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

                                    FORM 10-K

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

                      For the Year Ended December 31, 1998

                                       OR

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

                         Commission File Number 0-28252

                                BROADVISION, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                                94-3184303
               --------                                ----------
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)

 585 Broadway, Redwood City, California                      94063
 --------------------------------------                      -----
   (Address of principal executive offices)                (Zip Code)

                                 (650) 261-5100
                                 --------------
               Registrant's telephone number, including area code

          Securities registered pursuant to Section 12(b) of the Act:

 Title of each class                   Name of each exchange which registered
 -------------------                   --------------------------------------
       None                                            None

          Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.0001 par value
                         ------------------------------
                                (Title of Class)

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 [ ]

Indicate by check mark if the disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

Based on the closing sales price of March 12, 1999 the aggregate market value of
the voting stock held by nonaffiliates of the registrant was $1,148,094,481.

As of March 26, 1999,  registrant had outstanding  25,065,304 shares of Common
Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Parts  of  the  Proxy  Statement  for   Registrant's   1998  Annual  Meeting  of
Stockholders to be held May 5, 1999 are incorporated by reference in Part III of
this Form 10-K Report.


<PAGE>


                                                          BROADVISION, INC.

                                                     ANNUAL REPORT ON FORM 10-K

                                                    YEAR ENDED DECEMBER 31, 1998

<TABLE>
                                                          TABLE OF CONTENTS

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                                                                                                                            Page No.
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<S>                                                                                                                         <C>
Part I

Item 1. Business ........................................................................................................    3

Item 2. Properties ......................................................................................................   22

Item 3. Legal Proceedings ...............................................................................................   23

Item 4. Submission of Matters to a Vote of Security Holders .............................................................   23


Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ...........................................   23

Item 6. Selected Consolidated Financial Data ............................................................................   24

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ...........................   25

Item 7a. Quantitative and Qualitative Disclosure About Market Risk ......................................................   45

Item 8. Financial Statements and Supplementary Data .....................................................................   45

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................   61


Part III

Item 10. Directors and Executive Officers of the Registrant .............................................................   61

Item 11. Executive Compensation .........................................................................................   61

Item 12. Security Ownership of Certain Beneficial Owners and Management .................................................   61

Item 13. Certain Relationships and Related Transactions .................................................................   61


Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ...............................................   61

SIGNATURES ..............................................................................................................   62


</TABLE>

                                                                 2
<PAGE>


                                     PART I.

ITEM 1.    BUSINESS

The  following  discussion of the Company's  business  contains  forward-looking
statements that involve risks and  uncertainties.  The Company's  actual results
could  differ  materially  from  those  anticipated  in  these   forward-looking
statements as a result of certain factors,  including, but not limited to, those
set forth under "Risk Factors" and elsewhere in this Form 10-K.

       Overview and Background.................................................3

       The BroadVision Solution................................................6

       BroadVision Business Strategies.........................................6
         Focus on extending relationship management............................6
         Enhance targeted application solutions................................7
         Expand and leverage key business alliances............................7
         Maintain technological leadership.....................................8
         Grow international presence...........................................8

       BroadVision Products....................................................8
         BroadVision One-To-One Enterprise.....................................9
         BroadVision One-To-One Commerce......................................10
         BroadVision One-To-One Financial.....................................10
         BroadVision One-To-One Knowledge.....................................10
         Key capabilities of the BroadVision total end-to-end solution........11
         BroadVision One-To-One Tools.........................................11
         Other products.......................................................12

       BroadVision Professional Services......................................13
         Strategic services...................................................13
         Interactive services.................................................13
         Content and creative services........................................13
         Education services...................................................13
         Technical support....................................................13

       Customers and Markets..................................................13
         Sales and marketing..................................................15
         Strategic alliances..................................................15

       Competition............................................................16

       BroadVision Technology.................................................16

       Product Development ...................................................18

       Intellectual Property and Other Proprietary Rights ....................19

       Employees..............................................................20
         Executive officers and key personnel.................................21


Overview and Background

   BroadVision(TM) develops, markets and supports application software solutions
for  one-to-one  relationship  management  for the  extended  enterprise.  These
solutions  enable  businesses  to use the  Internet  as a  platform  to  conduct
commerce,  offer online financial services,  provide  self-service,  and deliver
targeted information to their customers, suppliers, distributors, employees, and
other constituents of their extended enterprises. The BroadVision One-To-One(TM)
product  family  allows  businesses  to tailor  World Wide Web (the  "Web") site
content to the needs and interests of  individual  users by  personalizing  each
visit on a real-time basis.  BroadVision  One-To-One  applications  achieve this
result  by  interactively   capturing  Web  site  visitor  profile  information,
organizing  the  enterprise's  content,  targeting  that content to each visitor
based on easily  constructed  business rules,  and executing  transactions.  The
Company believes the benefits of these  applications  include enhanced  customer
satisfaction and loyalty,  increased  business volume,  reduced costs to service
customers and execute transactions, and enhanced employee productivity.


                                       3
<PAGE>

Trends in One-to-One Relationship Management

   To prevail in the intensely competitive global marketplace, business managers
must continually devise new strategies to market, sell, distribute,  and support
their products and services.  From the 1950s to the 1980s, leading businesses in
North America,  Europe, and Asia advanced the sciences of mass production,  mass
communication,  and mass  distribution  to  establish  world  markets  for their
products and services.  During the 1980s,  these mass marketers  began using new
technologies  and analytical  techniques to better  segment and define  targeted
markets in order to reach  customer  groups most  likely to buy their  products.
These new approaches  helped  marketers  respond to increasing  competition  and
customer demands for improved quality,  service,  and product choice.  The trend
toward greater  specialization  has continued to increase as many marketers have
used targeted  marketing tools and new delivery  media,  such as direct mail and
telemarketing, to reach more precisely targeted market segments.

   In  the  latter  half  of  the  1990s,  many  marketing  executives  in  both
business-to-consumer  and  business-to-business  industries  have  turned  their
attention to the ultimate target market segment:  the market of one.  One-to-one
relationship   management  involves  a  systematic,   interactive   approach  to
developing  and managing a detailed  knowledge base that  integrates  individual
customers' product and business requirements, personal preferences, and purchase
histories with traditional demographic statistics. This information provides the
foundation  for  businesses  to  serve  customers  in the  form of  individually
tailored  products,  services,  information,  incentives,  and transactions.  By
focusing  on  individual  customers  and  one-to-one  relationship   management,
business managers can develop more productive relationships with their customers
that maximize customer  satisfaction,  develop customer loyalty, and contain the
high costs associated with new customer acquisition.

One-to-One Relationship Management on the Internet

   With the emergence of the Internet as a globally accessible, interactive, and
individually addressable communications and computing platform,  businesses have
the opportunity to implement one-to-one relationship management on a mass basis.
The  proliferation  of  inexpensive,  easy-to-use  Web browsers  and  affordable
Internet access  services has made the Internet easy to navigate,  accessible to
millions  of homes and  businesses,  and readily  adaptable  to a broad range of
business,  education,  commerce,   entertainment,  and  marketing  applications.
Technologies such as Java from Sun  Microsystems,  Inc. ("Sun") are facilitating
the  delivery of content  over the  Internet  and  accelerating  adoption of the
Internet as a mainstream business and personal computing platform.  In addition,
businesses are utilizing the Internet to create internal  enterprise  networking
environments  called  "intranets"  or  "extranets."  These networks are enabling
businesses to create Internet  applications that provide new ways of interacting
with employees, partners, and customers.

   As Internet use has grown,  industry  experts have  described the Internet as
the ideal platform for deploying  applications  that enable companies to develop
individual one-to-one  relationships across their entire enterprise.  Whether an
Internet application is designed primarily for delivering knowledge,  conducting
commerce,  or customer  self-service,  it offers  businesses an  opportunity  to
extend front office  services in a  personalized  and cost  effective way to all
constituents    in   their   extended    enterprise.    By    recognizing    the
relationship-building  potential of the Internet--in particular,  the ability to
interactively  capture visitor profile information,  observations,  and feedback
and  to  dynamically  target  useful  information  to  visitors  based  on  this
data--business  managers can utilize advanced Internet technologies to engage in
personalized dialogs with millions of customers on a one-to-one basis.

The Business Challenge on the Internet

   While the Internet is  increasingly  becoming a global platform for providing
and accessing information, there remain significant challenges to doing business
on the Internet.  The Internet is  characterized  by fluid and dynamic  content,
where information is continually  being updated and enhanced.  Visitors perceive
the value of Web sites to be directly  correlated  to the  frequency  of content
updates  and the  dynamic  behavior  of the  site.  Creating  the best Web sites
generally requires sophisticated creative and technical expertise.  Although the
market  has been  flooded  with  numerous  inexpensive  tools for  building  and
updating Web sites,  many of the companies  producing and using these tools have
failed to take full advantage of the Internet's dynamic one-to-one  relationship
potential.

