<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, 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, 92300 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 29, 1999 was 18,266,219 Ordinary Shares of 1 French
franc nominal value.  This includes 191,500 of treasury shares and 17,275,453
American Depositary Shares (as evidenced by American Depositary Receipts), each
corresponding to one Ordinary Share.

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

                             Business Objects S.A.
                               Table of Contents


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

         Condensed Consolidated Balance Sheets at
         September 30, 1999 and December 31, 1998                                                        3

         Condensed Consolidated Statements of Income for the
         three months ended September 30, 1999 and 1998 and the
         nine months ended September 30, 1999 and 1998                                                   4

         Condensed Consolidated Statements of Cash Flows for the
         nine months ended September 30, 1999 and 1998                                                   5

         Notes to Condensed Consolidated Financial Statements                                            6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operation                                                             10

Item 3.  Quantitative and Qualitative Disclosures About Market
         Risk                                                                                           24


PART II. OTHER INFORMATION                                                                              25

Item 1.  Legal Proceedings                                                                              25

Item 6.  Exhibits and current reports on Form 8-K                                                       25

         Signatures                                                                                     26
</TABLE>

                                      -2-
<PAGE>

                             BUSINESS OBJECTS S.A.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
               (In thousands, except per ordinary share amounts)


<TABLE>
<CAPTION>
                                                                          September 30, 1999           December 31, 1998
                                                                          ------------------           -----------------
                                                                              (Unaudited)                    (Note)
<S>                                                                       <C>                          <C>
ASSETS
Current assets:
Cash and cash equivalents                                                   $        93,863              $       71,713
Accounts receivable, net                                                             40,579                      42,236
Other current assets                                                                 11,784                       7,993
                                                                            ---------------              --------------
     Total current assets                                                           146,226                     121,942


Property and equipment, net                                                          13,695                      13,804
Goodwill, net                                                                         5,583                       1,460
Deposits and other assets                                                             1,961                         879
                                                                            ---------------              --------------
     Total assets                                                           $       167,465              $      138,085
                                                                            ===============              ==============


LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable                                                            $        10,899              $       10,439
Accrued payroll and related expenses                                                 17,556                      16,597
Deferred revenue                                                                     27,802                      21,684
Other current liabilities                                                            27,797                      22,118
                                                                            ---------------              --------------
     Total current liabilities                                                       84,054                      70,838

Notes Payable                                                                         1,000                         -

Shareholders' equity
Ordinary shares, FRF1 nominal value ($0.16 U.S. as of September 30, 1999):
Authorized 37,452 at September 30, 1999 and 36,243 at December 31, 1998;
Issued and outstanding 18,151 at September 30, 1999 and
17,255 at December 31, 1998.                                                          3,311                       3,166
Treasury stock, 192 shares at September 30, 1999                                     (4,611)                        -
Additional paid-in capital                                                           46,988                      38,705
Retained earnings                                                                    42,639                      28,394
Accumulated other comprehensive income                                               (5,916)                     (3,018)
                                                                            ---------------              --------------
Total shareholders' equity                                                           82,411                      67,247
                                                                            ---------------              --------------
Total liabilities and shareholders' equity                                  $       167,465              $      138,085
                                                                            ===============              ==============
</TABLE>

Note: The balance sheet at December 31, 1998 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 ordinary share data: unaudited)

<TABLE>
<CAPTION>
                                                               Three Months Ended           Nine Months Ended
                                                                  September 30,               September 30,
                                                                 1999       1998             1999      1998
                                                              --------    --------         --------   --------
<S>                                                           <C>         <C>              <C>        <C>
Revenues:
  License fees                                                $ 37,302    $ 26,232         $104,369   $ 74,811
  Services                                                      22,464      15,025           62,448     40,563
                                                              --------    --------         --------   --------
    Total revenues                                              59,766      41,257          166,817    115,374

Cost of revenues:
  License fees                                                   1,232         781            3,188      2,357
  Services                                                       8,995       6,253           26,122     16,602
                                                              --------    --------         --------   --------
     Total cost of revenues                                     10,227       7,034           29,310     18,959
                                                              --------    --------         --------   --------
Gross margin                                                    49,539      34,223          137,507     96,415
Operating expenses:
  Sales and marketing                                           28,668      22,214           82,122     63,778
  Research and development                                       6,500       4,956           18,922     13,787
  General and administrative                                     4,915       3,692           14,067     10,460
                                                              --------    --------         --------   --------
    Total operating expenses                                    40,083      30,862          115,111     88,025
                                                              --------    --------         --------   --------
Income from operations                                           9,456       3,361           22,396      8,390
Interest and other income, net                                     533         618            1,749      1,403
                                                              --------    --------         --------   --------
Income before provison for income
  taxes and minority interest                                    9,989       3,979           24,145      9,793
Provision for income taxes                                      (4,096)     (1,631)          (9,900)    (4,011)
Minority interest                                                    -         (40)               -       (114)
                                                              --------    --------         --------   --------
Net income                                                    $  5,893    $  2,308         $ 14,245   $  5,668
                                                              ========    ========         ========   ========

Net income per ADS and per share - basic                      $   0.33    $   0.14         $   0.80   $   0.34
                                                              ========    ========         ========   ========

ADS and shares used in computing net
  income per ADS and per share - basic                          18,007      16,975           17,727     16,903
                                                              ========    ========         ========   ========

