<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2001
                                                ---------------

                                       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: 0-27358

                                DOCUMENTUM, INC.
             (exact name of registrant as specified in its charter)

            DELAWARE                                  95-4261421
(STATE OR OTHER JURISDICTION OF            (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

6801 KOLL CENTER PARKWAY, PLEASANTON, CALIFORNIA          94566-7047
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)              (ZIP CODE)

      (Registrant's telephone number, including area code): (925) 600-6800

        Securities registered pursuant to Section 12(b) of the Act: None

                         Securities registered pursuant
                          to Section 12(g) of the Act:
                             Nasdaq National Market
                         Common Stock, $0.001 par value
                                (TITLE OF CLASS)

       Indicate by check mark whether the registrant 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 the registrant's Common Stock, par
value $0.001 per share, was 37,630,913 on March 31, 2001.


<PAGE>   2

                                    FORM 10-Q

                                      INDEX
<TABLE>

<S>               <C>                                                                                    <C>
PART I            FINANCIAL INFORMATION
    Item 1.       Condensed Consolidated Financial Statements

                  Condensed Consolidated Balance Sheets as of March 31, 2001 and December
                  31, 2000............................................................................  Page 3

                  Condensed Consolidated Statements of Operations for the three months
                  ended March 31, 2001 and 2000.......................................................  Page 4

                  Condensed Consolidated Statements of Cash Flow for the three months ended
                  March 31, 2001 and 2000.............................................................  Page 5

                  Notes to Condensed Consolidated Financial Statements................................  Page 6

    Item 2.       Management's Discussion and Analysis of Financial Condition and Results of
                  Operations..........................................................................  Page 9

     Item 3.      Quantitative and Qualitative Disclosures About Market Risk..........................  Page 20

PART II           OTHER INFORMATION

    Item 6.       Exhibits and Reports on Form 8-K....................................................  Page 20

Signature.............................................................................................  Page 20

</TABLE>



                                       2
<PAGE>   3

PART I.  FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                DOCUMENTUM, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT PER SHARE DATA; UNAUDITED)


<TABLE>
<CAPTION>
                                                                        MARCH 31,     DECEMBER 31,
                                                                       --------------------------
                                                                          2001           2000
                                                                       ---------       ---------
<S>                                                                    <C>             <C>
ASSETS
Current assets:
     Cash and cash equivalents                                         $  46,544       $  43,918
     Short-term investments                                               53,042          59,217
     Accounts receivable, net                                             47,527          57,156
     Other current assets                                                 14,682          13,920
                                                                       ---------       ---------
         Total current assets                                            161,795         174,211

Property and equipment, net                                               34,705          35,667
Other assets                                                              11,646           8,582
                                                                       ---------       ---------
                                                                       $ 208,146       $ 218,460
                                                                       =========       =========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                  $   3,516       $   5,751
     Accrued liabilities                                                  34,665          42,281
     Deferred revenue                                                     29,176          21,073
     Current portion of capital lease obligation                               -              65
                                                                       ---------       ---------
         Total current liabilities                                        67,357          69,170
                                                                       ---------       ---------

Stockholders' equity:
     Preferred stock, $0.001 par value; 10,000 shares authorized;
         none issued and outstanding                                           -               -
     Common stock, $0.001 par value; 200,000 shares authorized;
         37,631 and 36,847 shares issued and outstanding                      38              37
     Additional paid-in capital                                          175,607         168,733
     Accumulated other comprehensive loss                                 (1,329)           (702)
     Accumulated deficit                                                 (33,527)        (18,778)
                                                                       ---------       ---------
         Total stockholders' equity                                      140,789         149,290
                                                                       ---------       ---------
                                                                       $ 208,146       $ 218,460
                                                                       =========       =========

</TABLE>



     See accompanying notes to condensed consolidated financial statements.



                                       3

<PAGE>   4





                                DOCUMENTUM, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT PER SHARE DATA; UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                                     MARCH, 31
                                                              ------------------------
                                                                2001           2000
                                                              --------       --------
<S>                                                           <C>            <C>
Revenue:
   License                                                    $ 20,841       $ 24,958
   Service                                                      24,409         17,214
                                                              --------       --------
    Total revenue                                               45,250         42,172
                                                              --------       --------

Cost of revenue:
   License                                                       1,680          1,907
   Service                                                      12,940          8,457
                                                              --------       --------
    Total cost of revenue                                       14,620         10,364
                                                              --------       --------

Gross profit                                                    30,630         31,808
                                                              --------       --------

Operating expenses:
   Sales and marketing                                          28,651         18,526
   Research and development                                      9,675          7,674
   General and administrative                                    6,903          5,895
                                                              --------       --------
    Total operating expenses                                    45,229         32,095
                                                              --------       --------

Loss from operations                                           (14,599)          (287)

Interest and other income, net                                   1,191            782
                                                              --------       --------
Income (loss) before income tax provision                      (13,408)           495

Provision for income taxes                                       1,341            163
                                                              --------       --------
Net income (loss)                                             $(14,749)      $    332
                                                              ========       ========

Basic earnings (loss) per share                               $  (0.40)      $   0.01
                                                              ========       ========
Diluted earnings (loss) per share                             $  (0.40)      $   0.01
                                                              ========       ========

Shares used to compute basic earnings (loss) per share          37,327         34,446
                                                              ========       ========
Shares used to compute diluted earnings (loss) per share        37,327         38,828
                                                              ========       ========
</TABLE>







     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>   5

                                DOCUMENTUM, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                            (IN THOUSANDS; UNAUDITED)

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                                   MARCH 31,
                                                                            ------------------------
                                                                              2001           2000
                                                                            --------       --------
<S>                                                                         <C>            <C>
Cash flow from operating activities:
    Net income (loss)                                                       $(14,749)      $    332
    Adjustments to reconcile net income (loss) to net cash provided by
      (used in) operating activities:
         Depreciation and amortization                                         3,163          2,579
         Provision for doubtful accounts                                       1,171            308
         Loss on disposal of fixed assets                                          -            310
         Changes in assets and liabilities:
           Accounts receivable                                                 8,458         (1,714)
           Other current assets and other assets                                (784)          (392)
           Accounts payable                                                   (2,235)           281
           Accrued liabilities                                                (7,616)        (4,332)
           Deferred revenue                                                    8,103          5,990