                                       4
<PAGE>

   Many Web sites today simply  present text and  graphics  electronically  in a
static format, much like a product brochure.  There has recently been a dramatic
shift  away  from  companies  simply  building  these  "brochure-ware"  sites to
companies making a significant investment in building  mission-critical Internet
applications.  These Internet  applications  have the interactive  capability to
capture  visitor  profiles,  conduct  personalized  interactions,  enable secure
transactions,  remember  information from one visit to the next, enable business
managers to manage the site on a real-time  basis,  and integrate  into existing
business  systems.  Providing these  additional  capabilities is a valuable next
step for  companies  that plan to maximize  the  potential  of the  Internet for
relationship management across their extended enterprise.

   However,  most of the Web  sites  that have  moved  beyond  brochure-ware  to
provide electronic  commerce,  online financial services or knowledge management
applications  still have failed to capitalize fully on the Internet's  potential
for building one-to-one relationships. Sites that do support commerce often fail
to satisfy customer expectations, providing commercial experiences that are less
enjoyable and cost-effective than traditional  alternatives.  Most lack any form
of real-time  personalization and cannot dynamically target information based on
a  visitors'  preferences  and past  histories.  Others  lack  integration  with
mainstream business systems for supporting visitors  interactively or exchanging
information  with  corporate  databases.  While some of these sites use advanced
applications  to  support  online  order and  payment  transactions,  many still
require  buyers to place  orders by  telephone,  defeating a basic  objective of
online businesses.

The Technology Gap on the Internet


   Web sites are generally cumbersome for business managers to operate. Business
rules and  content,  such as  product  and  pricing  data,  financial  policies,
promotions,  and advertising campaigns, are often "hard-coded" into programs and
virtually  impossible for  non-technical  managers to change  dynamically.  Most
applications are not scaleable and require ongoing tuning and  re-engineering to
keep up with visitor growth and changes in Internet  technology.  Development is
often slow and defects are common due to the  limitations  of most  productivity
tools.  Generally,   with  currently  available  application  servers,  business
managers do not have the capability to react to market conditions with real-time
control and management of Web sites,  but instead are often  constrained by slow
"change request" processes that take technical specialists days or even weeks to
implement.

   In part, the limited  capabilities  of these static Web sites are a result of
the inadequacies of the technologies used to develop Internet applications. Many
Web developers  still rely on general  purpose  publishing  tools,  such as HTML
(Hypertext Mark-up Language) editors, to develop Web pages and the links between
them.  Many of  today's  Web  development  tool  kits  that  assist  in Web site
development do not offer capabilities for generating  personalized,  dynamic Web
pages or for easily  maintaining site content and page generation  logic.  These
tools  were  not  designed  to be  used  in  the  development  of  sophisticated
applications  offering  enterprise-scale  implementations of business processes,
such as product marketing, sales, or customer support. Using low-level tool kits
and commerce and merchant servers to develop and maintain sophisticated Internet
applications, such as those for managing customer relationships, managing a high
volume of online  transactions  and defining dynamic business rules, is a highly
complex  process  requiring  a breadth  of  expertise  that is often  beyond the
capabilities of in-house information technology organizations.  In addition, the
cost, time, and effort of building and maintaining Internet applications in this
manner is often beyond the funding capacity of internal application  development
budgets.

Application Systems for One-to-One Relationship Management

   The recent trends toward  one-to-one  relationship  management  and the rapid
adoption of the Internet as a technology  platform for conducting  business have
fueled the need for  sophisticated  packaged  application  software that enables
companies to quickly  create  applications  that build  personalized,  long-term
relationships with customers,  partners, and employees.  Early adopter companies
have built successful online  relationship  management  applications,  and these
online businesses are creating pressures for their competitors to come to market
quickly with online business sites. To build these sites,  the Company  believes
that more of these  businesses  are  turning  toward the  purchase  of  packaged
enterprise  Internet  applications.   These  packaged  applications  provide  an
attractive   alternative   to  in-house  or   third-party   custom   application
development,  enabling  companies  to get to market more quickly with a solution
that is more readily extensible and maintainable as the business evolves.




                                       5
<PAGE>

   To realize the  potential of  one-to-one  relationship  management,  Internet
applications must support the following activities:

*   Attract, retain and service visitors from the casual to the sophisticated by
    providing dynamic content,  interactive dialogs, and communities of interest
    in a friendly, easy to use Web site environment;

*    Offer a consistent  end-user  experience  across  multiple  customer  touch
     points such as  interactive  voice  response  systems and call  centers;  

*    Develop and maintain visitor profiles,  observe and remember  interactions,
     and engage in ongoing personalized dialogs while empowering  individuals to
     control the privacy of their personal data;

*    Provide  non-technical  business  managers  with the  ability to define and
     modify the Internet  application's business rules and content in real time;

*    Dynamically  target  personalized  content,  products,  and  incentives  to
     correspond  to profile  data in order to motivate  visitors to interact and
     conduct transactions;

*    Fulfill  financial  and  information  transactions  with secure  electronic
     commerce  processes;  and 

*    Integrate  and  interact  with  back  office  systems  to fully  utilize  a
     company's data and information resources.



The BroadVision Solution

   BroadVision   offers  a  family  of  packaged   applications  for  automating
relationship  management  throughout the extended  enterprise.  The  BroadVision
One-To-One  product  family  enables  companies to  capitalize  on the Internet,
intranets and  extranets for selling,  marketing,  and  supporting  all of their
business  constituents:   employees,  customers,  suppliers,  distributors,  and
others. The Company develops,  markets, and supports the BroadVision  One-To-One
family  of  Internet   applications   specifically   designed  for  relationship
management  as well as a variety of associated  software  tools to customize and
maintain  these  applications.   The  Company's  applications  are  specifically
designed to allow  non-technical  business managers to build lasting  one-to-one
customer  relationships  by  tailoring  content  to the needs and  interests  of
individual visitors by personalizing each experience on a real-time basis.

   The  Company's  customers  use  BroadVision   solutions  to  deploy  Internet
applications   that  engage   visitors  and  encourage   return  visits  through
personalized real-time interactions. These applications also allow the Company's
customer to capture  marketing  information  from  volunteered data and observed
behavior,  and generate revenues from electronic commerce.  The Company believes
that these  capabilities  are  especially  critical  for  business  managers and
Internet application  developers in order for them to take full advantage of the
Internet  as  an  emerging   marketplace   for   building   long-term   customer
relationships and conducting cost effective business transactions.


BroadVision Business Strategies

   The Company's  objective is to establish  one-to-one  real-time  relationship
management  as  a  standard  for  Web  sites  worldwide.  Consistent  with  that
objective, the Company has adopted the following strategies.

Focus on Extending  Relationship  Management by Providing  Packaged  Application
Solutions

   The  Company is  focusing  exclusively  on  developing  packaged  application
solutions  for  electronic  businesses   ("e-businesses")  that  are  developing
mission-critical   Web  sites  as  profitable  business  channels  for  managing
relationships and transactions with their customers,  partners,  employees,  and
other  constituents.  The Company believes that the next major phase of Internet
growth  will be driven by complete  packaged  application  solutions  that allow
businesses  to  capitalize  more fully on the  Internet as a business  venue for
interacting with the constituents of their extended enterprise.  Businesses will
implement these packaged  applications in order to speed time to market, rely on
a vendor rather than an internal development organization to maintain and update
the technology  underlying the business  application,  and reduce total cost and
risk of application deployment.


                                       6
<PAGE>

Enhance Targeted Application Solutions

   The Company will continue to leverage its BroadVision  One-To-One  Enterprise
relationship  management  system to enhance  its Web  application  products  and
services focused on specific  horizontal and/or vertical markets.  Utilizing its
expanding  libraries of reusable  application  objects and templates and working
closely with  customers  and  strategic  partners,  the Company  believes it can
deliver a targeted application solution for one-to-one  relationship  management
faster,  of a higher  quality,  and at a lower  cost than its  competitors.  The
Company has delivered targeted  application  solutions for  business-to-consumer
and  business-to-business  commerce,  for  retail  financial  services  and  for
knowledge  management.  The  Company  intends to remain  nimble and  flexible in
developing  other  applications  products  in the general  area of  relationship
management, in response to market opportunities that may arise.

Expand and Leverage Alliances with Key Business Partners

   To accelerate the acceptance of the  BroadVision  One-To-One  products and to
promote the  adoption of the Web as a  commercial  marketplace,  the Company has
developed  cooperative  alliances  with  leading  Internet  technology  vendors,
systems  integrators,  and Web site developers.  The Company believes that these
alliances will provide additional marketing and sales channels for the Company's
products,  enable the Company to more rapidly incorporate  additional  functions
and platforms  into the  BroadVision  One-To-One  products,  and  facilitate the
successful deployment of customer applications.

   The approach of leveraging  the Company's  business  alliances is intended to
increase the number of personnel  available  to perform  application  design and
development services for the Company's  customers;  enhance the Company's market
credibility,  increase the  potential  for lead  generation  and access to large
customer  accounts;  and  provide  additional  marketing  expertise  in  certain
vertical   industry  segments  while  providing   technical   expertise  in  the
development of reusable objects and templates.