Net income per ADS and per share - diluted                    $   0.30    $   0.13         $   0.74   $   0.32
                                                              ========    ========         ========   ========

ADS and shares and common share equivalents used in
  computing net income per ADS and per share - diluted          19,719      17,624           19,305     17,661
                                                              ========    ========         ========   ========
</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,
                                                                           1999         1998
                                                                         --------     --------
<S>                                                                     <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                              $  14,245    $   5,668
Adjustments to reconcile net income to net
  cash provided by operating activities:
     Depreciation                                                           5,213        3,904
     Amortization of goodwill                                               2,060          930
     Deferred income taxes                                                    183          -
     Changes in operating assets and liabilities:
        Accounts receivable                                                   581        3,306
        Other assets                                                       (3,911)      (1,491)
        Accounts payable                                                    1,045        2,112
        Accrued payroll and related expenses                                2,742        4,837
        Deferred revenue                                                    6,518        1,459
        Other current liabilities                                           2,534        5,247
                                                                        ---------    ---------
Net cash provided by operating activities                                  31,210       25,972

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment                                        (5,654)      (4,738)
Business acquisitions, net of cash acquired                                (4,627)        (982)
Purchases of short-term investments                                           -        (72,518)
Proceeds from sales of short-term investments                                 -         49,741
                                                                        ---------    ---------
Net cash used for investing activities                                    (10,281)     (28,497)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations                               -            (16)
Issuance of ordinary shares                                                 8,428        2,305
Purchase of treasury shares                                                (4,611)         -
                                                                        ---------    ---------
Net cash provided by financing activities                                   3,817        2,289
Effect of foreign exchange rate changes on cash and
     cash equivalents                                                      (2,596)       1,640
                                                                        ---------    ---------
Net increase in cash and cash equivalents                                  22,150        1,404
Cash and cash equivalents at the beginning of the period                   71,713       36,508
                                                                        ---------    ---------
Cash and cash equivalents at the end of the period                      $  93,863    $  37,912
                                                                        =========    =========
</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements.

                                      -5-

<PAGE>

                             Business Objects S.A.
             Notes to Condensed Consolidated Financial Statements
                              September 30, 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 three and nine
    month periods ended September 30, 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 $1,770,000 at September 30, 1999 and $1,672,000 at
    December 31, 1998.

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 97-2, as amended by SOP 98-4 and 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,

                                      -6-
<PAGE>

    primarily training and consulting, are generally recognized at the time the
    service is performed.

5.  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          Nine Months Ended
                                                       September 30,               September 30,
                                                     1999        1998            1999        1998
                                                  ----------  ----------      ----------  ----------
<S>                                               <C>         <C>             <C>         <C>
Net Income......................................     $ 5,893     $ 2,308         $14,245     $ 5,668
                                                     =======     =======         =======     =======
Basic - Weighted average ADSs and shares
outstanding.....................................      18,007      16,975          17,727      16,903
                                                     -------     -------         -------     -------
Incremental ordinary shares attributable to
shares issuable under employee stock plans and
warrants........................................       1,712         649           1,578         758
                                                     -------     -------         -------     -------
Diluted - Weighted average ADSs and shares
outstanding.....................................      19,719      17,624          19,305      17,661
                                                     =======     =======         =======     =======
Basic net income per ADS and per share..........     $  0.33     $  0.14         $  0.80     $  0.34
                                                     =======     =======         =======     =======
Diluted net income per ADS and per share........     $  0.30     $  0.13         $  0.74     $  0.32
                                                     =======     =======         =======     =======
</TABLE>

6.  Comprehensive Income

    We had total comprehensive income of $8,676,000 and $11,347,000 for the
    three and nine month periods ended September 30, 1999, respectively, and
    total comprehensive income of $5,560,000 and $8,078,000 for the three and
    nine month periods ended September 30, 1998, respectively. The difference
    between total comprehensive income and net income is caused by the change in
    the cumulative translation adjustment account during the three and nine
    month periods ended September 30, 1999 and 1998, respectively.

7.  Acquisitions and Related Notes Payable

    During April 1999 we acquired all the outstanding shares in Prophecy Holding
    B.V., the sole shareholder of Prophecy Automatisering B.V. ("Prophecy"), a
    Dutch consulting firm predominately focused on decision support solutions as
    they relate to packaged applications. The aggregate purchase price,
    including direct acquisition costs, was $3,075,000 in cash plus notes
    payable totaling $3,000,000. The notes are payable in two installments, with
    $2,000,000 payable in April 2000 and the remaining $1,000,000 payable in
    April 2001, subject to certain contingencies relating to continuing
    employment of the principals of Prophecy. $5,278,000 of the purchase price
    has been allocated to goodwill and is being amortized over a five year
    period that began in April 1999. We have accounted for the

                                      -7-
<PAGE>

    acquisition of Prophecy using the purchase method, and have included its
    operating results in our consolidated operating results from the date of
    acquisition.

    During March 1999, we exercised our option to acquire the remaining 20% of
    the outstanding shares of our Italian distributor in exchange for $1,024,000
    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 purchased 9.5% of the outstanding shares of our
    Norwegian distributor, Component Software Nordic A.S., in exchange for
    $864,000 in cash. This investment has been accounted for under the cost
    method of accounting.

8.  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 September 30, 1999, the cost of these modifications is
    nominal and has not significantly affected our operating results.