                                                                            --------       --------
              Net cash provided by (used in) operating activities             (4,489)         3,362
                                                                            --------       --------

Cash flow from investing activities:
    Purchases of investments                                                 (15,518)       (17,372)
    Sales of investments                                                      18,651         16,868
    Purchases of property and equipment                                       (2,201)        (3,372)

                                                                            --------       --------
              Net cash provided by (used in) investing activities                932         (3,876)
                                                                            --------       --------

Cash flow from financing activities:
    Issuance of common stock                                                   6,875         12,474
    Repayments on capital lease obligations                                      (65)           (60)

                                                                            --------       --------
              Net cash provided by financing activities                        6,810         12,414
                                                                            --------       --------

Effect of exchange rate changes on cash                                         (627)          (119)
                                                                            --------       --------

Net increase in cash and cash equivalents                                      2,626         11,781
Cash and cash equivalents at beginning of period                              43,918         18,286

                                                                            --------       --------
Cash and cash equivalents at end of period                                  $ 46,544       $ 30,067
                                                                            ========       ========

</TABLE>




     See accompanying notes to condensed consolidated financial statements.




                                       5
<PAGE>   6

                                DOCUMENTUM, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

Basis of presentation

The unaudited condensed consolidated financial statements of Documentum included
herein reflect all adjustments, consisting only of normal recurring adjustments,
which in the opinion of management are necessary to present fairly the Company's
consolidated financial position, results of operations and cash flow for the
periods presented. These financial statements should be read in conjunction with
the Company's audited consolidated financial statements included in the
Company's 2000 Annual Report on Form 10-K. The consolidated results of
operations for the period ended March 31, 2001 are not necessarily indicative of
the results to be expected for any subsequent quarter or for the entire fiscal
year ending December 31, 2001.

New Accounting Standards

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning after
June 15, 1999. In June 1999, the FASB issued SFAS No. 137, which deferred the
effective date to fiscal years beginning after June 15, 2000. The new standard
establishes accounting and reporting requirements for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. Such instruments are to be recognized on the balance sheet
as either an asset or a liability measured at fair value. Changes in fair value
must be recognized currently in earnings or in other comprehensive income if
specific hedge criteria are met. Special accounting for qualifying hedges allows
a derivative instrument's gains and losses to offset related results on the
hedged item in the statement of income, to the extent effective. If a
transaction is designated to receive hedge accounting, the company must
establish at the inception of the hedge the method it will use for assessing the
effectiveness of the hedge and the measurement approach for determining the
ineffective aspect of the hedge. At December 31, 2000, and March 31, 2001, the
company held no derivative instruments that fell under the accounting rules of
SFAS No. 133. Therefore, the adoption of SFAS No. 133 on January 1, 2001 had no
effect on the company's consolidated results of operations or financial
position.

Comprehensive income (loss)

Comprehensive income (loss) is comprised of net income (loss) and other
non-owner changes in stockholders' equity, including foreign currency
translation gains/losses and unrealized gains or losses on available-for-sale
marketable securities. The Company's unrealized gains and losses on
available-for-sale marketable securities have been insignificant for all periods
presented. The Company's total comprehensive income (loss) was as follows (in
thousands):

<TABLE>
<CAPTION>
                                                 Three Months Ended March 31,
                                                 ---------------------------
                                                    2001           2000
                                                  --------       --------
<S>                                               <C>            <C>
Net income (loss)                                 $(14,749)      $    332
Other comprehensive loss:
     Foreign currency translation adjustment          (627)          (119)
                                                  --------       --------
         Comprehensive income (loss)              $(15,376)      $    213
                                                  ========       ========
</TABLE>


 Basic and Diluted Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average number
of shares of common stock. Diluted net income (loss) per share is computed using
the weighted average number of shares of common stock and common equivalent
shares outstanding during the period. Common equivalent shares consist of stock
options (using the treasury stock method). Common equivalent shares are excluded
from the computation if their effect is antidilutive.



                                       6
<PAGE>   7

                                DOCUMENTUM, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


All share and per share amounts have been adjusted retroactively to reflect the
two-for-one stock split, which was effective November 14, 2000. The following is
a reconciliation of the computation for basic and diluted net income (loss) per
share (in thousands, except per share data):

<TABLE>
<CAPTION>
                                          Three Months Ended March 31,
                                          ----------------------------
                                              2001          2000
                                            ---------       -------
<S>                                         <C>             <C>
Net income (loss)                           $ (14,749)      $   332
                                            =========       =======

Shares calculation:
   Weighted average shares outstanding         37,327        34,446
   Stock options                                    -         4,382
                                            ---------       -------
     Total shares used to compute
     diluted earnings per share                37,327        38,828
                                            =========       =======

Income (loss) per basic share               $   (0.40)      $  0.01
                                            =========       =======
Income (loss) per diluted share             $   (0.40)      $  0.01
                                            =========       =======
</TABLE>



Options to purchase 7,239,352 and 92,656 shares of common stock were outstanding
during the three months ended March 31, 2001 and 2000, respectively, but were
excluded from the computation of diluted net income (loss) per share if either
the option's exercise price was greater than the average market price of the
common shares during the period or inclusion of such options would have been
anti-dilutive.

Segment Reporting

The Company's management considers its business activities to be focused on the
license of its products and related services to customers. Since management's
primary form of internal reporting is aligned with the offering of products and
services, the Company believes it operates in these two segments.

Internationally, the Company markets and supports its products and services
primarily through its subsidiaries and various distributors. Service revenue
consists of customer maintenance and consulting and training services. Revenue
is generally attributed to geographic areas based on the country in which the
customer is domiciled. Maintenance revenue, however, is currently recorded in
its entirety in North America. For the period ended March 31, 2001 and 2000, no
one customer accounted for more than 10% of total revenue. Long-lived assets are
attributed to geographic areas based on the country where the assets are
located.