   To date,  the  Company  has signed  business  alliances  with over 90 systems
integration,  design,  consulting,  and other services organizations  worldwide,
which has expanded the Company's sales and support infrastructure and post-sales
implementation  capabilities  while broadening market awareness for the Company.
Alliances to date include American Management Systems,  Andersen Consulting LLP,
Cambridge   Technology   Partners,   Computer  Sciences   Corporation,   Context
Integration,  Concept 5, Daimler-Benz Information Systems AG (Debis),  Dimension
AB,  Ernst & Young  LLP,  Gran  Via  Internet,  NTT  Data  Corporation,  Metamor
Worldwide, Sema Group plc, Siemens Business Services Gmbh and Co., and others.

   The  Company  also  places a  strategic  emphasis  on  developing  technology
alliances in order to ensure that the  Company's  products are based on industry
standards  and the  Company is  positioned  to take  advantage  of  current  and
emerging  technologies.  The  benefits of this  approach  include  enabling  the
Company  to focus on its core  competencies  while  reducing  time to market and
simplifying  the  task of  designing  and  developing  applications  by both the
Company and its customers.

   Some of the Company's  strategic  technology  alliances to date have included
alliances with  Hewlett-Packard  and Sun  Microsystems,  providers of enterprise
server  hardware and systems  software;  IONA  Technologies,  Inc.  ("IONA"),  a
provider  of  a  CORBA-compliant   development  platform;  Oracle,  Sybase,  and
Informix,   providers  of  standard  RDBMSs;   RSA,  a  provider  of  encryption
technology; Security First Technologies ("S1"), a provider of integrated, secure
Internet  financial  applications;  and  VeriFone,  Inc.  and  CyberCash,  Inc.,
providers of payment systems.

   Specific strategic  alliances of the Company include ventures with Macromedia
to jointly develop the next version of its BroadVision  One-To-One Design Center
product;  Hewlett-Packard  to embed Web  Quality  of Service  technologies  into
BroadVision  products;  Cisco  Systems  to  create  a  unique  Cisco-BroadVision
One-To-One  reference  architecture,  configuration  guide,  and performance and
scaleability  benchmarks;  S1 to develop  and  market  joint  products  based on
Virtual  Financial  Manager  ("VFM"),  S1's  suite of  Internet-based  financial
services applications;  and Sema Group to jointly develop and market BroadVision
One-To-One applications for the telecommunications sector.



                                       7
<PAGE>

   The Company's will continue to place an emphasis on  establishing  additional
such alliances as new technologies and standards  emerge,  although no assurance
can be given that the Company will be successful in  establishing or maintaining
such alliances.

Maintain Technological Leadership

   The Company  believes  that it offers the most  complete  solution  available
today for extended relationship management for e-businesses. The Company intends
to maintain this  leadership  position by  continuing to enhance its  technology
through heavy investment in research and development  activities,  incorporating
industry-leading  components into its products, and employing its own technology
and human resources as a source of ongoing technological advantage.

   Having  employed the Common  Object  Request  Broker  Architecture  ("CORBA")
standard  as  a  cornerstone  of  its  product  architecture,  the  Company  has
integrated other CORBA-compatible technologies,  such as the JavaScript and Java
development languages, into its products.

   Utilizing  in-house  expertise and experiences  with  customers,  the Company
intends  to  maintain  its   leadership   position  in  providing  a  scaleable,
innovative, and open architecture.

Grow International Presence

   To  capitalize  on the  emergence  of the Internet as a global  network,  the
Company  has  established  worldwide  distribution  capabilities  with direct or
distributor sales personnel in 43 cities in 34 countries.

   Direct sales  operations are found in Amsterdam,  Basel,  Hong Kong,  London,
Munich, Paris, Singapore and Tokyo. The Company distributes its products through
licensed distributors,  value-added resellers,  and systems integrators in those
countries and in Argentina,  Belgium,  Brazil, China, France, Finland,  Germany,
Japan, Korea, Kuwait, Mexico, South Africa, Spain, Sweden, Switzerland,  Taiwan,
Turkey and the United Kingdom.

   The Company intends to continue to certify providers of professional services
for BroadVision  products in these and other countries.  The Company's  partners
include  multinational   systems  integrators,   as  well  as  partners  with  a
single-country scope of operations.

   The  Company's  product  architecture  is designed  to support  international
languages,  and the Company is currently  shipping  versions of its  BroadVision
One-To-One Enterprise relationship management system that support the display of
content in Arabic, traditional Chinese, Hebrew, Japanese, Korean, Slovakian, and
Turkish as well as all Western European languages.

   The Company's strategies involves substantial risk. There can be no assurance
that the Company will be successful in  implementing  its strategies or that its
strategies,  even if  implemented,  will lead to successful  achievement  of the
Company's  objectives.  If the  Company is unable to  implement  its  strategies
effectively,  the Company's business, financial condition, and operating results
may be materially adversely affected.


BroadVision Products

   The Company develops,  markets and supports a family of extended relationship
management  applications  products  and  associated  software  tools  for use in
customizing and maintaining solutions built with these applications.

   BroadVision  offers  four  applications  products  -  BroadVision  One-To-One
Enterprise,  One-To-One Commerce, One-To-One Financial, and One-To-One Knowledge
that provide a spectrum of complementary capabilities offering numerous business
functions and supporting the needs of companies in different industries.



                                       8
<PAGE>

BroadVision  One-To-One Enterprise is the Company's base product,  providing the
technology platform on top of which the vertical-market  One-To-One applications
are built. This flexible relationship  management system contains cross-industry
functionality  such as profile and content  management;  adapters to third-party
systems;  and  matching  technologies  and  algorithms.  It  utilizes  an  open,
scaleable  application  architecture  for Web  session  management,  secure user
authentication and authorization,  dynamic and personalized page generation, and
transaction handling.

   BroadVision   One-To-One  Enterprise  provides  the  following   capabilities
designed to meet the needs of  companies  delivering  personalized  relationship
management on their Web sites:

         Profiling -  BroadVision  One-To-One  Enterprise  stores and  maintains
         dynamic  profiles of Web site  visitors.  Profile data can be collected
         from  information  in  existing   customer   information   files,  from
         information provided explicitly by site visitors, and by observation of
         visitors' behavior on the site.  Visitors' session information is saved
         in a transaction log and can be used to update and enrich the visitors'
         profiles.  Profile  information is stored in any of several widely used
         third-party relational databases.

         Content Management - BroadVision One-To-One Enterprise delivers dynamic
         content to the user in response to their  interests and needs.  Content
         items  available  for  display to visitors  comprise  one of six types:
         templates  (Web  page  designs  and  layouts),  products,   editorials,
         advertisements,  incentives,  and  discussion  groups.  Each  of  these
         content types has a rich set of attributes that describe its properties
         and key features. This content is managed within BroadVision One-To-One
         Enterprise with tools to create,  classify,  organize,  and publish the
         content.

         Highly Personalized  Interactions - BroadVision  One-To-One  Enterprise
         provides  tools for  business  managers to create and manage  "if-then"
         rules and taxonomy-based  matching schemes that determine which content
         to deliver to Web site  visitors  and the  conditions  under  which the
         content  should be  delivered.  The criteria for content  selection can
         include  the  visitor's   demographic   or   psychographic   variables,
         historical behavior, current session behavior, context information such
         as date and  time,  and  marketing  logic  for  delivering  incentives,
         promotions,  and recommendations.  This allows Web sites to personalize
         product  information,   editorials,   pricing,  advertising,   coupons,
         incentives,  and  promotions  for Web site  visitors who fit  specified
         profiles or the predetermined  criteria as established by the company's
         business managers.

         Simplicity - In an extended  enterprise,  Web site  visitors are casual
         and varied. They require  applications whose use is intuitively obvious
         and which are personalized for their individual  information needs. For
         example, a brokerage application needs to be sophisticated enough for a
         professional investor yet also immediately usable by a casual investor.
         BroadVision    One-To-One    Enterprise   provides   the   personalized
         interactions capable of servicing such a broad constituency.

         Internationalization  - The Company is currently  shipping  versions of
         BroadVision  One-To-One  Enterprise which are capable of supporting the
         display of content in Arabic,  traditional Chinese,  Hebrew,  Japanese,
         Korean,  Slovakian,  Turkish and all  Western  European  languages.  In
         addition,  BroadVision  One-To-One Enterprise supports the new European
         currency,  the Euro,  including  conversions  between European Monetary
         Union  currencies and the Euro, with on-screen prices displayed in both
         the Euro and local currencies.

         Open  Architecture  -  BroadVision  One-To-One  Enterprise  uses  "open
         adapters"  to  enable  easy  integration  with  a  company's   existing
         infrastructure,  with over 60 different  third-party system integrators
         completed to date.