9.  Stock Repurchase Program

    In October 1998, the Board of Directors approved the implementation of a
    share repurchase program whereby the Company may repurchase up to 1,000,000
    shares of its ordinary shares or ADSs.

    In May 1999, we repurchased on the Nasdaq National Market a total of 191,500
    of our shares for an aggregate cost of $4.6 million. In compliance with
    French law, the shares will be used for distribution under our employee
    stock option and stock purchase plans.

10. Litigation Settlement

    During September 1999, we settled our patent litigation with Brio Technology
    ("Brio") involving our United States patent number 5,555,703 entitled
    "Relational Database Access System Using Semantically Dynamic Objects".
    Under the confidential agreement Brio acknowledges the validity of our
    patent and Brio will pay an undisclosed sum of money to us for rights to use
    the patent. We will recognize the gains under the settlement under the cost
    recovery method of accounting. In addition, Brio will dismiss its pending
    lawsuit against us alleging infringement of Brio's US patent number
    5,915,257.

11. Subsequent Events

    In October 1999, we acquired all the outstanding shares of Next Action
    Technology, Ltd. ("NAT"), a UK-based developer of set-based analysis
    technology for customer selection and segmentation applications, in exchange
    for approximately $8.0 million in cash and notes

                                      -8-
<PAGE>

    payable. The total goodwill and intangible assets of $8.0 million will be
    amortized over the estimated useful life ranging to five years beginning in
    the fourth quarter of 1999. The acquisition will be accounted for using the
    purchase method of accounting.

    In November 1999, we completed a public offering of 1,035,000 of our
    ordinary shares in France and other European countries with net proceeds to
    us of approximately 68.7 million Euros, or approximately $72.0 million. A
    registration statement under the Securities Act of 1933, as amended, was
    filed with the U.S. Securities and Exchange Commission and a prospectus
    under French law was filed with the Commissions des Operations de Bourse in
    connection with the offering. As a result of the offering, our ordinary
    shares became listed on the Premier Marche of the ParisBourse(SBF).

                                      -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 a broad family of business
intelligence software tools.  We introduced our core software, BusinessObjects,
in 1990.  BusinessObjects operates using a client/server architecture, runs on
Windows 95 and Windows NT operating systems, and is interoperable with most
major databases.  We introduced our platform for internet installations,
WebIntelligence, in 1997.  WebIntelligence provides some of the same
functionality as BusinessObjects, but operates using an internet-based
architecture, runs in Windows NT and is accessible through most major Internet
browsers and most desktop platforms.

We derive our revenues from license fees and from charges for services,
consisting of post-sale customer support, consulting and training services. We
generally recognize software license fees upon delivery of the software product
to the end user. We recognize revenues from our customer support services on a
straight-line basis over the period during which we provide the support
services. We recognize consulting and training service revenues as the services
are provided. In software arrangements that include rights to multiple software
products, post-contract customer support, and/or other services, we allocate the
total arrangement fee among each deliverable based on the relative fair value of
each of the deliverables determined based on vendor-specific objective evidence.

Our revenues have increased over each of the periods presented, reflecting
increased sales of licenses of our business intelligence tools and related
services. We believe that with the continuing proliferation of the Internet and
the increasing acceptance of performing business functions over the Internet,
revenues from our WebIntelligence version of our product should represent an
increasing portion of our licensing revenues.

Our gross margins for our license revenues are significantly higher than our
gross margins generated from the sale of our services. The cost of license fees
consists primarily of costs incurred for materials, packaging, freight and
royalties, have fluctuated from 3.3% to 3.0% of the related revenues in the
three and nine month periods ended September 30, 1999 and 1998, respectively.
The cost of services, consisting of the cost of providing maintenance,
consulting and training, most of which are personnel costs, have fluctuated from
40.0% to 41.8% of the related revenues in the three and nine month periods ended
September 30, 1999 and 1998 as a result of service mix changes.

Our operating expenses have increased each year due to the growth of our
business, although these expenses have generally fluctuated as a percent of
revenues from year to year. The dollar

                                      -10-
<PAGE>

increases in operating expenses are primarily due to an increase in personnel in
our sales and marketing, product development and general and administrative
functions.

As with many software companies, we experience seasonality in our business, with
revenues generally higher in the fourth quarter of each year and lower in the
first quarter of the following year. We believe that this trend is primarily the
result of a tendency of customers to delay software purchases until the fourth
quarter due to their annual budget.  In addition, our third quarter is a
relatively slow quarter due to the lower economic activity throughout Europe
during the summer months.

In view of our significant growth in recent years, we believe that period-to-
period comparisons of our financial results are not necessarily meaningful and
you should not rely upon them as an indication of future performance.