                                       7
<PAGE>   8

                                DOCUMENTUM, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

The following table presents a breakdown of revenue and long-lived assets by
geographic region for the three months ended March 31, 2000 and 2001 (in
thousands):

<TABLE>
<CAPTION>

For the Three Months Ended March 31, 2001      License Revenue    Service Revenue      Total Revenue    Long-Lived Assets
                                               ---------------    ---------------      -------------    -----------------
<S>                                            <C>                <C>                   <C>             <C>
North America                                    $ 9,647            $20,047               $29,694            $30,983
Europe                                             8,982              4,220                13,202              2,865
Asia/Pacific                                       2,018                142                 2,160                857
Other                                                194                  -                   194                  -
                                                 -------            -------               -------            -------

      Total                                      $20,841            $24,409               $45,250            $34,705
                                                 =======            =======               =======            =======

</TABLE>

<TABLE>
<CAPTION>
For the Three Months Ended March 31, 2000   License Revenue    Service Revenue      Total Revenue     Long-Lived Assets
                                            ---------------    ---------------      -------------     ------------------
<S>                                          <C>               <C>                  <C>               <C>
North America                                    $13,835            $14,568              $28,403           $25,150
Europe                                            10,543              2,512               13,055             3,182
Asia/Pacific                                         552                134                  686               181
Other                                                 28                  -                   28                 -
                                                 -------            -------              -------           -------

Total                                            $24,958            $17,214              $42,172           $28,513
                                                 =======            =======              =======           =======
</TABLE>


Subsequent Event

On April 2, 2001 the Company pre-announced that primarily due to the downturn in
the United States economy a significant number of orders which were expected to
close in March 2001 had been cancelled and/or delayed. Consequently, the Company
would not meet the revenue expectations of Wall Street and would report a net
loss for the three-month period just ended on March 31, 2001. As a result of the
impact of the downturn in the United States economy, management developed a plan
to reduce costs and improve operating efficiencies. The Company expects to
record a restructuring charge in the range of $4.0 to $7.0 million. The
restructuring charge will be comprised primarily of severance payments and
benefits related to the involuntary termination of approximately 139 employees
and cancellation of outstanding accepted offers of employment, of which
approximately 84% were based in the United States and the remainder were based
in Europe.




                                       8
<PAGE>   9

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

FORWARD-LOOKING STATEMENTS

The following discussion contains forward-looking statements regarding the
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed herein as well as those discussed under
the caption "Risk Factors". Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and in the Company's other
reports filed with the Securities and Exchange Commission that attempt to advise
interested parties of the risks and factors that may affect the Company's
business.






                                       9
<PAGE>   10

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED
                                                   MARCH 31,
                                              -------------------
                                               2001        2000
                                               ----        ----
<S>                                            <C>         <C>
Revenue:
  License                                        46%         59%
  Service                                        54%         41%
                                               ----        ----
   Total revenue                                100%        100%
                                               ----        ----

Cost of revenue:
  License                                         4%          5%
  Service                                        29%         20%
                                               ----        ----
   Total cost of revenue                         33%         25%
                                               ----        ----

Gross profit                                     67%         75%
                                               ----        ----

Operating expense:
  Sales and marketing                            63%         44%
  Research and development                       21%         18%
  General and administrative                     15%         14%
                                               ----        ----
   Total operating expense                       99%         76%
                                               ----        ----

Loss from operations                            (32)%        (1)%


Interest and other income, net                    3%          2%
                                               ----        ----
Income (loss) before income tax provision       (29)%         1%

Provision for income taxes                        3%          0%
                                               ----        ----
Net income (loss)                               (32)%         1%
                                               ====        ====

AS A PERCENTAGE OF RELATED REVENUE:

Cost of license revenue                           8%          8%
Cost of service revenue                          53%         49%

</TABLE>






Revenue

The Company's revenue is derived from the sale of licenses for its
internet-scale content management solutions and related services, which include
maintenance and support, consulting and training services. Revenue from license
arrangements are recognized upon contract execution, provided all shipment
obligations have been met, fees are fixed or determinable, and collection is
probable. The Company uses the residual method to recognize revenue when a
license agreement includes one or more elements to be delivered at a future date
if evidence of the fair value of all undelivered elements exists. If an
undelivered element of the arrangement exists under the license



                                       10
<PAGE>   11

arrangement, revenue is deferred based on vendor-specific objective evidence of
the fair value of the undelivered element. If vendor-specific objective evidence
of fair value does not exist for all undelivered elements, all revenue is
deferred until sufficient evidence exists or all elements have been delivered.
Allowances for estimated future returns are provided upon shipment. Amounts
billed or payments received in advance of revenue recognition are recorded as
deferred revenue. Revenue from annual maintenance and support agreements is
deferred and recognized ratably over the term of the contract. Revenue from
consulting and training is deferred and recognized when the services are
performed and collectibility is deemed probable. Beginning in 2000, the Company
recognized revenue in accordance with Statement of Position (SOP) 97-2,
"Software Revenue Recognition," as amended by SOP 98-9, "Modification of SOP
97-2, Software Revenue Recognition, with Respect to Certain Transactions". In
addition, during the fourth quarter of 2000, the Company adopted the provisions
of Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"), which explains how the SEC staff believes existing
revenue recognition rules should be applied or analogized to for transactions
not addressed by the existing rules. The adoption of SAB 101 did not have a
material impact on the company's financial position or results of operations.

License revenue decreased by 17% or $4.2 million to $20.8 million for the three
months ended March 31, 2001 from $25.0 million for the three months ended March
31, 2000. The decrease in license revenue for the three months ended March 31,
2001 over the same period in 2000 in absolute dollars and as a percentage of
total revenue was due to a decrease in the number of licenses sold, as well as a
decrease in the number of customers who purchased additional product licenses.
In the first quarter of 2001, the Company experienced a weakness in customer
demand and difficulty in closing large license contracts with customers due to a
general downturn in the United States economy. This economic condition adversely
impacted sales for enterprise software applications. For the three months ended
March 31, 2001 and 2000 the company had sales to a single customer which
accounted for $2.2 million and $3.7 million, respectively or 11% and 15% of
total license revenue, respectively.

Service revenue increased by 42% to $24.4 million for the three months ended
March 31, 2001 from $17.2 million for the three months ended March 31, 2000,
representing 54% and 41% of total revenue in the respective periods. The
increase in absolute dollars was attributable to a larger installed base of
customers receiving ongoing maintenance, training and consulting services and
increases in the Company's professional services staff in conjunction with the
Company's focus to expand solution offerings to customers. The increase as a
percentage of revenue was due to the decrease in license revenue, as described
above.