                                       9
<PAGE>
<TABLE>

<CAPTION>
                               Core Features of BroadVision One-To-One Enterprise
------------------------------ ------------------------ ------------------------ --------------------------------
PROFILING                      CONTENT                  MATCHING                 OPEN ADAPTERS
---------                      -------                  --------                 -------------
<S>                            <C>                      <C>                      <C>
Demographics                   Product                  Alerts                   Data warehouses
Preferences                    Information              Attribute search         ERP systems
Interests                      Editorials               Collaborative filtering  Line-of-business applications
Usage history                  Advertising              Community rating         Call centers
Observation                    Incentives               Email targeting          Payment processors
Permissions                    Discussion groups        Entitlements             Shipping & handling systems
Support for external           Page templates           Event-based matching     Configurations
content and profiles                                    Full Text search         Tax systems
                                                        Matching agents          Fulfillment systems
                                                        Observation              LDAP
                                                        Rule-based matching      Middleware
                                                        User profile             Search engines
                                                                                 Customer service
                                                                                 Data feeds
                                                                                 Security
                                                                                 Other third-party systems
------------------------------ ------------------------ ------------------------ --------------------------------
</TABLE>


BroadVision One-To-One Commerce is an enterprise-class  application solution for
the rapid deployment and dynamic  personalization  of high transaction  Internet
commerce sites.  This extensible and flexible  electronic  commerce  application
helps businesses sell more efficiently to their online customers,  whether these
customers are consumers, businesses or channel partners.

   With  its  advanced,   instant  personalization   capabilities,   BroadVision
One-To-One  Commerce  enables   fast-moving,   high  transaction   companies  to
immediately change the products,  prices, promotions and other content to better
meet user  needs - even on a user's  first  visit to a Web site.  Full  commerce
transaction  capabilities  include  persistent  shopping carts,  shopping lists,
real-time  pricing,  automatic  tax  calculation,  shipping  and  handling  cost
computation, payment processing, order fulfillment and management and more.

BroadVision  One-To-One  Financial  is an  enterprise-class  financial  services
solution  that  enables  banks,  brokerages,  mutual fund  companies,  and other
financial   institutions  to  rapidly  deploy  personalized  financial  services
applications  that enable  customers to access  their  account  information  and
perform a rich set of secure  transactions within and between accounts using the
Internet.

   BroadVision  One-To-One  Financial  provides  customers  with a Web site that
offers   customized   interactions   that  enable   financial   institutions  to
differentiate themselves while forging closer relationships with customers. When
customers  spend more time on a bank's  site,  the bank has the  opportunity  to
build a more profitable relationship with the customer.

BroadVision One-To-One Knowledge is an enterprise-class  application designed to
dramatically increase the productivity of corporate knowledge workers, including
sales and  marketing  professionals,  channel  business  partners and  executive
management.

   Optimized for rapid deployment over corporate  intranets and extranets,  this
agent-based   application  enables  individuals  and  work  groups  to  organize
information into flexible, interactive knowledge channels accessible through Web
browsers.  These interactive  channels automate the intelligent  distribution of
information  for  employees  and partners on a  one-to-one,  just-in-time  basis
throughout an enterprise. BroadVision One-To-One Knowledge provides an immediate
solution to the  problems  faced by  enterprises  around the world:  information
accessibility, overload, awareness and high cost.



                                       10
<PAGE>

Key Capabilities of the BroadVision Total End-to-End Soultion

   The  Company  designed  all  of  these  applications   products  for  use  in
mission-critical,  high-performance  environments  by customers  with  demanding
architecture,   deployment,  and  maintenance  requirements.  Some  of  the  key
capabilities of the applications include:

*    Broad applicability - robust functionality to support business-to-business,
     business-to-consumer,  and  business-to-employee  relationship  management,
     including personalized  marketing and communications,  selling and commerce
     transaction handling, and customer self-service.

*    Scaleability - architected  for high  performance  and fast response  while
     supporting  large numbers of  simultaneous  users accessing the system over
     the public Internet or private intranets or extranets.
 
*    Open and standard -  object-oriented  application code written in C++, Java
     and JavaScript  allows  developers and system  integrators to use,  modify,
     adapt, or extend the  applications to create a rapidly  customized  product
     that meets the specific  business  requirements  of a particular  corporate
     customer.  Support for the CORBA  standard  for  object-oriented  computing
     permits  distribution of the application across multiple  processors.  This
     design enables high-volume  performance,  flexible application  deployment,
     and easy integration with other third party or legacy applications.

*    Transaction  processing  - handles a wide-range  of commerce and  financial
     services  transactions   including  order  pricing  and  discount/incentive
     handling,   tax  computation,   shipping  and  handling  charges,   payment
     authorization,  credit card charge  processing,  order  tracking,  news and
     stock  feeds  --  through  a  combination  of  built-in  functionality  and
     integration with other products.
 
*    Platform  independence - versions available for multiple operating systems,
     including Sun Solaris, Microsoft Windows NT, and HP-UX. Databases supported
     include Oracle, Sybase, Informix, and Microsoft SQL Server.
 
*    Multi-lingual - content display available in Arabic,  traditional  Chinese,
     Hebrew,  Japanese,  Korean,  Slovakian,  Turkish and all  Western  European
     languages.

BroadVision One-To-One Tools

   BroadVision  applications  are customized and maintained using tools that are
licensed to customers separately from the applications products. Inherent to the
functionality  of  the  Company's  applications  is a  set  of  building  blocks
comprised of customizable "components," "application templates," and "rule sets"
that   are   instrumental   in   rapidly   building   and   easily   maintaining
One-To-One-based applications. A description of the Company's tools products are
as follows.

BroadVision  One-To-One  Design Center.  BroadVision  One-To-One  Design Center,
integrated  with  Macromedia(R)'s  Dreamweaver(TM)  2, is a  PC-based  tool that
offers Web authors and Internet application  developers faster time to market by
shortening the development  cycle. It also requires fewer specialized skills and
reduces overall  development and maintenance  costs. The BroadVision  One-To-One
Design  Center  with  Dreamweaver  2  gives  the Web  author  direct  access  to
BroadVision's  powerful  personalization  and  functional  components  through a
series of wizards  in the  Dreamweaver  visual  development  environment.  These
wizards  generate  server-side  JavaScript,  which  is the  primary  programming
language for BroadVision applications. By making simple point and click choices,
the Web author can visually construct a complete,  dynamic  application  without
having to write HTML or JavaScript.  In addition,  because the wizards  directly
access information on the BroadVision  development server, the code is generated
correctly  the first time,  without  human  error.  The net result is  increased
productivity and accuracy.

BroadVision One-To-One Command Center.  BroadVision One-To-One Command Center is
a  PC-based  tool that  allows  non-technical  business  managers  to make rapid
changes to the Web site without  programmer  intervention.  With the BroadVision
One-To-One  Command  Center,  business  managers can define rules  incorporating
"if-then"  relationships to match content to users based on profile information,
transaction  history,  session  behavior,  and other data. They can also develop
business  rules  that  evaluate  user   information   gathered  during  previous
interactions  and use it to  target  products  and  services  during  subsequent
interactions.  Also, business managers can make real-time changes to content and
generate  management  reports  that  monitor  the  activity  on their  Web site,
enabling the  evaluation  of the  effectiveness  of content and  services  being
offered on the site.

                                       11
<PAGE>

BroadVision  One-To-One  Publishing Center.  BroadVision  One-To-One  Publishing
Center is a Java- and Web-based  tool that allows a distributed  and remote team
of non-technical content experts to collaboratively  manage every aspect of site
content,  including creation,  editing, staging,  production, and archiving. The
BroadVision  One-To-One  Publishing Center provides personal and shared in-boxes
that enable teams of content  creators to collaborate in developing  content.  A
programming  calendar  facilitates  staging,  scheduling,  and  coordination  of
content  publishing.  This tool provides the ability to preview content prior to
publishing,  to control access to publishing,  and to capture  content  taxonomy
information.  It supports  content created with HTML editors,  Microsoft  Office
products,  and Lotus Domino.  An associated  tool,  the  BroadVision  One-To-One
Instant  Publisher,  is designed for casual  content  contributors.  It provides
simple,  personalized publishing forms, so that casual contributors can leverage
the  functionality  of the  BroadVision  One-To-One  Publishing  Center  without
becoming expert users.

Other Products

   In  addition to its  proprietary  products,  the  Company  has  entered  into
agreements  which  enable  it  to  resell  third-party  software  products  from
CyberSource Corporation, Verity, Inc., Oracle Corporation ("Oracle"), Macromedia
("Macromedia"),   IONA,  NetPerceptions   ("NetPerceptions")  and  Sybase,  Inc.
("Sybase").  These are  sublicensed to end users and either  incorporated  in or
sold as  options to the  Company's  own  products.  License  revenue  from these
third-party  products was  insignificant  and constituted  less than 1% of total
software product license revenues in each of the years for 1998, 1997 and 1996.

