460              7,620
                                                ---------------   ---------------           ---------------    ---------------
          Total operating expenses                      30,862            23,472                    88,025             65,909
                                                ---------------   ---------------           ---------------    ---------------
Income from operations                                   3,361               699                     8,390              1,195
Interest and other income, net                             618               178                     1,403              1,478
                                                ---------------   ---------------           ---------------    ---------------
Income before provision for income taxes                 3,979               877                     9,793              2,673
Provision for income taxes                              (1,631)             (716)                   (4,011)            (1,471)
Minority interest                                          (40)               35                      (114)                33
                                                ---------------   ---------------           ---------------    ---------------
Net income                                            $  2,308          $    196                  $  5,668           $  1,235
                                                ===============   ===============           ===============    ===============

Basic net income per ADS and per share                $   0.14          $   0.01                  $   0.34           $   0.07
                                                ===============   ===============           ===============    ===============

ADSs and shares used in computing basic
     net income per ADS and per share                   16,975            16,689                    16,903             16,575
                                                ===============   ===============           ===============    ===============

Diluted net income per ADS and per share              $   0.13          $   0.01                  $   0.32           $   0.07
                                                ===============   ===============           ===============    ===============

ADS and shares used in computing diluted
     net income per ADS and per share                   17,624            16,798                    17,661             16,772
                                                ===============   ===============           ===============    ===============

</TABLE>

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>
                                                                      Nine Months Ended
                                                                        September 30,
                                                                     1998           1997
                                                                  ------------  -------------
<S>                                                               <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                          $  5,668       $  1,235
 Adjustments to reconcile net income to net
     cash provided by operating activities:
        Depreciation and amortization                                   3,904          2,982
        Amortization of goodwill                                          930            380
        Compensation expense                                                -             62
        Changes in operating assets and liabilities:
           Accounts receivable                                          3,306         (9,452)
           Other assets                                                (1,491)        (1,610)
           Accounts payable                                             2,112          1,496
           Accrued payroll and related expenses                         4,837            933
           Deferred revenue                                             1,459          3,916
           Other current liabilities                                    5,247            238
                                                                  ------------  -------------
 Net cash provided by operating activities                             25,972            180

 CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment                                   (4,738)        (4,959)
 Purchases of intangible assets                                          (982)        (2,640)
 Purchases of short-term investments                                  (72,518)       (58,516)
 Proceeds from sales of short-term investments                         49,741         69,970
                                                                  ------------  -------------
 Net cash provided by (used for) investing activities                 (28,497)         3,855

 CASH FLOWS FROM FINANCING ACTIVITIES:
 Principal payments on capital lease obligations                          (16)           (76)
 Issuance of ordinary shares                                            2,305          1,022
                                                                  ------------  -------------
 Net cash provided by financing activities                              2,289            946
 Effect of foreign exchange rate changes on cash and
     cash equivalents                                                   1,640         (1,912)
                                                                  ------------  -------------
 Net increase in cash and cash equivalents                              1,404          3,069
 Cash and cash equivalents at the beginning of the period              36,508         21,862
                                                                  ------------  -------------
 Cash and cash equivalents at end of the period                      $ 37,912       $ 24,931
                                                                  ============  =============
</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements.

                                     - 5 -
<PAGE>
 
                             BUSINESS OBJECTS S.A.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                              SEPTEMBER 30, 1998

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 the
    Company's financial position, results of operations, and cash flows for the
    interim periods presented have been made. Operating results for the three
    and nine month periods ended September 30, 1998 are not necessarily
    indicative of the results that may be expected for the year ending December
    31, 1998. These financial statements should be read in conjunction with the
    Company's audited consolidated financial statements and footnotes as
    included in the Company's Annual Report on Form 10-K for the year ended
    December 31, 1997.

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 $1,772,000 and $1,568,000 at September 30, 1998 and
    December 31, 1997, respectively.

4.  REVENUE RECOGNITION

    On January 1, 1998, the Company adopted Statement of Position No. 97-2,
    "Software Revenue Recognition" (SOP 97-2), which superceded Statement of
    Position No. 91-1, "Software Revenue Recognition" (SOP 91-1). Arrangements
    with effective dates prior to January 1, 1998 have been and will be
    accounted for under SOP 91-1. Any amendments after January 1, 1998 to
    arrangements with effective dates prior to January 1, 1998 will be accounted
    for under SOP 97-2. The implementation of SOP 97-2 did not have a material
    adverse effect on the Company's business or on the Company's reported
    revenues and earnings for the quarter and nine months ended September 30,
    1998.

    In accordance with SOP 97-2, 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>
 
    On March 31, 1998, Statement of Position No. 98-4, "Deferral of the
    Effective Date of a Provision of SOP 97-2, Software Revenue Recognition"
    (SOP 98-4) was issued. SOP 98-4 defers for one year the application of
    certain provisions of SOP 97-2. These provisions limit what is considered
    vendor-specific objective evidence of the fair value of the various elements
    in a multiple element arrangement. All other provisions of SOP 97-2 remain
    in effect.