The Company markets its products through its direct sales force and its indirect
channel partners. While historically the Company has generated the majority of
its revenue from its direct sales force, the Company has also focused on
complementing its direct sales channel with indirect channels, consisting of
systems integrators, distributors, and application service providers. Revenue
from all indirect channel partners comprised 39% and 37% of license revenue for
the three months ended March 31, 2001 and 2000, respectively. Revenue from
indirect partners for any period is subject to significant variations. As a
result, the Company believes that period to period comparisons of indirect
revenue are not necessarily meaningful and should not be relied upon as an
indication of future performance.

International revenue represented 54% and 45% of license revenue for the three
months ended March 31, 2001 and 2000, respectively. The increase in
international revenue as a percent of license revenue in 2001 was primarily due
to a decrease in total license revenue in the first three months of 2001 as
compared to the same period in 2000. In addition, the Company had an
enterprise-wide sale to a single global customer in the amount of $2.2 million
in Europe during the three months ended March 31, 2001, which increased
international revenue as a percentage of overall worldwide sales. The general
economic slowdown in the first three months of fiscal year 2001 negatively
impacted domestic revenue to a greater extent than international revenue. The
Company classifies license revenue as domestic or international based upon the
billing location of the customer. In many instances, especially with large
purchases from multinational companies, the customer has the right to deploy the
licenses anywhere in the world. Thus, the percentages discussed herein represent
where licenses were sold, and may or may not represent where the products are
used. As a result, the Company believes that period to period comparisons of
international revenue are not necessarily meaningful and should not be relied
upon as an indication of future performance.





                                       11
<PAGE>   12

Cost of revenue

Cost of license revenue consists primarily of the royalties paid to third-party
vendors, packaging, documentation, production, and freight costs. Royalties,
which are paid to third-parties for selected products, include both fixed and
variable fees. Cost of license revenue decreased 12% to $1.7 million for the
three months ended March 31, 2001 from $1.9 million for the three months ended
March 31, 2000, representing 8% of the related license revenue for the three
months ended March 31, 2001 and 2000. The decrease in cost of license revenue
for the three months ended March 31, 2001, in absolute dollars was related to
lower license sales for the three months ended March 31, 2001 over the
comparable period. Cost of revenue stayed the same as a percentage of license
revenue for the three months ended March 31, 2001 over the comparable period in
2000 due to the continued shift in the mix of products being sold. The Company
expects the cost of license revenue to fluctuate in absolute dollar amount and
as a percentage of total license revenue as the related license revenue
fluctuates.

Cost of service revenue consists primarily of personnel-related costs incurred
in providing consulting services, training to customers and maintenance
services, which includes telephone support. Cost of services revenue increased
by 52% to $12.9 million for the three months ended March 31, 2001 from $8.5
million for the three months ended March 31, 2000, representing, 53% and 49% of
the related service revenue for the three months ended March 31, 2001 and 2000,
respectively. The increase in cost of service revenue in absolute dollar amount
and as a percentage of service revenue was a result of increased
personnel-related costs as the Company expanded its consulting, training and
maintenance operations to support its larger installed customer base, as well as
an increase in solutions offered to customers. The Company expects the cost of
service revenue to increase in absolute dollar amount as the related service
revenue increases.

Operating expenses

Sales and marketing. Sales and marketing expenses consist primarily of salaries,
benefits, sales commissions and other expenses related to the direct sales
force, various marketing expenses and costs of other market development
programs. Sales and marketing expenses increased by 55% to $28.7 million for the
three months ended March 31, 2001 from $18.5 million for the three months ended
March 31, 2000, representing 63% and 44% of total revenue for the three months
ended March 31, 2001 and 2000, respectively. The increase in absolute dollar
amount in the three months ended March 31, 2001 over the comparable period in
2000, was due to the Company's strategy to invest heavily in its sales and
marketing infrastructure, including an increase in the number of sales teams and
marketing programs. The increase as a percentage of total revenue in the three
months ended March 31, 2001 over the comparable period in 2000 was due to the
decrease in license revenue for the three months ended March 31, 2001, as
described above. The Company expects that sales and marketing expense will
fluctuate in terms of absolute dollar amount, however, will decrease as a
percentage of total revenue.

Research and development. Research and development expenses consist primarily of
salaries and benefits for software developers, contracted development efforts
and related facilities costs. Research and development expenses increased by 26%
to $9.7 million for the three months ended March 31, 2001 from $7.7 million for
the three months ended March 31, 2000, representing 21% and 18% of total revenue
for the three months ended March 31, 2001 and 2000, respectively. The increase
in absolute dollar reflects the expansion of the company's engineering staff and
related costs required to support the development of new products, as well as
localization of and enhancements to existing products. The increase as a
percentage of total revenue for the three months ended March 31, 2001 over the
comparable period in 2000 was due to the decrease in license revenue in 2001, as
described above. Based on the Company's research and development process, costs
incurred between the establishment of technological feasibility and general
release have been insignificant and therefore have been expensed as incurred.
The Company expects research and development costs will fluctuate in terms of
absolute dollar amount, however, will decrease as a percentage of total revenue.

General and administrative. General and administrative expenses consist
primarily of personnel costs for finance, information technology, legal, human
resources and general management, as well as outside professional services.




                                       12
<PAGE>   13

General and administrative expenses increased by 17% to $6.9 million for the
three months ended March 31, 2001 from $5.9 million for the three months ended
March 31, 2000, representing 15% and 14% of total revenue for the three months
ended March 31, 2001 and 2000, respectively. The increase in absolute dollar
amount for the three months ended March 31, 2001 over the comparable period in
2000 was primarily due to increased staffing and professional fees necessary to
manage and support the Company's planned growth, as well as consulting costs
associated with changes to the Company's information systems. The increase as a
percentage of total revenue was due to the decrease in license revenue in the
first three months of fiscal year 2001, as described above. The Company expects
general and administrative expenses will fluctuate in terms of absolute dollar
amount, however, will decrease as a percentage of total revenue.