<TABLE>

   The table below summarizes certain features of the Company's products:
<CAPTION>
------------------------------------ ------------------------------------------ -----------------------------------
              Product                                 Product                       Operating Platforms/RDBMS
               Name                                 Description
------------------------------------ ------------------------------------------ -----------------------------------
<S>                                  <C>                                        <C>
Relationship Management System:      Full object-oriented environment for       Sun Solaris, HP-UX, Microsoft
One-To-One Enterprise                developing, testing, and tuning            Windows NT operating systems
                                     horizontal applications. One-To-One
                                     Enterprise is sold with one
                                     development-only One-To-One Command        Oracle, Sybase, Informix,
                                     Center and One-To-One Design Center        Microsoft SQL Server RDBMS
------------------------------------ ------------------------------------------ -----------------------------------
Applications Products:               Packaged applications offering vertical    Sun Solaris, HP-UX, Microsoft
One-To-One Commerce                  functionality for electronic commerce,     Windows NT operating systems
One-To-One Financial                 online financial services and knowledge
One-To-One Knowledge                 management
                                                                                Oracle, Sybase, Informix,
                                                                                Microsoft SQL Server RDBMS
------------------------------------ ------------------------------------------ -----------------------------------
Deployment System:                   Full environment for deployment of         Sun Solaris,  HP-UX, Microsoft
One-To-One Enterprise                production application                     Windows NT operating systems

                                                                                Oracle, Sybase, Informix,
                                                                                Microsoft SQL Server RDBMS
------------------------------------ ------------------------------------------ -----------------------------------
Deployment System:                   Full environment for deployment of         Sun Solaris, HP-UX, Microsoft
One-To-One Applications              production applications                    Windows NT operating systems

                                                                                Oracle, Sybase, Informix,
                                                                                Microsoft SQL Server RDBMS
------------------------------------ ------------------------------------------ -----------------------------------
One-To-One Design Center             PC-based application enabling              Windows 95 operating system
                                     application developers and Web authors
                                     to quickly and easily build dynamic Web
                                     page templates
------------------------------------ ------------------------------------------ -----------------------------------
One-To-One Command Center            PC-based application enabling business     Windows 95 operating system
                                     managers to monitor state of  Web
                                     applications, interactively change
                                     business rules in real time, and
                                     generate reports
------------------------------------ ------------------------------------------ -----------------------------------
One-To-One                           Publishing Center Browser-based            Any  browser on the  client;  Sun
                                     application enabling content  developers   Solaris, HP-UX, Microsoft Windows
                                     and  editors to manage the publishing      NT on the server
One-To-One Instant Publisher         of new content to the Web site; optional
                                     tool for causal publishers
------------------------------------ ------------------------------------------ -----------------------------------
</TABLE>
                                       12
<PAGE>

BroadVision Professional Services

   The Company's Worldwide  Professional Services Organization ("WPSO") provides
a broad range of consulting  services in support of BroadVision's  total product
line. The Company's WPSO provides  comprehensive business application expertise,
technical  know-how,  and product  knowledge to  complement  its products and to
provide  total  solutions to customer  business  requirements.  A summary of the
consulting services provided by the Company is as follows.

Strategic Services provides business strategy and process consulting,  assisting
customers  in defining  and  planning  profitable  online  businesses.  Services
include in-depth needs analysis, customer segmentation, site story boarding, and
preparing  detailed  plans  and  procedures  necessary  to  achieve  timely  and
successful  implementations  of  the  Company's  software  products.   Strategic
Services consulting is generally offered on a time and materials basis.

Interactive  Services provides  technical services for development of customized
BroadVision-based applications,  custom interfaces, data conversions, and system
integration.  These  consultants  participate  in a wide  range  of  activities,
including  requirements  definition  and  application  design,  development  and
implementation.  These  consultants  also provide advanced  technology  services
focused on application development for custom objects and templates and database
administration and tuning.  Interactive Services consulting is generally offered
on a time and materials basis.

Content and Creative  Services is a group  specializing  in content  management,
sourcing, workflow processes, and user-interface design. The group is made up of
One-To-One  design experts and a variety of leading  design houses.  This unique
team combines  years of  interactive  design and  marketing  experience to build
purposeful  user-interfaces  that meet customers  pre-defined goals. Content and
Creative Services consulting is generally offered on a time and materials basis.

Education  Services are offered to customers  either at the Company's  education
facilities  or at the  customers'  locations,  as either  standard or customized
classes.  These classes are priced at either fixed daily rates or on a per-class
basis.

Technical Support includes  telephone support and upgrade rights to new releases
(inclusive of patch releases as necessary) and product enhancements, as provided
under the Company's standard maintenance  agreement.  The annual maintenance fee
for these services is based upon a percentage of the then-current list price for
the licensed software fee, payable annually in advance.


Customers and Markets

   The  Company  has  licensed  its  product  to over 250  customers,  including
approximately 70 partners  worldwide.  The types of applications being developed
by licensees using BroadVision  software include product  merchandising,  retail
financial services, and corporate knowledge management for employees,  partners,
and customers.  As of December 31, 1998,  BroadVision products were commercially
deployed in over 110 live web sites.  The  Company's  target  customers  include
Global 2000  organizations  that are at the  forefront  of  building  innovative
Internet  applications to increase revenues and reduce operational costs. During
1998, no customer  accounted for more than 10% of the Company's  total revenues.
In 1997,  software license and service revenues from one customer  accounted for
approximately  11% of the Company's  total revenues and during 1996 one customer
accounted for 10% of the Company's total revenues.

   The  market for the  Company's  products  and  services  continues  to evolve
rapidly.  As is typical  for new and  rapidly  evolving  industries,  demand and
market acceptance for recently introduced products and services are subject to a
high  level  of  uncertainty,  especially  where,  as is true  of the  Company's
product, acquisition of the product requires a large capital commitment or other
significant  commitment  of  resources.   With  respect  to  the  Company,  this
uncertainty is compounded by the risks that consumers and  enterprises  will not
adopt  electronic  commerce and  knowledge  management  and that an  appropriate
infrastructure  necessary to support increased commerce and communication on the
Internet will fail to develop,  in each case, to a sufficient  extent and within
an adequate time frame to permit the Company to succeed.

                                       13
<PAGE>

   Adoption of electronic  commerce and knowledge  management,  particularly  by
those individuals and enterprises that have historically relied upon traditional
means of commerce and communication,  will require a broad acceptance of new and
substantially   different   methods  of  conducting   business  and   exchanging
information.  Moreover,  the  Company's  products  and  services  involve  a new
approach to the conduct of online business and, as a result, intensive marketing
and sales efforts may be necessary to educate  prospective  customers  regarding
the uses  and  benefits  of the  Company's  products  and  services  in order to
generate demand for the Company's  systems.  For example,  enterprises that have
already invested  substantial  resources in other methods of conducting business
may be  reluctant or slow to adopt a new approach  that may replace,  limit,  or
compete with their existing  systems.  Similarly,  individuals  with established
patterns  of  purchasing  goods and  services  may be  reluctant  to alter those
patterns or may  otherwise be resistant to providing  the personal data which is
necessary to support the Company's consumer profiling capability.

   The  Company  has  targeted  a  number  of  markets  that it  believes  to be
especially conducive to one-to-one relationship management  applications.  These
markets,  identified in the table below, have historically been characterized by
early adoption of online  technology or could  otherwise  benefit from providing
significant interactive service to their end-user customers.

<TABLE>
<CAPTION>
---------------------- -------------------------- ---------------------- ---------------------------------------------
Target Industry        Sample Applications        Sample Customers       Benefits of BroadVision Solutions
---------------------- -------------------------- ---------------------- ---------------------------------------------
<S>                    <C>                        <C>                    <C>
Financial services     Home banking               Argentaria             Investment and insurance content targeted
and insurance          Online brokerage           Credit Suisse          based on profiles of visitors
                       Obtaining information on   Hartford               Nationwide service can be locally targeted
                       and selecting:             USAA                   Low-cost distribution channel
                       -  Loans                                          Tremendous cross-selling and up selling
                       -  Mutual funds                                   opportunity.
                       -  Insurance                                      Secure and high performance online
                                                                         transactions
---------------------- -------------------------- ---------------------- ---------------------------------------------
High technology &      Knowledge management       The Baan Company       Ability to disseminate large amounts of
manufacturing          Business-to-business       Hewlett-Packard        knowledge/information in a personalized way
                       purchasing                 Macromedia             based on purchaser's profile
                                                  Oracle                 Maintain and make available up-to-date
                                                  Xerox                  information related to complex purchasing
                                                                         decisions
                                                                        
                                                                         Supports  purchase  orders,  Visa  purchasing
                                                                         cards, volume discounts,  price locks, custom
                                                                         pricing schedules
---------------------- -------------------------- ---------------------- ---------------------------------------------
Retail and             Online shopping            Cyberian Outpost       Creation of branded communities based on
Distribution           Interactive catalogues     Electronic Arts        profiles of visitors
                                                  Fingerhut              Online, real-time control of business
                                                  The Good Guys          rules, such as pricing and promotions by
                                                  RS Components          content providers
                                                                         Reduced transaction costs of direct
                                                                         purchases
---------------------- -------------------------- ---------------------- ---------------------------------------------
Travel and leisure     Reservations               Air Miles              Provide travel planning advice and
                       Travel planning            American Airlines      transaction services without agents or
                       Brand projection,          Thomas Cook            other intermediaries
                       loyalty programs, and                             Opportunity to cross-sell or up sell
                       affinity marketing                                services in addition to basic travel
                                                                         reservations based on user profiles
---------------------- -------------------------- ---------------------- ---------------------------------------------
Telecommunications     Commerce:                  Belgacom               Selective sharing of visitor profiles
                       Business-to-business and   Hong Kong Telecom      between aggregators and content providers
                       business-to-consumer       JiangSu Telecom        Online, real-time control of business
                       Online services            Telus Advanced         rules, such as pricing and promotions.
                       Self-service (call         Communications
                       centers)                   Vodafone
---------------------- -------------------------- ---------------------- ---------------------------------------------
Media and publishing   Purchasing digital media   Grolier                Ability to price digital products and
                       Knowledge management       Meta Group             services in real time
                                                  Milwaukee Journal      Dynamically target relevant information to
                                                  Sentinel               individuals
                                                  Singapore Post
                                                  Virgin.net
---------------------- -------------------------- ---------------------- ---------------------------------------------
Application Service    Hosting services           Debis Systemhaus       Extend BroadVision solutions to mid-tier
Providers              bundling packaged          Metronet               market
                       application software and   Servi Banca            BroadVision publishing tools enable remote
                       complex Web site           Usinternetworking      publication to hosted Web sites
                       management as turnkey      US Web
                       service
---------------------- -------------------------- ---------------------- ---------------------------------------------
</TABLE>