5.  SALES RETURNS AND WARRANTIES

    The Company's distributors do not have the right to return merchandise for
    credit or refund. Any other potential sales returns are covered by the
    Company's allowances for sales returns and doubtful accounts. The Company
    provides for the costs of warranty when specific problems are identified.
    The Company has not experienced any significant warranty claims to date.

6.  NET INCOME PER ADS AND PER SHARE

    The Company's 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:

<TABLE>
<CAPTION>
                                                                     Three Months Ended                  Nine Months Ended
                                                                        September 30,                      September 30,
                                                                    1998             1997             1998             1997
                                                              --------------   --------------    -------------   ---------------
                                                                      (in thousands, except per ADS and per share amounts)
<S>                                                             <C>              <C>               <C>             <C>
  Net income..................................................       $ 2,308          $   196          $ 5,668           $ 1,235
                                                                     =======          =======          =======           =======
  Basic- Weighted average ADSs and shares outstanding.........        16,975           16,689           16,903            16,575
                                                                     -------          -------          -------           -------
  Incremental ordinary shares attributable to shares issuable
  under employee stock plans and warrants....................            649              109              758               197
                                                                     -------          -------          -------           -------
  Diluted- Weighted average ADSs and share outstanding........        17,624           16,798           17,661            16,772
                                                                     =======          =======          =======           =======
  Basic net income per ADS and per share......................       $  0.14          $  0.01          $  0.34           $  0.07
                                                                     =======          =======          =======           =======
  Diluted net income per ADS and per share....................       $  0.13          $  0.01          $  0.32           $  0.07
                                                                     =======          =======          =======           =======
</TABLE>
                                                                                

7.  COMPREHENSIVE INCOME

    As of January 1, 1998, the Company adopted Financial Accounting Standards
    Board Statement No. 130, "Reporting Comprehensive Income" (FAS 130). FAS 130
    establishes

                                     - 7 -
<PAGE>
 
    new rules for the reporting and the display of comprehensive income and its
    components. FAS 130 also requires unrealized gains or losses on the
    Company's 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 the Company's net income or
    shareholders' equity.

    The Company had total comprehensive income of $5,560,000 and $8,078,000 for
    the three and nine month periods ended September 30, 1998, respectively, and
    a total comprehensive loss of $522,000 and $3,923,000 for the three and nine
    month periods ended September 30, 1997, respectively. The difference between
    total comprehensive income (loss) and net income is caused by the change in
    the cumulative translation adjustment account during the three and nine
    month periods ended September 30, 1998 and 1997.

8.  RECENT PRONOUNCEMENTS

    During June 1997, the Financial Accounting Standards Board issued Statement
    No. 131, "Disclosures About Segments of an Enterprise and Related
    Information" (FAS 131). This statement replaces Statement No. 14 and changes
    the way public companies report segment information. FAS 131 is effective
    for fiscal years beginning after December 15, 1997 and will be adopted by
    the Company for the year ended December 31, 1998.

    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. Because of
    the Company's minimal use of derivatives, management does not anticipate
    that the adoption of the new Statement will have a significant effect on
    earnings or the financial position of the Company.

9.  ADDITIONAL INVESTMENT IN MINORITY-OWNED SUBSIDIARY

    During April 1998 the Company exercised its option to acquire an additional
    29% of the outstanding shares of its Italian distributor in exchange for
    $982,000, increasing the Company's ownership interest to 80%. 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 1998. The purchase
    agreement provides for a call/put option that gives the Company the right to
    purchase and the minority shareholder the right to require the Company to
    purchase the remaining 20% of the shares in 1999 for an amount to be
    determined using a net asset and revenue based formula.

10. INTRODUCTION OF THE EUROPEAN ECONOMIC AND MONETARY UNION (EMU)

    Eleven of the 15 member countries of the European Union are scheduled to
    establish fixed conversion rates between their existing sovereign currencies
    and the Euro and to adopt the Euro as their common legal currency effective
    January 1, 1999. The Euro will then trade on currency exchanges and be
    available for non-cash transactions. The Company is currently expending
    resources to review and modify its products to support the Euro's
    requirements, determine pricing strategies in the new economic environment,
    analyze the legal and contractual implications for contracts, evaluate
    system capabilities, and ensure banking vendors can support the Company's
    operations with respect to Euro transactions. The

                                     - 8 -
<PAGE>
 
    Company expects that modifications will be made to its business operations
    and systems on a timely basis and does not believe that the cost of such
    modifications will have a material adverse impact on the Company's operating
    results. There can be no assurance, however, the Company will be able to
    complete such modifications to comply with Euro requirements, which could
    have a material adverse effect on the Company's operating results. In
    addition, the Company faces risks to the extent that vendors upon whom the
    Company relies and their suppliers are unable to make appropriate
    modifications to support Euro transactions. The Company has not yet
    completed its evaluation of the impact of the Euro upon its functional
    currency designations.


                                     - 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 the
Company's financial statements set forth below and in the section titled
"Business Factors".  The Company assumes no obligation to update the forward-
looking information or such factors.