Interest and other income, net

Interest and other income, net, consists primarily of interest income earned on
the Company's cash, cash equivalents and short term investments, and other items
including foreign exchange gains and losses, the gain on sale of fixed assets,
and interest expense. Interest and other income, net, increased by $0.4 million
for the three months ended March 31, 2001 to $1.2 million from $0.8 million for
the three months ended March 31, 2000. The increase for the three months ended
March 31, 2001 over the same period in 2000 was a result of higher average cash
balances and higher average interest rates earned on those cash balances in
2001. In the second quarter of 2000, the Company made a shift in its investment
strategy from a portfolio containing predominantly tax-exempt securities to
include more higher-yielding, taxable securities. To date, the Company's
international sales have been generally denominated in U.S. dollars and the
Company has not engaged in hedging activities as the exposure to currency
fluctuations has been insignificant. In the future, as the Company expands its
international operations, the Company may have an increased amount of non-U.S.
dollar denominated contracts. Unexpected changes in the exchange rates for these
foreign currencies could result in significant fluctuation in the foreign
currency translation gains and losses in future periods.

Income taxes

Income tax provision for the interim periods is based on estimated annual income
tax rates. The Company's effective tax rate for the three months ended March 31,
2001 and 2000 was 10% and 33%, respectively. The decrease in the Company's
effective tax rate is a result of its loss position during the quarter. The
Company's 2001 tax rate represents projected international taxes. The tax rate
may vary by quarter based on the Company's operating results and the mix of
domestic and international income.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash, cash equivalents and short-term investments totaled $99.6
million at March 31, 2001 representing 48% of total assets. The Company has
invested its cash in excess of current operating requirements in investment
grade securities. The investments have variable and fixed interest rates and
primarily short-term maturities. In accordance with SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities," such investments are
classified as "available-for-sale."

Net cash used in operating activities was $4.5 million for the three months
ended March 31, 2001 as compared with net cash provided by operating activities
of $3.4 million for the three months ended March 31, 2000. For the three months
ended March 31, 2001, cash used in operations was primarily attributable to a
net loss of $14.7 million, adjusted for depreciation and amortization of $3.2
million and provision for doubtful accounts of $0.3 million, an increase in
other current assets and other assets of $0.8 million, a decrease in accounts
payable and accrued liabilities of $2.2 million and $7.6 million, respectively,
offset by a decrease in accounts receivable of $9.3 million and an increase in
deferred revenue of $8.1 million. For the three months ended March 31, 2000,
cash generated by operating activities was primarily attributable to net income
of $0.3 million, adjusted for depreciation and amortization of $2.6 million,
provision for doubtful accounts of $0.3 million, loss on disposal of fixed
assets of $0.3 million, increases in accounts payable and deferred revenue of
$0.3 million and $6.0 million, respectively, offset by increases in accounts
receivable and other assets in the amount of $1.7 million and $0.4 million,
respectively, and a decrease in accrued liabilities of $4.3 million.



                                       13
<PAGE>   14

For the three months ended March 31, 2001 and 2000, capital expenditures were
$2.2 million and $3.4 million, respectively. Capital expenditures for the three
months ended March 31, 2001 and 2000, were primarily for computer equipment and
computer software applications related to changes and improvements made in the
Company's information systems. Additionally, for the three months ended March
31, 2000, expenditures were made for office furniture and leasehold improvements
related to the new office facility described below.

For the quarter ending March 31, 2001, the Company received $3.8 million and
$3.1 million in proceeds from employee stock option exercises and employee stock
purchase plan purchases, respectively.

In August 1999, the Company entered into an unsecured revolving line of credit
agreement with a bank ("the Facility"). The facility allows for borrowing of up
to $20 million bearing interest at the Company's option of either: (1) the
bank's prime rate of (2) the LIBOR rate plus 1.5 %. This line of credit expires
on July 30, 2001. The Company must comply with certain financial covenants and
conditions as described in the Facility. Currently, the Company is in violation
of a number of these covenants, but has obtained a waiver from the bank in
regard to the violations. The Company did not have any borrowings outstanding
under this line of credit as of March 31, 2001.

In 1999, the Company entered into two capital lease agreements under a
sale-leaseback arrangement for the rental of computer equipment in the amount of
$292,000 and $171,000. The lease agreements required quarterly principal and
interest payments in the amount of $37,000 and $22,000, respectively. The leases
had interest rates of 1.66% and 2.605% and maturity dates of July 2001 and
September 2001, respectively. The remaining amounts related to these leases at
December 31, 2000 were paid in the first quarter of fiscal year 2001.

In June 1998, the Company signed and made a deposit of $2.5 million to lease
approximately 122,000 square feet and 63,000 square feet in Pleasanton,
California beginning in June 1999 and November 1999, respectively, and expiring
in May 2005 and March 2006, respectively. In January 2000, the Company signed an
amendment to the existing leases, which provides for the rental of an additional
37,138 square feet of space, beginning July 2000 and expiring in March 2006. The
Pleasanton, California space serves as the Company's headquarters and contains
the principal administrative, engineering, marketing and sales facilities. The
Company has made and will continue to make significant capital purchases related
to leasehold improvements and office furniture for new facilities. The Company
currently has no other significant capital spending or purchase commitments
other than normal purchase commitments and commitments under facilities leases.

The Company believes that its existing cash, cash equivalents and short-term
investment balances, its available bank financing and the cash flows generated
from operations, if any, will be sufficient to meet its anticipated cash needs
for working capital and capital expenditures for at least the next twelve
months. A portion of the Company's cash could be used to acquire or invest in
complementary businesses or products or obtain the right to use complementary
technologies. The Company periodically evaluates, in the ordinary course of
business, potential investments such as businesses, products or technologies.
See "Risk Factors. "

Restructuring Charges

On April 2, 2001 the Company pre-announced that primarily due to the downturn in
the United States economy a significant number of orders which were expected to
close in March 2001 had been cancelled and/or delayed. Consequently, the Company
would not meet the revenue expectations of Wall Street and would report a net
loss for the three-month period just ended on March 31, 2001. As a result of the
impact of the downturn in the United States economy, management developed a plan
to reduce costs and improve operating efficiencies. The Company expects to
record a restructuring charge in the range of $4.0 to $7.0 million. The
restructuring charge will be comprised primarily of severance and benefits
related to the involuntary termination of approximately 139 employees and
cancellations of outstanding accepted offers of employment, of which
approximately 84% were based in the United States and the remainder were based
in Europe.



                                       14
<PAGE>   15

After completion of this restructuring, the Company will be carrying a revenue
capacity greater than revenue it anticipates generating short-term in the United
States market. As a result of this "excess" capacity in the United States, the
Company anticipates it will report a net loss in the second and third quarters
of this fiscal year and projects it will return to breakeven in the fourth
quarter of the year.