                                                          14
<PAGE>


Sales and Marketing

   The  Company   markets  its  products   primarily   through  a  direct  sales
organization  with operations in North America,  Europe,  and  Asia/Pacific.  On
December 31, 1998,  the Company's  direct sales  organization  included 95 sales
representatives,  managers,  applications consultants, and pre-sales support and
post-sales support personnel. The Company has a sales office at its headquarters
in Redwood City,  California  and has North  American  sales offices in Atlanta,
Boston,  Chicago,  Dallas,  Los  Angeles,  Minneapolis,  and New York City,  and
established  a sales and  service  office in  Washington  DC for the US  Federal
Government.  The Company has subsidiaries in France,  Germany,  the Netherlands,
Switzerland,  the United  Kingdom,  Japan,  and Hong Kong and a sales  office in
Singapore.

   A  component  of  the  Company's  strategy  is  continued  expansion  of  its
international  activities.  The  Company  intends to  broaden  its  presence  in
international markets by expanding its international sales force and by entering
into  additional  distribution  agreements.  The  Company  also  contracts  with
resellers and commissioned agents in North America,  South America,  Europe, and
Asia.  Although the Company  generates leads from many sources,  the majority of
the  Company's  leads have come from press  articles  discussing  the  Company's
products  and  customers   implementing   one-to-one   relationship   management
applications.  Initial sales  activities  typically  include a demonstration  of
BroadVision  One-To-One  capabilities at the prospect's site, followed by one or
more detailed technical reviews, often presented at the Company's  headquarters.
The sales process usually involves a collaboration with the prospective customer
in order to specify the scope of the  application.  The  Company's  professional
services organization typically plays a key role in helping customers to design,
and then develop, their applications.

   The Company's marketing efforts are targeted at product strategy  development
and product  management;  building market awareness  through press and analysts;
producing and maintaining marketing information and sales tools;  generating and
developing customer leads; and sourcing and managing  relationships with systems
integrators,  value-added  resellers,  creative design and advertising agencies,
and technology partners. As of December 31, 1998, 26 employees were engaged in a
variety of marketing activities, including preparing marketing research, product
planning, and collateral marketing materials,  managing press coverage and other
public  relations,  identifying  potential  customers,  attending  trade  shows,
seminars, and conferences, establishing and maintaining close relationships with
recognized industry analysts, and maintaining the Company's Web site.

   The license of the Company's  software  products is often an  enterprise-wide
decision by prospective customers,  requiring the Company to engage in a lengthy
sales cycle to provide a significant level of education to prospective customers
regarding  the use and benefits of the  Company's  products.  In  addition,  the
implementation of the Company's  products  involves a significant  commitment of
resources by the customers or by the Company's WPSO consultants over an extended
period of time.  As a result,  the Company's  sales and customer  implementation
cycles are subject to a number of significant  delays over which the Company has
little or no control.  Delays in license transactions as a result of the lengthy
sales cycle or delays in customer  production  or  deployment  of a system could
have a material adverse effect on the Company's business,  financial  condition,
and  operating  results,  and can be expected to cause the  Company's  operating
results to vary significantly from quarter to quarter.

Strategic Alliances

   A  significant  element  of the  Company's  sales  strategy  is to  engage in
strategic  business alliances to assist the Company in marketing,  selling,  and
developing  customer  applications.  This  approach is intended to increase  the
number of personnel  available  to perform  application  design and  development
services for the Company's customers;  enhance the Company's market credibility,
increase  the  potential  for lead  generation  and  access  to  large  customer
accounts;  and  provide  additional  marketing  expertise  in  certain  vertical
industry  segments while  providing  technical  expertise in the  development of
reusable objects and templates.  To date the Company has developed key strategic
business alliances with over 90 systems  integration,  design,  consulting,  and
other services  organizations,  including American Management Systems,  Andersen
Consulting,   Cambridge  Technology  Partners,  Computer  Sciences  Corporation,
Context  Integration,  Concept 5, Daimler-Benz  Information  Systems AG (Debis),
Ernst & Young LLP, Gran Via Internet,  NTT Data Corporation,  Metamor Worldwide,
Sema Group plc, Siemens Business Services Gmbh and Co., and others.


                                       15
<PAGE>

Competition

   The market for online  interactive  relationship  management  applications is
rapidly evolving, and intensely competitive.  The Company expects competition to
persist and intensify in the future.  The Company's  primary  competition  comes
from  in-house  development  efforts by potential  customers  or  partners.  The
Company's  competitors  also  include  other  vendors  of  application  software
directed  at  interactive  commerce  and  financial  services  and  Web  content
developers  engaged to develop custom software or to integrate other application
software  into  custom  solutions.   The  Company  currently  encounters  direct
competition   from   Edify   Corporation   ("Edify"),   InterWorld   Corporation
("InterWorld"),   International   Business  Machines  Inc.  ("IBM"),   Microsoft
Corporation  ("Microsoft"),  Open Market Inc. ("OMI"),  and Vignette Corporation
("Vignette"),  among others.  Some of these  competitors  have longer  operating
histories, and significantly greater financial,  technical, marketing, and other
resources  than the Company and thus may be able to respond  more quickly to new
or changing opportunities, technologies, and customer requirements.

   Also, current and potential competitors may have greater name recognition and
more extensive  customer bases that could be leveraged,  thereby  gaining market
share to the Company's detriment. Such competitors may be able to undertake more
extensive promotional  activities,  adopt more aggressive pricing policies,  and
offer more attractive terms to purchasers than the Company. Moreover, certain of
the Company's current and potential competitors,  such as IBM and Microsoft, may
bundle  their  products in a manner that may  discourage  users from  purchasing
products offered by the Company.

   In  addition,  current and  potential  competitors  have  established  or may
establish  cooperative  relationships  among themselves or with third parties to
enhance their  products.  Accordingly,  it is possible that new  competitors  or
alliances among  competitors may emerge and rapidly acquire  significant  market
share.

   The  principal  competitive  factors  affecting  the market for the Company's
products are depth and breadth of  functionality  offered,  ease of  application
development,  time required for  application  development,  reliance on industry
standards, reliability, scaleability, maintainability, personalization and other
features, product quality, price, and customer support.

   The Company believes it presently  competes favorably with respect to each of
these factors. However, the Company's market is still evolving, and there can be
no assurance that the Company will be able to compete  successfully with current
or future competitors,  or that competitive  pressures faced by the Company will
not  have a  material  adverse  effect  on  the  Company's  business,  financial
condition, and operating results.


BroadVision Technology

   The Company believes its advanced  technology enables the delivery of robust,
scaleable,  and innovative Internet  relationship  management solutions into the
market faster and at a lower cost than  alternatives.  The Company's  technology
consists of the following key elements:

Architectural Design

   The Company  believes that the technical  demands of  interactive  one-to-one
relationship  management on the Internet  require an  architectural  design that
stresses standards, openness, interoperability, and flexibility. The Company has
designed  its  current  application  system  as an  architectural  solution  for
building  dynamic,   scaleable,   and  extensible  Internet   applications.   By
emphasizing reusable methods,  separation of application logic,  business rules,
and  data,  and  adherence  to  open  standards,   the  BroadVision   One-To-One
applications  family  provides  an  efficient  architecture  for  customers  and
partners to build,  modify,  and control  applications,  as well as to integrate
them with external business systems. The Company believes this architecture also
provides a robust  foundation  on which the  Company  can  rapidly  develop  new
products.

                                       16
<PAGE>

Adherence to Industry Standards

   The Company has invested  substantially  in developing  its  architecture  to
comply with CORBA, a standard for  applications  software design and development
widely  adopted  in the  commercial  software  industry.  Applications  that are
CORBA-compliant  can run on either single  computers with one or more processors
or across large networks,  allow replication and relocation of object servers to
improve system performance,  are platform independent, and have strongly defined
Application  Programming  Interfaces through the use of the Interface Definition
Language specified by CORBA.