                                      -11-
<PAGE>

Results of Operations
The following table sets forth selected items from our consolidated statements
of income expressed as a percentage of total revenues for the periods indicated:

<TABLE>
<CAPTION>
                                                       Three Months Ended              Nine Months Ended
                                                         September 30,                   September 30,
                                                    ----------------------          ----------------------
                                                      1999          1998              1999          1998
                                                    --------      --------          --------      --------
<S>                                              <C>             <C>             <C>             <C>
Revenues:
 License fees..................................       62.4%         63.6%              62.6%        64.8%
 Services......................................       37.6          36.4               37.4         35.2
                                                     -----         -----              -----        -----
   Total revenues..............................      100.0%        100.0%             100.0%       100.0%
                                                     =====         =====              =====        =====
Cost of revenues:
 License fees..................................        2.1           1.9                1.9          2.0
 Services......................................       15.0          15.2               15.7         14.4
                                                     -----         -----              -----        -----
   Total cost of revenues......................       17.1          17.1               17.6         16.4
                                                     -----         -----              -----        -----
Gross margin...................................       82.9          82.9               82.4         83.6
Operating expenses:
 Sales and marketing...........................       48.0          53.8               49.2         55.3
 Research and development......................       10.9          12.0               11.3         11.9
 General and administrative....................        8.2           8.9                8.5          9.1
                                                     -----         -----              -----        -----
   Total operating expenses....................       67.1          74.7               69.0         76.3
                                                     -----         -----              -----        -----
Income from operations.........................       15.8           8.2               13.4          7.3
Interest and other income, net.................        0.9           1.5                1.0          1.2
                                                     -----         -----              -----        -----
Income before provision for income taxes and
 minority interest.............................       16.7           9.7               14.4          8.5
Provision for income taxes.....................       (6.9)         (4.0)              (5.9)        (3.5)
Minority interest..............................        0.0          (0.1)               0.0         (0.1)
                                                     -----         -----              -----        -----
Net income.....................................        9.8%          5.6%               8.5%         4.9%
                                                     =====         =====              =====        =====

Gross margin (as a percentage of related
 revenues):
 License fees..................................       96.7%         97.0%              96.9%        96.8%
 Services......................................       60.0%         58.4%              58.2%        59.1%
</TABLE>


The following table sets forth the percentage of our total revenues that is
attributable to each of our geographic territories:

<TABLE>
<CAPTION>
                                Three Months Ended             Nine Months Ended
                                  September 30,                  September 30,
                                           Percent of Total Revenue
                              -----------------------------------------------------
                                      1999        1998         1999          1998
                                      ----        ----         ----          ----
<S>                           <C>                 <C>          <C>           <C>
Europe.......................         59.4%       61.9%        62.7%         63.4%
North America................         32.4%       30.2%        30.1%         28.3%
Rest of World................          8.2%        7.9%         7.2%          8.3%
                                      -----       -----        -----         -----
Total........................          100%        100%         100%          100%
                                      =====       =====        =====         =====
</TABLE>

Note: Amounts in prior periods have been restated to reflect the change in
management analysis of geographic territories.

                                      -12-
<PAGE>

Three and Nine Months Ended September 30, 1999

     Revenues


Total revenues increased to $59.8 million for the three months ended September
30, 1999, up from $41.3 million in the comparable prior year period,
representing a period-over-period increase of $18.5 million or 44.9%.  Total
revenues increased to $166.8 million for the nine months ended September 30,
1999, up from $115.4 million in the comparable prior year period, representing a
period over period increase of $51.4 million, or 44.6%.  In each period
presented, a majority of our total revenues was derived from license fees for
BusinessObjects, WebIntelligence and related platforms.  Our service revenues
were comprised of revenues from maintenance, consulting services and training
activities related to licenses of BusinessObjects, WebIntelligence and related
platforms.

     .  License Fees. Revenues from license fees were $37.3 million for the
three months ended September 30, 1999 and $26.2 million for the comparable prior
year period, representing a period-over-period increase of $11.1 million or
42.2%. Revenues from license fees were $104.4 million for the nine months ended
September 30, 1999 and $74.8 million for the comparable prior year period,
representing a period-over-period increase of $29.6 million or 39.5%. The
increase in license fees in all periods was primarily due to increased sales
efforts for our software products, of which a majority of license fees consisted
of licenses of BusinessObjects. Sales of the WebIntelligence version of our
product have increased due to an increase in the use of the Internet and market
demand for Internet products.

We anticipate that license fees, which represented approximately 62.4% and 63.6%
of our total revenues for the three month periods ended September 30, 1999 and
1998, respectively, and approximately 62.6% and 64.8% of our total revenues for
the nine month periods ended September 30, 1999 and 1998, respectively, will
continue to represent a majority of our revenue for the foreseeable future.  The
decrease in license fees as a percent of total revenues for the three and nine
month periods ended September 30, 1999 as compared to the prior year period was
primarily due to increased customer demand for consulting and training services
and an increase in our installed customer 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 fees.  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 our license fees achieved in the past.

     . Services.  Revenues from services consist of maintenance, consulting and
training revenues. Revenues from services totaled $22.5 million for the three
months ended September 30, 1999, and $15.0 million for the comparable prior year
period, representing a period-over-period increase of approximately $7.4
million, or 49.5%. Revenues from services totaled $62.4 million for the nine
months ended September 30, 1999, and $40.6 million for the comparable prior year
period, representing a period-over-period increase of approximately $21.9
million, or 54.0%. The increase in revenues from services was due primarily to
increases in consulting and maintenance revenues. Consulting revenues increased
because of our emphasis in the 1999 period on enhancing consulting services to
drive sales of licenses of our software products. We have been enhancing our
consulting services because we believe consulting

                                      -13-
<PAGE>

services are important to our marketing efforts for our software products.
Maintenance revenues increased due to the growth 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 customer base and,
consequently, the growth rate of our revenues from services may not be as high
as growth rates achieved in the past. We anticipate increasing our efforts to
sell consulting, training and maintenance services, and expect our revenues from
services will continue to represent a significant portion of our total revenues.