RISK FACTORS

THE COMPANY'S OPERATING RESULTS ARE UNPREDICTABLE AND MAY VARY. Our future
operating results may vary significantly and are difficult to predict due to a
number of factors, of which many are beyond our control. These factors include:

-     demand for our products;
-     the level of product and price competition;
-     the length of our sales cycle;
-     the size and timing of individual license transactions;
-     the delay or deferral of customer implementations;
-     our success in expanding our customer support organization, direct sales
      force and indirect distribution channels;
-     the timing of new product introductions and product enhancements;
-     changes in our pricing policy;
-     the publication of opinions concerning us, our products or technology by
      industry analysts;
-     the mix of products and services sold;
-     levels of international sales;
-     activities of and acquisitions by competitors;
-     the timing of new hires;
-     changes in foreign currency exchange rates;
-     our ability to develop and market new products and control costs; and
-     domestic and international economic and political conditions.

One or more of the foregoing factors may cause our operating expenses to be
disproportionately high during any given period or may cause our net revenue and
operating results to fluctuate significantly.

READERS SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF
OUR FUTURE RESULTS BECAUSE THEY ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS. Our net
revenue and operating results may vary drastically from quarter to quarter
because of numerous factors largely beyond our control, including the following:

-     the potential delay in recognizing revenue from license transactions;
-     the discretionary nature of our customers' budget and purchase cycles;
-     variations in our customers' fiscal or quarterly cycles;
-     the size and complexity of our license transactions;
-     the timing of new product releases;
-     seasonal variations in operating results; and
-     the tendency to realize a substantial amount of revenue in the last weeks,
      or even days, of each quarter.

The United States has been experiencing a general decline in economic
conditions. The downturn in general economic conditions has led to reduced
demand for a variety of goods and services, including many technology products.
During the quarter ended March 31, 2001, the Company did see a significant
decrease in the overall demand for its products and services that resulted in
lower than anticipated license revenue and a net loss of $14.7 million for the
quarter. The Company plans to monitor the status of the United States economy
and, specifically, demand for its products in the United States. After
completion of the announced restructuring, the Company will be
carrying a revenue capacity greater than revenue it anticipates generating
short-term in the United States market. As



                                       15
<PAGE>   16

a result of this "excess" capacity in the United States, the Company anticipates
it will report a net loss in the second and third quarters of this fiscal year
and projects it will return to breakeven in the fourth quarter of the year.

Each customer makes a discretionary decision to implement our products that is
subject to its resources and budget cycles. Additionally, our license sales
generally reflect a relatively high amount of revenue per order, and as a
result, the loss or delay of individual orders, could have a significant impact
on quarterly operating results and revenue. Furthermore, the timing of license
revenue is difficult to predict because of the length of our sales cycle, which
typically ranges from three to nine months from initial contact. Also, our
strategy of providing customers with complete content management solutions
typically results in software licenses being bundled with services. In these
cases, the delivery of services may delay recognition of license revenue.
Because our operating expenses are based on anticipated revenue trends and
because a high percentage of these expenses is relatively fixed, any shortfall
from anticipated revenue or a delay in the recognition of revenue from license
transactions could cause significant variations in operating results from
quarter to quarter and could result in operating losses. If these expenses
precede, or are not followed by, increased revenue, our operating results could
be lower than expected and our common stock price may fall.

As a result of the foregoing and other factors, operating results for any
quarter are subject to significant variation, and we believe that
period-to-period comparisons of our results of operations are not necessarily
meaningful in terms of their relation to future performance. You should not rely
upon these comparisons as indications of future performance. Furthermore, it is
likely that our future quarterly operating results from time to time will not
meet the expectations of public market analysts or investors, in which case
there would likely be a drop in the price of our common stock.

THE COMPANY'S SALES AND IMPLEMENTATION CYCLES ARE LENGTHY AND DIFFICULT TO
PREDICT. In general, the timing of the sales and implementation of our products
is lengthy and not predictable with any degree of certainty. You should not rely
on prior sales and implementation cycles as an indication of future cycles.

The licensing of our software products is often an enterprise-wide decision by
prospective customers and generally requires us to engage in a lengthy sales
cycle (generally between three and nine months) to provide a significant level
of education to prospective customers regarding the use and benefits of our
products. Additionally, the size and complexity of any particular transaction
can also cause delays in the sales cycle. The implementation of our products can
involve a significant commitment of resources by customers over an extended
period of time and is commonly associated with substantial reengineering efforts
by the customer. For these and other reasons, the sales and customer
implementation cycles are subject to a number of significant delays over which
we have little or no control. A delay in the sale or customer implementation of
even a limited number of license transactions could result in lower than
expected revenue and cause our operating results to vary significantly from
quarter to quarter.

A SUBSTANTIAL PORTION OF THE COMPANY'S REVENUE IS ATTRIBUTABLE TO ONE FAMILY OF
PRODUCTS AND RELATED SERVICES. To date, substantially all of our revenue has
been attributable to sales of licenses of the Documentum EDMS and Documentum 4i
family of products and related services. We expect that Documentum 4i and
related products and services will account for a substantial majority of our
future revenue. As a result, factors adversely affecting the pricing of or
demand for such products, such as competition or technological change, could
harm our business, financial condition and results of operations.

The Company's failure to identify new product opportunities or to develop new
products or versions could harm the business. The content management software
and services market in which we compete is characterized by (1) rapid
technological change, (2) frequent introduction of new products and
enhancements, (3) changing customer needs, and (4) evolving industry standards.
The introduction of products embodying new technologies and the emergence of new
industry standards can render existing products obsolete and unmarketable.
Accordingly, the life cycles of our products are difficult to estimate. To keep
pace with technological developments, evolving industry standards and changing
customer needs, we must support existing products and develop new products. Our
future success also depends in part on our abilities to execute on our strategy
of developing web content management and business-to-business solutions and to
maintain and enhance relations with technology partners, including RDBMS
vendors, in order to provide our customers with integrated product solutions.