OVERVIEW

The Company develops, markets and supports decision support software tools for
the client/server and Internet markets. The Company's 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.

The Company operates on a multinational basis and a significant portion of its
business is conducted in currencies other than the U.S. dollar (mainly the
French franc, the British pound sterling, the Italian lira, the German mark, the
Dutch guilder 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, the Company cannot predict
the effect of exchange rate fluctuations upon future operating results.  To
date, the Company has not undertaken hedging transactions to cover its currency
transaction exposure.

Although the Company has been increasing the dollar volume of its sales through
indirect channels, revenues from such sales channels currently represent a
smaller portion of the Company's total revenues than direct sales.  There can be
no assurance that the Company will be able to continue to attract indirect
channels that will be able to market and support the Company's software
effectively.  Indirect sales represented 33% and 37% of total sales for the
three and nine month periods ended September 30, 1998, respectively, and 41% and
40% of total sales for the three and nine month periods ended September 30,
1997, respectively. The decline in indirect sales for the three and nine month
periods ended September 30, 1998 is due to the growth rate of direct sales which
exceed the growth rate of indirect sales.

                                     - 10 -
<PAGE>
 
RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                              Percentage of Revenues
                                                 ------------------------------------------------------------------------------
                                                            Three Months Ended                        Nine Months Ended
                                                              September 30,                             September 30,
                                                 -------------------------------------      -----------------------------------
                                                         1998                 1997                 1998                1997
                                                 -----------------      --------------      ---------------      --------------
<S>                                                <C>                    <C>                 <C>                  <C>
 
Revenues:
   License fees ..............................               63.6%               68.2%                64.8%               69.3%
   Services...................................               36.4                31.8                 35.2                30.7
                                                 -----------------      --------------      ---------------      --------------
   Total revenue..............................              100.0               100.0                100.0               100.0
                                                 -----------------      --------------      ---------------      --------------
Cost of revenues:
   License fees ..............................                1.9                 2.9                  2.0                 3.1
   Services ..................................               15.2                12.3                 14.4                11.2
                                                 -----------------      --------------      ---------------      -------------- 
   Total cost of revenues .......................            17.1                15.2                 16.4                14.3
                                                 -----------------      --------------      ---------------      --------------
Gross margin.....................................            82.9                84.8                 83.6                85.7
                                                 -----------------      --------------      ---------------      --------------
Operating expenses:
   Sales and marketing .....................                 53.8                60.0                 55.3                61.8
   Research and development ............                     12.0                12.3                 11.9                12.7
   General and administrative ............                    8.9                10.1                  9.1                 9.7
                                                 -----------------      --------------      ---------------      --------------
   Total operating expenses ............                     74.7                82.4                 76.3                84.2
                                                 -----------------      --------------      ---------------      --------------
 
Income/ (loss) from operations ............                   8.2                 2.4                  7.3                 1.5
Interest and other income, net ............                   1.5                 0.6                  1.2                 1.9
                                                 -----------------      --------------      ---------------      --------------
 
Income before provision for income taxes                      9.7                 3.0                  8.5                 3.4
Provision for income taxes ...............                   (4.0)               (2.5)                (3.5)               (1.9)
Minority interest ..............................             (0.1)                0.1                 (0.1)               (0.0)
                                                 -----------------      --------------      ---------------      --------------
Net income ....................................               5.6%                0.6%                 4.9%                1.5%
                                                 =================      ==============      ===============      ==============
Gross margin
   License fees ..............................               97.0%               95.8%                96.8%               95.6%
   Services ....................................             58.4%               61.3%                59.1%               63.6%
</TABLE>

  The following table sets forth the geographic source of the Company's
revenues:

<TABLE>
<CAPTION>
                                                                           Percentage of Total Revenues
                                                 ------------------------------------------------------------------------------
                                                            Three months ended                        Nine months ended
                                                              September 30,                             September 30,
                                                 -------------------------------------      -----------------------------------
                                                         1998                 1997                 1998                1997
                                                 -----------------      --------------      ---------------      --------------
<S>                                                <C>                    <C>                 <C>                  <C>
Europe...........................................               62%                 59%                  64%                 63%
North America....................................               32%                 34%                  30%                 31%
Asia/Pacific.....................................                6%                  7%                   6%                  6%
                                                 -----------------      --------------      ---------------      --------------
      Total......................................              100%                100%                 100%                100%
                                                              ====                ====                 ====                ====
</TABLE>

                                     - 11 -
<PAGE>
 
  LICENSE FEES.  Revenues from license fees were $26.2 million and $19.4 million
for the three months ended September 30, 1998 and 1997, respectively,
representing a quarter over quarter increase of $6.8 million or 35%. Revenues
from license fees were $74.8 million and $54.2 million for the nine months ended
September 30, 1998 and 1997, respectively, representing a period over period
increase of $20.6 million or 38%.  The increase in license fees were primarily
due to increased unit license sales of the Company's software products, of which
a majority of license revenues consisted of licenses of BusinessObjects.
Revenues from the sale of Webintelligence, the Company's thin client platform,
represented approximately 10% and 7% of the Company's total license revenues for
the three and nine month periods ended September 30, 1998.  There were no
revenues recognized from the sale of Webintelligence during the comparable
periods of 1997.