     Cost of Revenues


     .  Cost of License Fees.  Cost of license fees consists primarily of costs
incurred for materials, packaging, freight and royalties.  Cost of license fees
totaled $1.2 million for the three months ended September 30, 1999 compared to
$781,000 in the prior year period, and $3.2 million for the nine months ended
September 30, 1999 compared to $2.4 million in the prior year period.  Cost of
license fees have fluctuated from 3.3% to 3.0% as a percent of the related
revenues in the three and nine month periods ended September 30, 1999 and 1998.
We expect our cost of license fees as a percentage of license fees to remain
substantially consistent with these levels.

     .  Cost of Services.  Cost of services consists primarily of personnel
costs associated with providing maintenance services, consulting and training.
Cost of services totaled $9.0 million for the three months ended September 30,
1999 compared to $6.3 million in the comparable prior year period, and totaled
$26.1 million for the nine months ended September 30, 1999 compared to $16.6
million in the prior year period. Cost of services as a percent of service
revenues decreased to 40.0% for the three months ended September 30, 1999 from
41.6% for the comparable prior year period, and increased to 41.8% as a percent
of service revenues for the nine months ended September 30, 1999 from 40.9% for
the comparable prior year period. The decrease in cost of services as a percent
of the related revenues for the three month periods ended September 30, 1999 was
due to increased productivity in providing maintenance and consulting services
as compared to the three month period ended September 30, 1998. The increase in
cost of services as a percent of the related revenues for the nine month periods
ended September 30, 1999 was primarily due to the change in mix of services
provided, with consulting services, which have a higher cost relative to
revenues than maintenance and training, 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.

     Operating Expenses


     .  Sales and Marketing.  Sales and marketing expenses consist primarily of
salaries, related benefits and sales commissions as well as amounts paid for
product promotion activities. Sales and marketing expenses totaled $28.7 million
for the three months ended September 30, 1999 compared to $22.2 million in the
comparable prior year period, and totaled $82.1 million for the nine months
ended September 30, 1999 compared to $63.8 million in the comparable prior year
period. Sales and marketing expenses decreased as a percent of total revenues to
48.0% for the three months ended September 30, 1999 from 53.8% for the
comparable prior year period and decreased to 49.2% as a percent of total
revenues for the nine months ended September 30, 1999 from 55.3% for the
comparable prior year period. The decrease in sales and marketing expenses as a
percent of total revenues for the three and nine months ended September

                                      -14-
<PAGE>

30, 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 $6.5 million for the three months
ended September 30, 1999 compared to $5.0 million in the prior year period, and
totaled $18.9 million for the nine months ended September 30, 1999 compared to
$13.8 million in the comparable prior year period.  Research and development
expenses decreased as a percent of total revenues to approximately 10.9% for the
three months ended September 30, 1999 from 12.0% for the comparable prior year
period, and decreased to 11.3% as a percent of total revenues for the nine
months ended September 30, 1999 from 11.9% for the comparable prior year period.
The increase in absolute dollars in research and development expenses to the
three and nine months ended September 30, 1999 from the comparable prior year
period is due to increased staffing and associated support required to expand
and enhance our product line. Research and development expenses are expected to
continue to increase in absolute dollars but may vary as a percent of revenues
in the future.

We capitalize eligible software development costs upon achievement of
technological feasibility subject to net realizable value considerations.  Based
on our development process, technological feasibility is generally established
upon completion of a working model.  Research and development costs prior to the
establishment of technological feasibility are expensed as incurred.  Because
the period between achievement of technological feasibility and the general
release of our products has been of relatively short duration, costs qualifying
for capitalization were insignificant during the three and nine months ended
September 30, 1999, and there were no capitalized software development costs at
September 30, 1999.

     .  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 $4.9 million for the three months
ended September 30, 1999 compared to $3.7 million in the prior year period, and
totaled $14.1 million for the nine months ended September 30, 1999 compared to
$10.5 million in the prior year period.  General and administrative expenses
decreased as a percent of total revenues to 8.2% for the three months ended
September 30, 1999 from 8.9% for the comparable prior year period, and decreased
to 8.5% as a percent of total revenues for the nine months ended September 30,
1999 from 9.1% for the comparable prior year period.  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 and to operational efficiencies. 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 $808,000 and $312,000 for the three months ended September 30, 1999
and 1998, respectively, and totaled $2,060,000 and $930,000 for the nine months
ended September 30, 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.

                                      -15-
<PAGE>

Interest and Other Income, Net

Interest and other income, net totaled $533,000 for the three months ended
September 30, 1999 compared to $618,000 in the prior year period, and totaled
$1,749,000 for the nine months ended September 30, 1999 compared to $1,403,000
in the prior year period. Net interest income increased to $614,000 and
$1,806,000 for the three and nine month periods ended September 30, 1999 from
$574,000 and $1,330,000 for the three and nine month periods ended September 30,
1998. Increases in net interest income were primarily due to the increase in
cash and cash equivalents and the investment of a greater percentage of our cash
balances in 1999 as compared to 1998, offset by reduced interest rate yields.

Net foreign currency exchange losses totaled $81,000 and $57,000 for the three
and nine month periods ended September 30, 1999 as compared to gains of $44,000
and $73,000 for the comparable prior year periods.