   Through CORBA  compliance,  the Company's  products are fully compatible with
other  CORBA-based  technologies,  such as Java and  JavaScript.  In addition to
CORBA,  the Company  uses other widely  accepted  standards  in  developing  its
products,  including SQL (Structured  Query  Language) for accessing  relational
database management systems ("RDBMSs"), CGI (Common Gateway Interface), and HTTP
(Hypertext Transfer Protocol) for Internet access,  NSAPI (Netscape  Application
Programming  Interface) for access to Netscape's  Internet servers,  SSL (Secure
Socket  Layer)  for  secure  transmissions  over  networks,  and the RC2 and MD5
encryption algorithms supplied by RSA Data Security,  Inc. ("RSA").  BroadVision
One-To-One  Enterprise  can be operated in conjunction  with RDBMSs  provided by
Oracle, Informix Corporation ("Informix"), Microsoft, and Sybase.

   Most of the Company's  programs are written in C++ and Java,  widely accepted
standard  programming  languages for  developing  object-oriented  applications.
Application templates are written in JavaScript. Adherence to industry standards
provides compatibility with existing applications, enables ease of modification,
and  reduces  the  need  for  software  to be  rewritten,  thus  protecting  the
customer's investment.

N-Tier Architecture

   BroadVision  One-To-One  Enterprise  utilizes  an  N-tier  architecture  that
logically separates application presentation,  business rules, and data. Between
each  of  these  tiers  are  session  manager  and  project  adapter   interface
technologies,  described below, that establish seamless interoperability between
application components. This architecture partitions applications across:


*    A front-end tier that manages the application presentation and interface to
     Web site visitors;

*     Application   engine  tier(s)  that  manage  the  one-to-one   life  cycle
      activities--community,  profiling,  targeting,  and  transactions--and the
      business rules that define the interactive characteristics and behavior of
      one-to-one    relationship   management    applications.    Due   to   the
      object-oriented  design of this code and the reliance on CORBA,  this code
      can be distributed across multiple logical and physical  processors,  thus
      enabling the N-tier design of the application; and

*     A back-end tier that integrates underlying database management systems for
      storing  BroadVision  One-To-One data with external  business systems that
      perform  specialized  relationship  management  functions,  such as online
      credit card  authorization  and payment  handling,  sales tax and shipping
      computation, online and off-line order fulfillment,  inventory management,
      visitor demographic analysis, and data mining.

The Company believes this N-tier architecture offers significant advantages over
alternative approaches, including:

*    Bandwidth, database, and platform independence;

*    Modularity, to enable changes to be made to one area of an application with
     minimal impact on other areas;

*    The ability for business  managers to define and control  business rules in
     real time without requiring programming changes to application logic; and

*    The ability to support  specialized  "object adapters" that reduce time and
     cost  to  integrate  BroadVision  One-To-One   applications  with  existing
     business systems, the ability to perform such integration with a minimum of
     programming, and the ability to localize applications to different language
     and currency requirements.

                                       17
<PAGE>

Session Manager

   The Company has developed  proprietary  "session manager" technology designed
to manage the high volume of dynamic  interactions that occur in online sessions
between  many  concurrent  Web  site  visitors  and  a  relationship  management
application. The session manager enables three key activities:

*    Maintaining  context,  or "state,"  between visitors and sites so that each
     current and future  interaction  can trigger a response  appropriate to the
     objectives of both visitor and site provider;

*    Interpreting  application objects and templates at runtime,  and retrieving
     profile data and business rules to  dynamically  generate HTML that creates
     content, Web pages, and interactions tailored to the needs and interests of
     individual Web site visitors; and

*    Enabling  application  scaleability  by allowing Web site  providers to add
     additional  software processes or hardware  processors to their Web systems
     to support more concurrent Web site visitors without incurring  performance
     degradation or additional overhead in application maintenance.

Components and Application Templates

   The  Company  believes  that the  costs  and time  associated  with  Internet
application  development and maintenance can be  substantially  reduced with its
technology for object-oriented application development. This technology consists
primarily of  customizable  components and  application  templates.  Utilized in
combination  with  the  Company's  structured  development  methodology,   these
technologies  are designed to help  customers and partners  create  libraries of
reusable program  components that increase  application  quality and reduce cost
and time-to-market of new and maintained applications. In addition,  application
templates,  written  in  JavaScript,  enable  business  managers  to define  and
implement business rules through the BroadVision  One-To-One Command Center on a
real-time basis. The Company's  consultants  currently use these technologies to
develop  application  solutions  for  customers,  and  the  Company's  Education
Services Group offers  training  classes to customers and partners on the use of
components and application templates.


Product Development

   The Company believes that its future success will depend in large part on its
ability to enhance  the  BroadVision  One-To-One  product  family,  develop  new
products,  maintain technological  leadership,  and satisfy an evolving range of
customer requirements for large-scale interactive online relationship management
applications.  The Company's product development organization is responsible for
product  architecture,  core technology,  product testing and quality assurance,
writing  product user  documentation,  and expanding the ability of  BroadVision
One-To-One  products to operate with the leading hardware  platforms,  operating
systems,  database management systems,  and key electronic commerce  transaction
processing  standards.   Since  inception,  the  Company  has  made  substantial
investments in product development and related activities.  Certain technologies
have been acquired and integrated into BroadVision  One-To-One  products through
licensing arrangements.

   As of December 31, 1998,  there were 73  employees in the  Company's  product
development  organization.  The Company's research and development expenses were
$9,227,000,  $7,392,000 and  $4,985,000,  for the years ended December 31, 1998,
1997 and 1996,  respectively.  To date,  the  Company  has not  capitalized  any
software  development  costs as products are made available for general  release
relatively concurrent with the establishment of technological  feasibility.  The
Company  expects to  continue  to devote  substantial  resources  to its product
development activities.

   The  information  services,   software,  and  communications  industries  are
characterized by rapid technological change,  changes in customer  requirements,
frequent new product and service  introductions and  enhancements,  and emerging
industry  standards.  The  introduction  of products and services  embodying new
technologies  and the  emergence of new industry  standards  and  practices  can
render existing products and services obsolete and unmarketable.

                                       18
<PAGE>

   The Company's future success will depend,  in part, on its ability to develop
leading  technologies,  enhance its existing products and services,  develop new
products and services  that address the  increasingly  sophisticated  and varied
needs of its prospective  customers,  and respond to technological  advances and
emerging industry standards and practices on a timely and cost-effective basis.

   There can be no assurance  that the Company will be successful in effectively
using new technologies,  adapting its products to emerging  industry  standards,
developing,  introducing, and marketing product and service enhancements, or new
products and services,  or that it will not experience  difficulties  that could
delay or prevent the successful development, introduction, or marketing of these
products and  services,  or that its new product and service  enhancements  will
adequately  meet  the   requirements  of  the  marketplace  and  achieve  market
acceptance.

   If the Company is unable,  for  technical  or other  reasons,  to develop and
introduce  new products and services or  enhancements  of existing  products and
services  in a timely  manner in  response  to  changing  market  conditions  or
customer  requirements,  or if new products  and services do not achieve  market
acceptance,  the Company's business,  financial condition, and operating results
will be materially adversely affected.


Intellectual Property and Other Proprietary Rights

   The  Company's  success and ability to compete are dependent to a significant
degree on its proprietary  technology.  The Company provides its products to end
users generally under nonexclusive,  nontransferable licenses during the term of
the  agreement,  which is usually in  perpetuity.  Under the  general  terms and
conditions of the Company's  standard license  agreement,  the licensed software
may be used solely for internal operations  pursuant to BroadVision's  published
licensing practices.

   The Company holds a patent on its core technology for  personalized  business
on the Internet.  The United  States  Patent  Office issued Patent  5,710,887 on
January 20, 1998 to the Company,  covering  certain  elements of the BroadVision
One-To-One  Application System. There can be no assurance that this patent would
survive a legal challenge to its validity or provide significant protection.  On
December 11, 1998, in the Northern  District of California,  BroadVision filed a
lawsuit against Art Technology  Group, Inc. ("ATG") . The complaint alleges that
ATG is infringing  BroadVision's  U.S. Patent No. 5,710,887 and seeks injunctive
relief and  unspecified  damages.  On February 3, 1999,  ATG filed an answer and
counterclaim  against  BroadVision in which ATG seeks  declaratory  judgment for
non-interference and declaratory judgment for invalidity of the patent.

   The Company has  registered  "BroadVision"  and applied for  registration  of
"BroadVision  One-To-One"  as  trademarks  in the United  States.  Although  the
Company takes steps to protect its trade secrets, there can be no assurance that
misappropriation  will not occur or that  copyright and trade secret  protection
will be available in certain countries.

   The source code for the Company's proprietary software is protected both as a
trade secret and as a copyrighted  work. The Company makes source code available
for  certain  portions  of its  products.  In  addition,  some of the  Company's
agreements with its customers  contain  provisions  requiring  release of source
code for  limited,  non-exclusive  use by the  customer  in the  event  that the
Company ceases to do business or the Company fails to support its products.
The provision of source code may increase the likelihood of  misappropriation by
third parties.