  The Company anticipates that license fees, which represented approximately 64%
and 68% of the Company's total revenues for the three month periods ended
September 30, 1998 and 1997, respectively, and approximately 65% and 69% of the
Company's total revenues for the nine month periods ended September 30, 1998 and
1997, respectively, will continue to represent a majority of its revenues for
the foreseeable future.  The decrease in license revenues as a percent of total
revenues for the three and nine month periods ended September 30, 1998 as
compared to the three and nine month periods ended September 30, 1997 was
primarily due to increased customer demand for consulting and training services
and an increase in the Company's 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, the
Company expects that the market penetration by, and number of, the Company's
competitors will increase, and, as a result, the growth rate in the Company's
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 $15.0 million and $9.1 million for the three
month periods ended September 30, 1998 and 1997, respectively, and $40.6 million
and $24.0 million for the nine month periods ended September 30, 1998 and 1997,
respectively.  Revenues from services in the third quarter of 1998 increased
approximately $5.9 million, or 65%, over the third quarter of 1997, while
services in the nine months ended September 30, 1998 increased approximately
$16.6 million, or 69%, over the nine months ended September 30, 1997. The
increase in revenues from services for both periods was due primarily to
increases in consulting and training revenues, and from increases in maintenance
revenues related to increases in the Company's installed customer base and the
renewal of support contracts.  As market penetration by, and the number of,
competitors increase, the growth rate of the Company's installed base and,
consequently, the growth rate of the Company's services revenues may not be as
high as growth rates achieved in the past.  The Company anticipates increasing
its efforts in selling consulting, training and maintenance services, and
expects that service revenues should continue to represent a significant portion
of its total revenues.

  COST OF LICENSE FEES.  Cost of license fees consists primarily of costs
incurred for materials, packaging, freight and royalties, and totaled $781,000
and $826,000 for the three months ended September 30, 1998 and 1997,
respectively, and $2.4 million for both nine month periods ended September 30,
1998 and 1997.  Cost of license fees as a percent of license fee revenues
decreased from approximately 4% for the quarter and nine month period ended
September 30, 1997 to approximately 3% for the quarter and nine month period
ended September 30, 1998.

                                     - 12 -
<PAGE>
 
  COST OF SERVICES.  Cost of services consists of the cost of providing
consulting, training and maintenance, and totaled $6.3 million and $3.5 million
for the three months ended September 30, 1998 and 1997, respectively, and $16.6
million and $8.7 million for the nine months ended September 30, 1998 and 1997,
respectively.  Cost of services as a percent of service revenues increased from
38.7% for the quarter ending September 30, 1997 to 41.6% for the quarter ending
September 30, 1998, and from 36.4% for the nine months ended September 30, 1997
to 40.9% for the nine months ended September 30, 1998.  The increase in cost of
services as a percent of the related revenues for both periods 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 a greater
portion of total service revenues in the 1998 periods.  The increase in expenses
in absolute dollars was primarily due to increases in headcount to support the
Company's service activities and, to a lesser extent, to the subcontracting of
consulting and training activities.

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 $22.2
million and $17.1 million for the three months ended September 30, 1998 and
1997, respectively, and $63.8 million and $48.4 million for the nine months
ended September 30, 1998 and 1997, respectively.  Sales and marketing expenses
decreased as a percent of total revenues from 60.0% for the quarter ended
September 30, 1997 to 53.8% for the comparable quarter in 1998, and from 61.8%
for the nine month period ended September 30, 1997 to 55.3% for the comparable
period in 1998.  The decrease in sales and marketing expenses as a percent of
total revenues for both periods is primarily due to revenues growing at a faster
rate than spending on sales and marketing activities. The increase in sales and
marketing expenses in absolute dollars for both periods is attributable to the
expansion of the Company's 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 $5.0 million and $3.5 million for the
three months ended September 30, 1998 and 1997, respectively, and $13.8 million
and $9.9 million for the nine months ended September 30, 1998 and 1997,
respectively.  Research and development expenses decreased slightly as a percent
of total revenues from 12.3% for the quarter ended September 30, 1997 to 12.0%
for the comparable quarter in 1998, and from 12.7% for the nine month period
ended September 30, 1997 to 11.9% for the comparable period in 1998.  The
decrease in research and development expenses as a percent of total revenues is
primarily due to revenues growing at a faster rate than spending on research and
development expenses.  The increase in absolute dollars in research and
development expenses for both periods is due to increased staffing and
associated support required to expand and enhance the Company's product line.
As of September 30, 1998, the Company 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, 