Income Taxes

The provision for income taxes totaled $4.1 million for the three months ended
September 30, 1999 compared to $1.6 million in the comparable prior year period,
and totaled $9.9 million for the nine months ended September 30, 1999 compared
to $4.0 million in the prior year period. The effective income tax rate is 41%
for all periods presented. The increase in income taxes in dollars for all
periods presented was due to the increased pretax income.

Liquidity and Capital Resources

As of September 30, 1999, we had cash, cash equivalents and short-term
investments of $93.9 million, an increase of $22.1 million from December 31,
1998. We generated cash from operations of $31.2 million for the nine months
ended September 30, 1999, as compared to $26.0 million for the comparable period
in 1998. Net cash generated in 1999 resulted primarily from net income and non-
cash charges for depreciation and amortization, and deferred revenue, partially
offset by increases in other assets.

Our investing activities for the nine months ended September 30, 1999 consisted
primarily of the the acquisition of 100% of the outstanding shares of Prophecy
for $3.1 million in cash plus notes payable totaling $3.0 million, the purchase
of the remaining 20% of the outstanding shares of our Italian distributor for
$1.0 million, the purchase of a 9.5% interest in our Norwegian distributor for
$864,000 and expenditures for fixed assets of $5.7 million. We have no
significant capital commitments at September 30, 1999.

Our financing activities for the nine months ended September 30, 1999 resulted
primarily from the issuance of common shares under employee stock options and
stock purchase plans totaling $8.4 million, offset by the repurchase of treasury
shares totaling $4.6 million. In compliance with French law applicable to us
prior to this offering, the shares will be used for distribution under our
employee stock option and stock purchase plans.

In October 1998, the Board of Directors approved the implementation of a share
repurchase program whereby we may repurchase up to 1,000,000 shares of our
ordinary shares or ADSs.

                                      -16-
<PAGE>

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.

Year 2000 Compliance
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 initiatives underway to evaluate the potential
impact of Year 2000 issues relating to our products, our internal information
and management systems and the third parties with whom we do business.

Products
We have developed our current core software tools, BusinessObjects and its
platform for internet-based installations, WebIntelligence, to comply with the
Year 2000 Conformity Requirements developed by the British Standards Institute.
We have conducted testing on our BusinessObjects and WebIntelligence software.
Although we believe our software to be compliant under most customer
environments, we have identified a limitation -- for the specific customer
operation of importing and 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. This limitation is only present in version 4.1.6 and earlier versions of
our software BusinessObjects, and version 2.0.1 and earlier versions of our
platform WebIntelligence. We believe this limitation is applicable to a limited
number of customer environments. We have developed a workaround for this
limitation that can easily be implemented by the customer.

Because our product and platforms are used in conjunction with underlying
operating systems, and database, middleware and other software programs, they
are necessarily subject to the limitations, including Year 2000 related
limitations of third party software. In order to minimize potential Year 2000
compliance issues, we recommend to our customers that they use our current
software 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 software as used
with the respective 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 software, we cannot assure you that the implementation of our
software will not be affected in the future by Year 2000 issues related to
modification or revisions in the respective 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.

Internal Systems
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 key information technology systems and are in

                                      -17-
<PAGE>

the process of evaluating our non-information technology systems. The assessment
phase of our information technology systems indicated that some of our critical
information technology systems may not be Year 2000 compliant. We have
implemented corrections to and are developing contingency plans for our critical
information technology systems, and have retained external consultants to assist
in this process.

Third Parties
We conducted an assessment of our key suppliers and vendors that provide us with
products, services, and systems, as well as others with whom we transact
business on a local and worldwide basis. We have also evaluated the ability of
key indirect sales channel partners such as system integrators, value-added
resellers and consultants, to supply Year 2000 compliant products and services
and to maintain continuous operations. We have found that some of these third
parties offer products or services, or operate business systems, that may expose
us to Year 2000 problems. We are working with these third parties to determine
what approaches, if any, they are proposing to address their Year 2000 issues,
and we are developing contingency plans as appropriate.

Remediation
We are developing contingency plans to remediate, to the extent possible, any
Year 2000 deficiencies, and we have retained external consultants to assist us
in this process. 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 prior to the end of 1999. We
currently anticipate incurring approximately $500,000 in costs 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, including litigation, may seriously affect
our business, financial condition and operating results.

Risk 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:

We target our products to one market and if sales of our products in this market
decline, our operating results will be seriously harmed.
We generate substantially all of our revenues from licensing and service fees
generated from the sale of our products in the business intelligence software
market, and we expect to continue to do so in the future. Accordingly, our
future revenues and profits will depend significantly on our ability to further
penetrate the business intelligence software market. If we are not successful in
selling our products in our targeted market due to competitive pressures,
technological advances by others or otherwise, our operating results would
suffer.

Our quarterly operating results are subject to fluctuations, which may affect
our stock price.
Historically, our quarterly operating results have varied substantially from
quarter to quarter, and we anticipate this pattern to continue. This is
principally because our license fees are variable from quarter to quarter, while
a high percentage of our operating expenses are relatively fixed, and are based
on anticipated levels of revenues. In addition, we expect our expenses to
increase

                                      -18-
<PAGE>

as our business grows. If revenues earned in any particular quarter fall short
of anticipated revenue levels, our quarterly operating results would be
significantly harmed.

While the variability of our license fees is partially due to factors that would
influence the quarterly results of any company, our business is particularly
susceptible to quarterly variations because:

     .  We typically receive a substantial amount of our revenues in the last
        weeks of the last month of a quarter, rather then evenly throughout the
        quarter.