                                       16
<PAGE>   17

The Company may not be successful in maintaining and enhancing the
aforementioned relationships or in developing, marketing and releasing new
products or new versions of our products that respond to technological
developments, evolving industry standards or changing customer requirements. We
may also experience difficulties that could delay or prevent the successful
development, introduction and sale of these enhancements. In addition, these
enhancements may not adequately meet the requirements of the marketplace and may
not achieve any significant degree of market acceptance. If we fail to
successfully maintain or enhance relationships with our technology partners or
to execute on our integrated product solution strategy, or if release dates of
any future products or enhancements are delayed, or if these products or
enhancements fail to achieve market acceptance when released, our business,
operating results and financial condition could be harmed. We have in the past
experienced delays in the release dates of enhancements to our products. While
the delays we have experienced to date have been minor (not exceeding six
months), there can be no assurance that we will not experience significant
future delays in product introduction.

THE COMPANY IS DEPENDENT ON THE MARKET FOR CONTENT MANAGEMENT SOLUTIONS, WHICH
MAY NOT CONTINUE TO GROW. The market for content management software and
services is intensely competitive, highly fragmented and rapidly changing. Our
future financial performance will depend primarily on the continued growth of
the market for content management software and services and the adoption of our
products by organizations in this market. If the content management software and
services market fails to grow or grows more slowly than we currently anticipate,
our business, financial condition and operating results would be harmed.

THE COMPANY FACES INTENSE COMPETITION FROM SEVERAL COMPETITORS AND MAY BE UNABLE
TO COMPETE. Our products target the emerging market for Web-based and
client/server software solutions. This market is intensely competitive, rapidly
changing and significantly affected by new product introductions and other
market activities of industry participants. We encounter direct competition from
a number of public and private companies that offer a variety of products and
services addressing this market. These companies include FileNet, OpenText,
Interwoven and Vignette. Additionally, several other enterprise software
vendors, such as Microsoft, Oracle and Lotus (a division of IBM) are potential
competitors in the future. Many of these current and potential competitors have
longer operating histories, significantly greater financial, technical,
marketing and other resources, significantly greater name recognition and a
larger installed base of customers than we do. In addition, several of these
companies, including Microsoft, Oracle, Lotus and others, have well-established
relationships with our current and potential customers and strategic partners,
as well as extensive resources and knowledge of the enterprise software industry
that may enable them to more easily offer a single-vendor solution. As a result,
these competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products, than we can.

We also face indirect competition from systems integrators. We rely on a number
of systems consulting and systems integration firms for implementation and other
customer support services, as well as for recommendations of our products during
the evaluation stage of the purchase process. Although we seek to maintain close
relationships with these service providers, many of them have similar, and often
more established, relationships with our competitors. If we were unable to
develop and maintain effective, long-term relationships with these third
parties, our competitive position would be materially and adversely affected.
Further, many of these third parties possess industry-specific expertise and
have significantly greater resources than we do, and may market software
products that compete with us in the future.

There are many factors that may increase competition in the market for Web-based
and client/server software solutions, including (1) entry of new competitors,
(2) alliances among existing competitors and (3) consolidation in the software
industry. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could harm our business,
financial condition and operating results. If we cannot compete successfully
against current and future competitors or overcome competitive pressures, our
business, operating results and financial condition may be harmed.

THE COMPANY IS DEPENDENT ON A RELATIVELY SMALL NUMBER OF CUSTOMERS AND THOSE
CUSTOMERS TEND TO BE CONCENTRATED IN SEVERAL INDUSTRIES. Our success depends on
maintaining relationships with our existing customers.


                                       17
<PAGE>   18


A relatively small number of customers have accounted for a significant
percentage of our revenue. Additionally, our customers are somewhat concentrated
in the process and discrete manufacturing, pharmaceutical, financial services
and high technology industries. We expect that sales of our products to a
limited number of customers and industry segments will continue to account for a
significant percentage of revenue for the foreseeable future. The loss of a
small number of customers or any reduction or delay in orders by any such
customer, or our failure to market successfully our products to new customers
and new industry segments could harm our business, and our prospects.

THE COMPANY RELIES ON A NUMBER OF RELATIONSHIPS WITH THIRD PARTIES FOR SALES,
DISTRIBUTION AND INTEGRATION. We have established strategic relationships with a
number of organizations that we believe are important to our sales, marketing
and support activities and the implementation of our products. We believe that
our relationships with these organizations, including indirect channel partners
and other consultants, provide marketing and sales opportunities for our direct
sales force, expand the distribution of our products and broaden our product
offerings through product bundling. These relationships allow us to keep pace
with the technological and marketing developments of major software vendors and
provide us with technical assistance for our product development efforts. Our
failure to maintain these relationships, or to establish new relationships in
the future, could harm our business.

THE COMPANY DEPENDS ON THE SERVICE OF KEY PERSONNEL. Our future performance
depends in significant part on the continued service of our key technical, sales
and senior management personnel, none of whom is bound by an employment
agreement with us. The loss of services of one or more of our executive officers
or key technical personnel could harm our business, operating results and
financial condition.

Our future success also depends on our continuing ability to attract and retain
highly qualified technical, sales and managerial personnel. Competition for such
personnel is intense, and there can be no assurance that we can retain key
employees or that we can attract, assimilate or retain other highly qualified
personnel in the future.

THE COMPANY IS SUBJECT TO RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. Our
revenue is primarily derived from large multi-national companies. To service the
needs of these companies, we must provide worldwide product support services.
The Company has offices in London, Paris, Munich, Tokyo, Melbourne, Hong Kong,
Singapore, Taipei, and Seoul. The Company operates its international technical
support operations in the London, Munich and Melbourne offices. We have
expanded, and intend to continue expanding, our international operations and
enter additional international markets. This will require significant management
attention and financial resources that could adversely affect our operating
margins and earnings. We may not be able to maintain or increase international
market demand for our products. If we do not, our international sales will be
limited, and operating results could suffer.

Our international operations are subject to a variety of risks, including (1)
foreign currency fluctuations, (2) economic or political instability, (3)
shipping delays, (4) various trade restrictions, (5) our limited experience in,
and the costs of, localizing products for foreign countries, (6) longer accounts
receivable payment cycles and (7) difficulties in managing international
operations, including, among other things, the burden of complying with a wide
variety of foreign laws.

THE COMPANY'S INDUSTRY IS CHARACTERIZED BY VIGOROUS PROTECTION AND PURSUIT OF
INTELLECTUAL PROPERTY RIGHTS THAT COULD RESULT IN SUBSTANTIAL COST TO THE
COMPANY. We rely primarily on a combination of copyright, trademark and trade
secret laws, confidentiality procedures and contractual provisions to protect
our proprietary rights. We also believe that factors such as the technological
and creative skills of our personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are essential to
establishing and maintaining a technology leadership position. We seek to
protect our software, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection.

Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or to obtain and use information that we
regard as proprietary. Policing unauthorized use of our products is difficult,
and while we are unable to determine the extent to which piracy of our products
exists, software piracy


                                       18
<PAGE>   19

can be expected to be a persistent problem. In addition, the laws of some
foreign countries do not protect our proprietary rights as fully as do the laws
of the United States. Our means of protecting our proprietary rights in the
United States or abroad may not be adequate. Additionally, our competition may
independently develop similar technology.

Although we do not believe that we are infringing on any proprietary rights of
others, third parties may claim that we have infringed their intellectual
property rights. Furthermore, former employers of our former, current or future
employees may assert claims that such employees have improperly disclosed to us
the confidential or proprietary information of such former employers. Any such
claims, with or without merit, could (1) be time-consuming to defend, (2) result
in costly litigation, (3) divert management's attention and resources, (4) cause
product shipment delays, and (5) require us to pay money damages or enter into
royalty or licensing agreements. A successful claim of intellectual property
infringement against us and our failure or inability to license or create a
workaround for such infringed or similar technology may result in substantial
damages, payments or termination if sales of infringing products.

We license certain software from third parties, including software that is
integrated with internally developed software and used in our products to
perform key functions. These third-party software licenses may not continue to
be available to us on acceptable terms. The loss of, or inability to maintain,
any of these software licenses could result in shipment delays or reductions,
resulting in lower than expected operating results.

THE COMPANY MAY FACE PRODUCT LIABILITY CLAIMS FROM OUR CUSTOMERS. Our license
agreements with our customers typically contain provisions designed to limit our
exposure to potential product liability claims. It is possible, however, that
the limitation of liability provisions contained in our license agreements may
not be effective under the laws of certain jurisdictions. A successful product
liability claim brought against us could result in payment of substantial
damages.

THE COMPANY IS SUBJECT TO THE RISKS ASSOCIATED WITH PRODUCT DEFECTS AND
INCOMPATIBILITIES. Software products frequently contain errors or failures,
especially when first introduced or when new versions are released. Also, new
products or enhancements may contain undetected errors, or "bugs," or
performance problems that, despite testing, are discovered only after a product
has been installed and used by customers. Errors or performance problems could
cause delays in product introduction and shipments or require design
modifications, either of which could lead to a loss in or delay in recognition
of revenue.

Our products are typically intended for use in applications that may be critical
to a customer's business. As a result, we expect that our customers and
potential customers will have a greater sensitivity to product defects than the
market for software products generally. Despite extensive testing by us and by
current and potential customers, errors may be found in new products or releases
after commencement of commercial shipments, resulting in loss of revenue or
delay in market acceptance, damage to our reputation, diversion of development
resources, the payment of monetary damages or increased service or warranty
costs, any of which could harm our business, operating results and financial
condition.

THE COMPANY IS SUBJECT TO RISKS ASSOCIATED WITH ACQUISITIONS. As part of our
business strategy, we frequently evaluate strategic opportunities available to
us and expect to make acquisitions of, or significant investments in, businesses
that offer complementary products and technologies. Any future acquisitions or
investments would expose us to the risks commonly encountered in acquisitions of
businesses. Future acquisitions of complementary technologies, products or
businesses will result in the diversion of management's attention from the
day-to-day operations of our business and the potential disruption of our
ongoing business. Additionally, such acquisitions may include numerous other
risks, including difficulties in the integration of the operations, products and
personnel of the acquired companies. Future acquisitions may also result in
dilutive issuances of equity securities, the incurrence of debt and amortization
expenses related to goodwill and other intangible assets. Our failure to
successfully manage future acquisitions may harm our business and financial
results.

THE COMPANY'S STOCK PRICE IS EXTREMELY VOLATILE. The trading price of our common
stock is subject to significant fluctuations in response to variations in
quarterly operating results, the gain or loss of significant orders, changes in


                                       19
<PAGE>   20

earning estimates by analysts, announcements of technological innovations or new
products by us or our competitors, general conditions in the software and
computer industries and other events or factors. In addition, the stock market
in general has experienced extreme price and volume fluctuations which have
affected the market price for many companies in industries similar or related to
ours and which have been unrelated to the operating performance of these
companies. These market fluctuations may decrease the market price of our common
stock.

SOME PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND OUR BYLAWS COULD DELAY
OR PREVENT A CHANGE IN CONTROL. Our Board of Directors is authorized to issue up
to 10,000,000 shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further approval by our stockholders. The preferred stock
could be issued with voting, liquidation, dividend and other rights superior to
those of the common stock. The rights of the holders of common stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could make it more difficult for a
third party to acquire a majority of our outstanding voting stock. We have
instituted a classified Board of Directors in our Amended and Restated
Certificate of Incorporation. We have also implemented a Share Purchase Plan (or
"Rights Plan") under which all stockholders of record as of February 24, 1999
received rights to purchase shares of a new series of preferred stock. The
rights are exercisable only if a person or group acquires 20% or more of our
common stock or announces a tender offer for 20% or more of the common stock.
These provisions and certain other provisions of our Amended and Restated
Certificate of Incorporation and certain provisions of our Amended and Restated
Bylaws and of Delaware law, could delay or make more difficult a merger, tender
offer or proxy contest.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - INTEREST
         RATE RISK

As of March 31, 2001 the Company's investment portfolio includes $38.0 million
of short-term corporate and municipal bonds which are subject to no interest
rate risk when held to maturity but may increase or decrease in value if
interest rates change prior to maturity. The remaining $15.0 million of
short-term investments are held in short-term securities bearing stated interest
rates and are therefore subject to no interest rate risk. An immediate 10%
change in interest rates would be immaterial to the Company's financial
condition or results of operations.

PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


            (a)     No reports on Form 8-K were filed during the quarter
ended March 31, 2001.






                                    SIGNATURE


Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report on Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized, on this 10th day of May, 2001.


                        DOCUMENTUM, INC.
                        (Registrant)


                        By: /s/ Bob L. Corey
                          ----------------------
                        Bob L. Corey
                        Executive Vice President & Chief Financial Officer


                                       20