                                     - 13 -
<PAGE>
 
and amortization of goodwill arising from acquisitions of companies and
ownership interest in subsidiaries in 1997 and 1998. General and administrative
expenses totaled $3.7 million and $2.9 million for the three months ended
September 30, 1998 and 1997, respectively, and $10.5 million and $7.6 million
for the nine months ended September 30, 1998 and 1997, respectively. General and
administrative expenses decreased as a percent of total revenues from 10.1% for
the quarter ended September 30, 1997 to 8.9% for the comparable quarter in 1998,
and from 9.7% for the nine month period ended September 30, 1997 to 9.1% for the
comparable period in 1998. 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 the
amortization of goodwill and increases in staffing to support the Company's
growth. Goodwill amortization expense is included in general and administrative
expenses and totaled $312,000 and $213,000 for the three months ended September
30, 1998 and 1997, respectively, and $930,000 and $380,000 million for the nine
months ended September 30, 1998 and 1997, 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 $618,000 and $178,000
for the three months ended September 30, 1998 and 1997, respectively, and $1.4
and $1.5 million for the nine months ended September 30, 1998 and 1997,
respectively.  Net interest income increased from $223,000 for the three months
ended September 30, 1997 to $574,000 for the three months ended September 30,
1998, and from $788,000 for the nine months ended September 30, 1997 to $1.3
million for the nine months ended September 30, 1998, primarily due to the
increase in cash, cash equivalents and short-term investments.  Cash, cash
equivalents and short-term investments increased from $31.6 million at September
30, 1997 to $63.9 million at September 30, 1998.  The decrease in interest and
other income, net, for the nine months ended September 30, 1998 was primarily
due to a decrease in net foreign currency exchange gains.  Net foreign currency
exchange gains totaled $44,000 for the three months ended September 30, 1998
versus a loss $45,000 for the comparable period during 1997.  Net foreign
currency exchange gains totaled $73,000 for the nine months ended September 30,
1998 versus $690,000 for the comparable period during 1997.  The gain recognized
in 1997 was 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

  The Company's effective tax rate was 41% and 82% for the three months ended
September 30, 1998 and 1997, respectively, and 41% and 55% for the nine months
ended September 30, 1998 and 1997.  The Company increased its effective tax rate
during the quarter ended September 30, 1997 due to limitations on its ability to
utilize certain foreign country losses and an increase in the corporate income
tax rate in France from 36.7% to 41.6%. The Company provides for income taxes
for each interim period based on the estimated annual effective tax rate for the
year.

                                     - 14 -
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

  As of September 30, 1998, the Company had cash, cash equivalents and short-
term investments of $63.9 million, an increase of $24.9 million from December
31, 1997.  The Company generated cash from operations of $26.0 million for the
nine months ended September 30, 1998, as compared to $180,000 for the comparable
period in 1997.  Net cash generated in 1998 resulted primarily from increases in
net income and non-cash charges for depreciation and amortization, increases in
accrued payroll and related expenses and other current liabilities, and a
decrease in accounts receivable.  The Company's investing activities consisted
primarily of the purchase and sale of short-term investments, the purchase of
$4.7 million of property and equipment, and the exercise of its option to
acquire an additional 29% of the outstanding shares of its Italian distributor
in exchange for $982,000.  The Company also generated cash of $2.3 million from
the issuance of ordinary shares under employee stock plans during the nine
months ended September 30, 1998.

  The Company believes that cash from operations together with existing cash and
cash equivalents and short-term investments will be sufficient to meet its cash
requirements for at least the next 12 months.

BUSINESS FACTORS

  Statements contained in this Management Discussion 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:

  Variability of Operating Results; Seasonality.  The Company's revenues and
operating results can vary, sometimes substantially, from quarter to quarter.
License fees are relatively difficult to forecast due to a number of reasons,
including the timing of the introduction of products or product enhancements,
competition and pricing in the computer software industry, the size and timing
of individual license transactions, variability of the Company's sales cycle,
customer order deferrals in anticipation of new products and customers' budget
changes.  The Company's software products are generally shipped as orders are
received.  As a result, license revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter.  The Company has often
recognized a substantial portion of its revenues in the last month of a quarter,
with these revenues frequently concentrated in the last weeks of a quarter.
Because the Company's operating expenses are based on anticipated revenues
levels and a high percentage of the Company's expenses are relatively fixed, a
minor delay in the recognition of specific revenues can cause significant
variations in operating results from quarter to quarter and may result in
losses.  For example, the Company plans to continue to increase its expenditures
to fund greater levels of research and development, a larger direct sales and
marketing staff, development of new distribution and resale channels, broader
customer support capability and the additional general and administrative
staffing necessary to support these functions.  To the extent such expenses
precede or are not subsequently followed by increased revenues, the Company's
results of operations and financial condition could be materially and adversely
affected.

  Similar to many companies in the software industry, the Company generally
experiences a lower revenues growth (and may experience a decrease in revenues)
in the first quarter of the year than the immediately preceding quarter.  The
Company believes that this seasonality in 

                                     - 15 -
<PAGE>
 
revenues has been primarily due to the concentration by some customers of their
larger capital purchases in the fourth quarter of the calendar year, and their
consequent lower purchasing activity during the following quarter. In addition,
the Company's European operations generally have lower revenues in the summer
months due to the generally reduced economic activity in Europe at such time,
which serves to build up a demand in the fourth quarter.