     .  Our strongest quarter each year is typically the fourth calendar
        quarter, as our customers often wait for the end of their annual budget
        cycle before deciding whether to purchase new software. Consequently,
        our revenues are generally lower in the first quarter. In addition, our
        third quarter is a relatively slow quarter due to lower economic
        activity throughout Europe during the summer months.

     .  Customers may delay purchasing decisions in anticipation of our new
        products or product enhancements or platforms or announced pricing
        changes by us or our competitors.

     .  We partly depend on large orders which may take several months to
        finalize. A delay in finalizing a large order may result in the
        realization of license fees being postponed from one quarter to the
        next.

     .  Our revenues are also sensitive to the timing of our competitors' offers
        of new products that successfully compete with ours on the basis of
        functionality, price or otherwise.


As a result of the above, 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.

Our stock price is susceptible to our operating results and to stock market
fluctuations.
In future quarters, our operating results may be below the expectations of
public market analysts and investors, and the price of our shares may fall. In
addition, the stock markets in both France and the United States have
experienced significant price and volume fluctuations, which have particularly
affected the market prices of many software companies and which have often been
unrelated to the operating performance of these companies. These market
fluctuations could affect our stock price.

Our software may have defects and errors, which may lead to a loss of revenue or
product liability claims.
BusinessObjects and its platform for internet-based installations,
WebIntelligence, are internally complex and occasionally 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 version then took significantly
longer 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 1996 were severely affected.

Despite extensive testing, we may not detect errors in our new products,
platforms or product enhancements, including BusinessObjects 5.0 and
WebIntelligence 2.5, which were recently launched in the United States, until
after we have commenced commercial shipments. If defects and errors are
discovered in our products, platforms or product enhancements after commercial
release:

                                      -19-
<PAGE>

     . potential customers may delay or forego purchases;

     . our reputation in the marketplace may be damaged;

     . we may incur 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 and lose market share, any of which could severely harm our
financial condition and operating results.

The protection of our intellectual property is crucial to our business, and if
third parties use our intellectual property without our consent, it could damage
our business.
Our success depends in part on our ability to protect our proprietary rights in
our intellectual property. Despite the precautions we take to protect these
rights, unauthorized third parties could copy aspects of our current or future
products or 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 or France.

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" as
some jurisdictions consider the name "Business Objects" to be generic or
descriptive in nature. As a result, we may be unable to effectively police
unauthorized use of our name or otherwise prevent the name of our software
products from becoming a part of the public domain.

To protect our proprietary rights, we may become involved in litigation, which
could be costly and negatively impact our operating results. Litigating claims
related to our proprietary rights can be very expensive in terms of management
time and resources, which could cause our financial condition and operating
results to suffer.

Third parties could assert that our technology infringes 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 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 assure you that third parties will never make these types of
claims. We believe that software products offered in our target markets will
increasingly be subject to infringement 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 could be forced to cease selling our products;

     . we would be forced to commit management resources to resolve the claim;

     . we may incur substantial litigation costs in defense of the claim;

     . we may be required to indemnify our customers;

     . we may have to expend significant development resources to redesign our
       products as a result of these claims; and

     . 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 contain terms that are unfavorable to us.

                                      -20-
<PAGE>

The loss of our rights to use software licensed to us by third parties could
harm our business.
In order to provide a complete product suite, we occasionally license software
from third parties, and sub-license this software to our customers. In addition,
to a limited extent, we license software programs from third parties and
incorporate these programs into our own software products. By utilizing third
party software in our business we incur 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 may not be able to obtain and
maintain licensing rights to needed technology on commercially reasonable terms,
which would harm our business and operating results.

Failure of our products or computer systems, or those of our customers,
suppliers or vendors, to recognize the Year 2000 could disrupt the operation of
our business.
We have developed our current core software tool, BusinessObjects and, its
platform for internet-based installations, WebIntelligence, to comply with the
Year 2000 Conformity Requirements developed by the British Standards Institute.
However, because we are dependent upon our customers' use of third party
software in connection with their use of our software, the implementation of our
products and platforms may be affected by Year 2000 issues related to
modifications or revisions in the respective third party software. We may face
claims based on Year 2000 issues arising from the integration and operation of
our products within an enterprise system. For example, we have identified a
limitation for a specific customer operation -- the importing and exporting of
data in certain file formats -- which is due to the regional setting of the
user's environment and can be changed by the user. This limitation is only
present in version 4.1.6 and earlier versions of our software BusinessObjects,
and version 2.0.1 and earlier versions of our platform WebIntelligence. Although
we believe this limitation is applicable to a limited number of customer
operations, we may in the future discover additional customer operations that
are affected by this limitation or other limitations, which may require us to
use significant resources to correct.

Furthermore, some of our customers continue to operate older versions of our
products that may experience problems associated with 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.

In addition, some of our suppliers and vendors may experience problems
associated with Year 2000 issues. If any of these third parties cannot provide
us on a timely basis 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.

Some of our key indirect sales channel partners, such as systems integrators,
value-added resellers and consultants, may also experience Year 2000 problems
and may be unable to supply their customers with Year 2000 compliant products
and services, or provide continuous operations. If any of these key indirect
sales channel partners cannot provide their customers with Year 2000 compliant
products and services, or if their operations suffer interruption, our business
may be disrupted and our operations may suffer.