  Dependence on Principal Product.  The Company generated the majority of its
total revenues from licenses of BusinessObjects in the third quarter of 1998 and
in all prior periods, and the Company expects that revenues from such licenses
will continue to represent a substantial majority of its total revenues for the
foreseeable future.  A substantial majority of the remaining portion of the
Company's total revenues is comprised of revenues from other licensed products
and services related to licenses of BusinessObjects. As a result, any factor
adversely affecting licenses of BusinessObjects would have a material adverse
effect on the Company. The Company's future financial performance will depend in
part on the Company's successful development and introduction, and customer
acceptance of new and enhanced versions of BusinessObjects and other products.
In addition, competitive pressures or other factors may result in significant
price erosion for BusinessObjects that could have a material adverse effect on
the Company's results of operations and financial condition.

  Competition.  The Company's products are specifically targeted at the decision
support software tools market.  The principal competitive factors affecting the
market for the Company's products are ease of use, functionality, product
architecture, price, product quality, breadth of distribution, customer support,
and name recognition.  The Company's products compete in four main market
sectors: 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.  Many of
the Company's competitors have longer operating histories and significantly
greater financial, technical, sales, marketing and other resources, as well as
greater name recognition and a larger installed base, than the Company. In
addition, many competitors, particularly relational database management system
vendors and enterprise resource planning vendors, have well-established
relationships with customers of the Company. The Company's competitors could in
the future introduce products with more features and lower prices than the
Company's products. These companies could also bundle existing or new products
with other more established products in order to compete with the Company. The
Company's focus on decision support tools may be a disadvantage in competing
with vendors who offer a broader range of products. Furthermore, as the decision
support market develops, a number of companies with significantly greater
resources than the Company could attempt to increase their presence in this
market by creating pricing pressures or by acquiring or forming strategic
alliances with competitors of the Company.

  During the three and nine month periods ended September 30, 1998, the Company
generated approximately 32% and 30%, respectively, of its revenues from its
operations in North America.  This market is highly competitive. The Company
believes that its continued success is partly dependent on its ability to
operate successfully in this geographic region.  Marketing activities and
purchasing decisions made by companies in this region influence purchasing
decisions made by companies on a worldwide basis.  The inability of the Company
to compete successfully in this region, or the ineffectiveness of its marketing
activities, could have a material adverse effect on the Company's results of
operations and financial condition.

                                     - 16 -
<PAGE>
 
  Although the Company has recently been increasing its sales through indirect
channels, revenues from such sales channels currently represent a smaller
portion of the Company's total revenues than direct sales and there can be no
assurance that the Company will be able to continue to attract indirect channels
that will be able to market and support the Company's software effectively.

  Rapid Technological Change and New Products.  The market for decision support
tools is characterized by frequent product introductions and rapid technological
change.  The Company's future success will depend on its ability to address the
increasingly sophisticated needs of its customers by developing enhancements and
new products in a timely manner that keep pace with technological developments,
emerging industry standards and customer requirements.  There can be no
assurance that the Company will be successful in developing and marketing new
products or enhancements to the Company's existing products that respond to
technological change, evolving industry standards or customer requirements, that
the Company will not experience difficulties that could delay or prevent the
successful development, introduction and sale of such new products and
enhancements or that such new products and enhancements will adequately meet the
requirements of the marketplace and achieve any significant degree of market
acceptance.  There can be no assurance that the introduction of new product
offerings by the Company or the Company's competitors will not cause customers
to deter or forego purchases of current versions of the Company's products,
which could have a material adverse effect on the Company's results of
operations and financial condition.

  Risks of Software Defects.  Software products as internally complex as
BusinessObjects and WebIntelligence frequently contain errors or defects,
especially when first introduced or when new versions or enhancements are
released.  There can be no assurance that, despite testing by the Company,
defects and errors will not be found in new versions or enhancements after
commencement of commercial shipments, resulting in loss of revenues or delay in
market acceptance, which could have a material adverse effect on the Company's
results of operations and financial condition.

  Manufacturing.  Substantially all of the Company's CD duplication, printing of
user manuals, packaging and manufacture of related materials are performed to
the Company's specifications by outside sources.  To date, the Company has not
experienced any material difficulties or delays in manufacture by third party
suppliers.  However, an interruption in production by a supplier or suppliers
could result in a delay in shipments of the Company's products and adversely
affect the Company's results of operations.

  Patents and Intellectual Property Protection.  The Company currently has one
patent issued in the United States relating to a "Relational Database Access
System Using Semantically Dynamic Objects".  The Company is currently engaged in
litigation asserting that one of its competitors infringes this patent.  There
can be no assurance that any current or future patents will provide the Company
with competitive advantages or will not be challenged by third parties, or that
the patents of others will not have an adverse effect on the Company's ability
to do business.  Furthermore, there can be no assurance that others will not
independently develop similar or competing technology or design around any
patents that may be issued to the Company.  The Company believes that it owns or
has licensed all proprietary rights relating to its software.  The Company
relies on a combination of the protections provided by applicable copyright,
trademark and trade secret laws, as well as on confidentiality procedures and
licensing arrangements, to establish and protect its rights in its software.
Despite the Company's efforts, it 

                                     - 17 -
<PAGE>
 
may be possible for unauthorized third parties to copy certain portions of the
Company's products or reverse engineer or obtain and use information that the
Company regards as proprietary. In addition, although the Company's name
together with its logo is registered as a trademark in France, the United
States, and a number of other countries, it may be difficult for the Company to
assert ownership rights in the name "Business Objects". Policing unauthorized
use of the Company's products by customers or preventing the name of the
Company's software from becoming part of the public domain is difficult. The
laws of certain countries do not protect the Company's proprietary rights to the
same extent as do the laws of the United States or France. Under French law, the
rights of the Company in its software are not patentable but are protected under
copyright law and infringements by third parties can be enjoined. While the
Company's competitive position may be affected by its ability to protect its
proprietary information, the Company believes that factors such as the technical
expertise and innovation skills of its personnel, its name recognition and
ongoing product support and enhancement may be more significant in maintaining
the Company's competitive position.

  The Company licenses its software products to customers on a non-exclusive,
non-transferable basis. License agreements typically provide that the licensed
product may be used solely for the customer's internal operations and for a
specified number of named or concurrent users.  With respect to customers, the
Company may rely on "shrink-wrap" license agreements for the protection of its
products.  A "shrink-wrap" license agreement is a printed license agreement
included within the packaged software that sets forth the terms and conditions
under which the purchaser can use the products.  Such license agreements take
effect upon the opening of the product package.

  The Company licenses certain software from third parties for sub-licensing by
the Company to its customers, and also licenses certain software programs from
third parties and incorporates them in the Company's software products.
Generally, such agreements grant the Company non-exclusive, worldwide licenses
with respect to such software.  The utilization of such third party software
involves risks additional to software developed in-house.  Third party providers
may cease or alter their operations, terminate the relationship, or be generally
unable to fulfill their obligations.  Such events may require the Company to
seek alternative technology which may or may not be available on commercially
reasonable terms.

  In the future, it may be necessary or desirable to obtain licenses relating to
software programs from third parties, and there can be no assurance that the
Company will be able to obtain the necessary technology or similar technology on
commercially reasonable terms.  Also, there can be no assurance that third
parties will not assert infringement claims against the Company in the future
with respect to current or future products or that any such assertions may not
require the Company to enter into royalty arrangements or result in costly
litigation.

  The Company has entered into source code escrow agreements with a limited
number of its distributors and end users requiring release of source code under
certain circumstances. Such agreements provide that such parties will have a
limited, non-exclusive right to use such code in the event that there is a
bankruptcy proceeding by or against the Company, if the Company ceases to do
business or if the Company fails to meet its contractual obligations.  The
provision of source code escrow agreements may increase the likelihood of
misappropriation by third parties.

                                     - 18 -
<PAGE>
 
  The Company is not aware of any infringement or claims of infringement by its
products on the proprietary rights of third parties.  There can be no assurance,
however, that third parties will not claim such infringement by the Company with
respect to current or future products.  The Company expects that software
products will increasingly be subject to such claims as the number of products
and competitors in the Company's industry segment grows and the functionality of
products overlap.  Any such claim, with or without merit, can be time consuming
and could result in costly litigation and require the Company to enter into
royalty and licensing agreements.  Such royalty or licensing agreements, if
required, may not be available on terms acceptable by the Company or at all.

  Multinational Operations and Currency Exchange Rate Fluctuations.  A
significant portion of the Company's business is conducted in currencies other
than the U.S. dollar, the currency in which its financial statements are stated.
The Company has historically recorded a majority of its expenses in French
francs, especially research and development expenses, with the substantial
majority of its revenues denominated in U.S. dollars, French francs and British
pound sterling. Moreover, fluctuations in the value of the currencies in which
the Company conducts its business relative to the U.S. dollar have caused and
will continue to cause dollar-translated amounts to change in comparison with
previous periods.  Due to the number of currencies involved, the constantly
changing currency exposures, and the substantial volatility of currency exchange
rates, the Company cannot predict the effect of exchange rate fluctuations upon
future operating results.  To date, the Company has not undertaken hedging
transactions to cover its currency transaction exposure.

  Countries in the Asia Pacific region, including Japan, have recently
experienced weaknesses in their currency, banking and equity markets.  Although
this region accounted for only 6% of the Company's consolidated revenues for the
three and nine months periods ended September 30, 1998, these weaknesses could
adversely affect demand for the Company's product and the U.S. dollar value of
the Company's foreign currency denominated sales in this region and ultimately
the Company's consolidated results of operations.