                                      -21-
<PAGE>

We may also experience reduced sales of our products and services as existing
and potential customers reduce their systems budgets due to increased
expenditures on their own Year 2000 compliance efforts. In addition, during the
remainder of 1999, our existing or potential customers may choose to defer new
software or services purchases until after January 1, 2000 to avoid the
possibility of introducing any new Year 2000 issues into their systems.

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. The loss of
the services of other key personnel or our inability to attract and retain
highly skilled technical, management, sales and marketing personnel could also
harm our business. 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 have multinational operations that are subject to risks inherent in
international operations, including currency exchange rate fluctuations.
Because we conduct our business throughout the world, we are subject to a number
of risks inherent in international operations, including compliance with various
foreign laws, regulations and tax structures, and longer accounts receivable
payment cycles outside of the United States. In particular, we conduct a
significant portion of our business in currencies other than the U.S. dollar,
the currency in which we report our financial statements. We expect to generate
a significant portion of our revenues and expenses in the Euro in the future. As
a result, our operating results expressed in U.S. dollars have been in the past,
and may be in the future, adversely impacted by currency exchange rate
fluctuations on the U.S. dollar value of foreign currency-denominated revenues
and expenses. Although we expect this pattern to continue, the acceptance of the
Euro and its use as the primary European currency is expected to reduce these
fluctuations with respect to our European activities. However, we cannot assure
you that these fluctuations will not continue and will not be significant. As of
September 30, 1999, we were not engaged in a foreign currency hedging program to
cover our currency transaction exposure.

Risks related to our industry

Our markets are highly competitive and competition could harm our ability to
sell products and services and reduce our market share.
Competition could seriously harm our ability to sell software and services at
prices and terms favorable to us. If we cannot compete effectively, we may lose
market share. 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

                                      -22-
<PAGE>

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. Some of these competitors have already,
or may in the future, provide their products or components of their products to
customers at no cost to the customer to gain market share. Because our products
are specifically designed and targeted to the business intelligence software
market, we may lose sales to competitors offering a broader range of products.
Furthermore, other companies larger than us could enter the market through
internal expansion or by strategically aligning themselves with one of our
current competitors and provide products that cost less than our products. We
believe that the business intelligence software tools market will continue to
grow and develop, and that more and more large companies may find it a desirable
market in which to compete. To the extent that we 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 business intelligence software tools is characterized by:

     . rapid technological advances;

     . changes in customer requirements; and

     . frequent new product introductions and enhancements.

To be successful, we must develop new products, platforms and enhancements to
our existing products that keep pace with technological developments, changing
industry standards and the increasingly sophisticated requirements of our
customers. If we are unable to respond quickly and successfully to these
developments and changes, we may lose our competitive position. In addition,
even if we are able to develop new products, platforms or enhancements to our
existing products, these products, platforms and product enhancements may not be
accepted in the marketplace. 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, platforms and product
enhancements. Any of these factors could severely harm our business, financial
condition and operating results.

                                      -23-
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors including those set forth in the Risk Factors section.

As of September 30, 1999, all of our investments were classified as cash
equivalents with maturities at the date of purchase of less than three months.
The principal portion of the investments are not subject to interest rate risk;
however, declines in interest rates over time will reduce our interest income.

We do not have any investments in equity or debt securities traded in the public
markets. Therefore, we do not currently have any direct equity price risk.

We 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 our 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 shareholders' equity.
Revenues and expenses generated from these subsidiaries are translated at
average exchange rates during the quarter 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, U.S. Dollars,
British pounds sterling, Japanese yen and Italian lira and we expect to generate
a significant portion of our revenues and expenses in the Euro in the future. As
a result, our operating results have been in the past, and may be in the future,
adversely impacted by currency exchange rate fluctuations on the U.S. dollar
value of foreign currency-denominated revenues and expenses. Although we expect
this pattern to continue, the acceptance of the Euro and its use as the primary
European currency is expected to alleviate these fluctuations with respect to
most of our European activities. However, we cannot assure you that these
fluctuations will not continue and will not be significant. We cannot predict
the effect of exchange rate fluctuations upon our future operating results. As
of September 30, 1999, we were not engaged in a foreign currency hedging program
to cover our currency transaction exposure.

                                      -24-
<PAGE>

                                   PART II.
                               OTHER INFORMATION

     Item 1. Legal Proceedings
       During September 1999 we settled the patent litigation with Brio
       Technology ("Brio") involving our United States patent number 5,555,703
       entitled "Relational Database Access System Using Semantically Dynamic
       Objects".  Under the confidential agreement Brio acknowledges the
       validity of our patent and Brio will pay an undisclosed sum of money to
       us for rights to use the patent.  In addition, Brio will dismiss its
       pending lawsuit against us alleging infringement of Brio's US patent
       number 5,915,257.

     Item 6. Exhibits and Current Reports on Form 8-K
        a)   Exhibits
             27.1 Financial Data Schedule
        b)   Reports on Form 8-K
             None.

                                      -25-
<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 11, 1999             By: /s/ Bernard Liautaud
                                       -------------------------------
                                            Bernard Liautaud
                                            Chief Executive Officer


Date: November 11, 1999             By: /s/ Clifton T. Weatherford
                                       -------------------------------
                                            Clifton T. Weatherford
                                            Chief Financial Officer

                                      -26-