  Eleven of the 15 member countries of the European Union are scheduled to
establish fixed conversion rates between their existing sovereign currencies and
the Euro and to adopt the Euro as their common legal currency effective January
1, 1999. The Euro will then trade on currency exchanges and be available for 
non-cash transactions. The Company is currently expending resources to review
and modify its products to support the Euro's requirements, determine pricing
strategies in the new economic environment, analyze the legal and contractual
implications for contracts, evaluate system capabilities, and ensure banking
vendors can support the Company's operations with respect to Euro transactions.
The Company expects that modifications will be made to its business operations
and systems on a timely basis and does not believe that the cost of such
modifications will have a material adverse impact on the Company's operating
results. There can be no assurance, however, the Company will be able to
complete such modifications to comply with Euro requirements, which could have a
material adverse effect on the Company's operating results. In addition, the
Company faces risks to the extent that vendors upon whom the Company relies and
their suppliers are unable to make appropriate modifications to support Euro
transactions. The Company has not yet completed its evaluation of the impact of
the Euro upon its functional currency designations.

  While the Company cannot predict what effect these various factors may have
on financial results, the aggregate effect of these and other factors could
result in significant volatility in the Company's future performance and
stock price.

  Product Distribution and Support.  Although the Company has been increasing
its sales through indirect channels, revenues from such sales represent a
smaller portion of the Company's total revenues than direct sales and there can
be no assurance that the Company will be able to attract indirect channels that
will be able to market and support the Company's software effectively.  There
can be no assurance that any VAR, system integrator, consulting partner,
distributor or reseller of the Company's products will continue to represent the
Company's products, and the inability to recruit or retain a significant number
of VARs, system integrators, consulting partners, distributors or resellers
could adversely affect the Company's results of operations.  Additionally, the
inability of the Company to expand its sales and marketing organization, to
implement new indirect sales channels to penetrate different and broader markets
than those addressed by its existing direct sales force and international
distributors, and to expand its support organization commensurate with the base
of its installed products could adversely affect the Company's results of
operations and financial performance.

  Impact of the Year 2000 Issue. The Year 2000 Issue is the result of computer
programs being written using two digits rather than four to define the
applicable year.  Any of the Company's 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 

                                     - 19 -
<PAGE>
 
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

The Company is using a four step process for addressing the issues surrounding
its internal management information systems: assessment, remediation, testing
and implementation.  The Company is currently in the assessment phase with
regards to its internal management information systems, and has identified those
systems that are not Year 2000 compliant. The assessment is being reviewed by
external consultants. The Company expects the total costs of assessment,
remediation, testing and implementation of its internal systems to be less than
$100,000 and to be completed by the end of 1999. The Company expects the process
of assessment, remediation, testing and implementation will be made on a timely
basis; however, there can be no assurance that the Company will be able to
modify such systems on a timely basis to comply with Year 2000 requirements,
which could have a material adverse effect on the Company's operating results.

The current version of the Company's products were developed to support Year
2000 compliance based on the British Standards Institution definition of Year 
2K Conformity Requirements; however, some of the Company's customers are running
older versions of the Company's products that are not Year 2000 compliant. The
Company has been encouraging such customers to migrate to current product
versions; however, there can be no assurance that such customers will migrate to
the current versions.

In addition, the Company faces risks to the extent that suppliers of products,
services and systems purchased by the Company and others with whom the Company
transacts business on a worldwide basis do not have business systems or products
that comply with the year 2000 requirements.  In the event any such third
parties cannot timely provide the Company with products, services or systems
that meet the year 2000 requirements, the Company's operating results could be
materially adversely affected.  Furthermore, there can be no assurance that
these or other factors relating to the year 2000 compliance issues, including
litigation, will not have a material adverse effect on the Company's business,
operating results or financial condition.

The Company is in the process of evaluating the need for contingency plans with
respect to Year 2000 requirements.  The necessity of any contingency plans must
be evaluated on a case-by-case basis and will vary considerably in nature
depending on the Year 2000 issue it may need to address.

  Management of Growth.  To date, the Company's business has grown rapidly.
Continued growth may place a significant strain on the Company's management and
operations. The Company's future operating results will depend on the ability of
its officers and key employees to continue to implement and improve its
operational and financial control systems and to expand, train, retain and
manage its employee base.  The Company's inability to manage growth effectively
could have a material adverse effect on the Company's results of operations and
financial performance.

  Legal Proceedings.  During January 1997, the Company filed a lawsuit in the
United States District Court for the Northern District of California against
Brio Technology, Inc. for alleged patent infringement.  The lawsuit alleges that
Brio Technology, Inc. infringes the Company's United States Patent No. 5,555,403
by making, using and selling its product known as BrioQuery 

                                     - 20 -
<PAGE>
 
Enterprise. The Company's complaint requests that the defendant be enjoined from
further infringing the patent.

  The Company is also involved in various legal proceedings arising in the
ordinary course of business.  The Company believes that the ultimate resolution
of these matters will not have a material effect on the Company's financial
position, results of operations or cash flows.

                                     - 21 -
<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.

                                     - 22 -
<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:  November 13, 1998           By:      /s/ Bernard Liautaud
                                      ----------------------------------
                                                Bernard Liautaud
                                            Chief Executive Officer


Date:  November 13, 1998           By:      /s/ Clifton T. Weatherford
                                      ----------------------------------
                                            Clifton T. Weatherford
                                            Chief Financial Officer

                                     - 23 -