   The  Company's  policy  is  to  enter  into  confidentiality  and  assignment
agreements with its employees, consultants, and vendors and generally to control
access to and distribution of its software, documentation, and other proprietary
information.  Notwithstanding these precautions,  it may be possible for a third
party  to copy or  otherwise  obtain  and use the  Company's  software  or other
proprietary  information  without  authorization  or to develop similar software
independently. Policing unauthorized use of the Company's products is difficult,
particularly  because the global  nature of the  Internet  makes it difficult to
control  the  ultimate  destination  or  security  of  software  or  other  data
transmitted.  The laws of other  countries  may afford the Company  little or no
effective protection of its intellectual property.

                                       19
<PAGE>

   There can be no  assurance  that the steps taken by the Company  will prevent
misappropriation  of its  technology  or that  agreements  entered into for that
purpose will be enforceable. In addition, litigation such as the lawsuit against
ATG,  may be  necessary  in the future to  enforce  the  Company's  intellectual
property  rights,  to protect the  Company's  trade  secrets,  to determine  the
validity and scope of the  proprietary  rights of others,  or to defend  against
claims of infringement or invalidity.  Such  litigation,  whether  successful or
unsuccessful,  could result in  substantial  costs and  diversions of resources,
either of which could have a material adverse effect on the Company's  business,
financial condition, and operating results.

   The Company may, in the future,  receive notices of claims of infringement of
other parties' trademark,  copyright, and other proprietary rights. There can be
no  assurance  that  claims  for  infringement  or  invalidity  (or  claims  for
indemnification  resulting  from  infringement  claims)  will not be asserted or
prosecuted against the Company. In particular,  claims could be asserted against
the Company for violation of trademark,  copyright, or other laws as a result of
the use by the Company,  its customers,  or other third parties of the Company's
products  to  transmit,  disseminate,  or  display  information  over  or on the
Internet.

   Any such claims,  with or without  merit,  could be time consuming to defend,
result in costly litigation,  divert management's attention and resources, cause
product  shipment  delays,  or require  the  Company  to enter  into  royalty or
licensing agreements.

   There can be no assurance that such licenses would be available on reasonable
terms, if at all, and the assertion or prosecution of any such claims could have
a material adverse effect on the Company's business,  financial  condition,  and
operating results.

   The Company relies upon certain software that it licenses from third parties,
including  RDBMSs from Oracle and Sybase,  object request  broker  software from
IONA, database access technology from Rogue Wave Software,  Inc. ("Rogue Wave"),
and other software which is integrated  with internally  developed  software and
used in the Company's software to perform key functions.  In this regard, all of
the Company's services incorporate data encryption and authentication technology
licensed from RSA.

   There can also be no  assurance  that the  Company's  third-party  technology
licenses will continue to be available to the Company on commercially reasonable
terms,  if at all. The loss or  inability  to maintain  any of these  technology
licenses could result in delays in  introduction  of the Company's  products and
services until equivalent technology, if available, is identified, licensed, and
integrated,  which  could  have a  material  adverse  effect  on  the  Company's
business, financial condition, and operating results.


Employees

   As of  December  31,  1998,  the  Company  employed a total of 271  full-time
employees,  including 121 in sales and marketing, 73 in product development,  50
in professional services and client support, and 27 in finance,  administration,
and operations.

   The Company  believes that its future  success is dependent on attracting and
retaining highly skilled  personnel.  Competition for such personnel is intense,
and there can be no  assurance  that the  Company  will  continue  to be able to
attract and retain high-caliber employees.

   The Company's  employees are not  represented  by any  collective  bargaining
unit.  The Company has never  experienced  a work  stoppage  and  considers  its
employee relations to be good.



                                       20
<PAGE>


<TABLE>
Executive Officers and Key Personnel

The  executive  officers  and key  personnel  of the  Company  and their ages at
February 28, 1999 are as follows:
<CAPTION>

              Name                   Age                    Position
              ----                   ---                    --------
<S>                                  <C>      <C>
Pehong Chen......................    41       Chairman of the Board, Chief Executive Officer and President
Randall C. Bolten................    46       Chief Financial Officer and Vice President, Operations
Clark W. Catelain................    51       Vice President, Engineering
Eric J. Golin....................    39       Vice President of Worldwide Professional Services
Michael A. Kennedy...............    36       Vice President of Global Strategic Alliances
Giuseppe Kobayashi...............    43       Vice President and General Manager of Japan/Asia-Pacific Operations
Francois Stieger.................    49       Vice President and General Manager of European Operations
James W. Thanos..................    50       Vice President and General Manager, Americas
Perry W. Thorndyke...............    49       Vice President, Business Development
Sandra J. Vaughan ...............    33       Vice President of Marketing
</TABLE>


   Pehong Chen has served as Chairman of the Board,  Chief Executive Officer and
President of the Company since its incorporation in May 1993. From 1992 to 1993,
Dr. Chen served as the Vice  President of  Multimedia  Technology  at Sybase,  a
supplier of client-server  software products. Dr. Chen founded and, from 1989 to
1992, served as President of Gain Technology  ("Gain"), a provider of multimedia
applications  development  systems,  which was acquired by Sybase. He received a
B.S. in Computer  Science from National Taiwan  University,  an M.S. in Computer
Science  from  Indiana  University,  and a Ph.D.  in Computer  Science  from the
University of California at Berkeley.

   Randall C. Bolten has served as Chief  Financial  Officer and Vice President,
Operations,  of the Company since  September 1995. From 1994 to 1995, Mr. Bolten
served as a financial consultant to various  entrepreneurial  enterprises.  From
1992  to  1994,  Mr.  Bolten  served  as  Chief  Financial   Officer  of  BioCad
Corporation,  a supplier of drug discovery software products. From 1990 to 1992,
Mr. Bolten served as Chief Financial  Officer,  Business  Development  Unit, and
then Vice President,  Finance of Teknekron Corporation, a company engaged in the
management  of  various  high  technology  companies.  He  received  an A.B.  in
Economics from Princeton University and an M.B.A. from Stanford University.

   Clark W. Catelain has served as Vice President,  Engineering,  of the Company
since June 1995.  From 1989 to May 1995, Mr.  Catelain served as the Senior Vice
President,  Engineering  of  Gupta  Corporation,  a  supplier  of  client/server
database  products.  Mr.  Catelain  received a B.S. in Mathematics  and Computer
Science from Purdue University.

   Eric J. Golin has served as Vice President of Worldwide Professional Services
of the Company since  September 1997. From September 1994 to September 1997, Dr.
Golin  served  as Senior  Architecture  Engineer  and later as Senior  Director,
Engineering of the Company. From September 1993 to September 1994, Dr. Golin was
a  principal  architect  for  OpenVision  Technology.  From  September  1989  to
September  1993,  Dr. Golin was Assistant  Professor of Computer  Science at the
University of Illinois at  Champaign-Urbana.  Dr. Golin received an B.S.,  M.S.,
and a Ph.D. in Computer Science from Brown University.

   Michael A. Kennedy has served as Vice President,  Global Strategic Alliances,
since  September 1997. From September 1995 to August 1997, Mr. Kennedy served as
Senior Director,  Marketing of the Company. From August 1993 to August 1995, Mr.
Kennedy  served  as  Director,   New  Media  Business   Development  for  Oracle
Corporation, supplier of database software. From December 1989 to July 1993, Mr.
Kennedy served as Senior Product Marketing Manager for Oracle  Corporation.  Mr.
Kennedy  received a B.Sc.  in Computer  Science  from the  Aberdeen  University,
Scotland.


                                       21
<PAGE>

   Giuseppe  Kobayashi  has  served as Vice  President  and  General  Manager of
Japan/Asia-Pacific  Operations of the Company  since January 1995.  From 1994 to
the present,  Mr. Kobayashi has also served as consultant to Wind River Systems,
Inc., a supplier of software development systems. During 1993, Mr. Kobayashi was
General  Manager,  Japan  Operations,  Gain Group at Sybase.  During  1992,  Mr.
Kobayashi  was General  Manager of Operations  at Gain.  From 1990 to 1992,  Mr.
Kobayashi  served as Managing  Director of Asia Pacific  Operations  at Teradata
Corporation,  a supplier of database  software.  Mr.  Kobayashi  holds a B.S. in
Computer Science from the University of San Francisco.

   Francois Stieger has served as Vice President and General Manager of European
Operations of the Company since January 1996.  From July 1994 to December  1995,
Mr. Stieger was employed as Senior Vice  President,  Europe and Middle East, for
OpenVision  Technologies,  Inc., a supplier of  distributed  systems  management
products and services.  From 1993 to 1994, Mr. Stieger served as Vice President,
Europe of the Gain Division of Sybase.  From 1987 to 1992, Mr. Stieger served as
Vice President,  Europe,  Central and Southern  region of Oracle,  a supplier of
relational  database  software.  Mr.  Stieger holds a Diplome  Universitaire  De
Technologie in Mathematics and Mechanics from the University of Strasbourg.

   James W. Thanos has served as Vice President and General Manager, Americas of
the Company since January  1998.  From January 1995 to January 1998,  Mr. Thanos
served as Vice President of North American Operations of Aurum Software, a sales
force automation  company. . From May 1994 to January 1995, Mr. Thanos served as
Vice  President of Sales of Digital.  From January 1993 to May 1994,  Mr. Thanos
served as Vice  President  of Sales of Harvest  Software,  an optical  character
recognition  software  company.  From December 1988 to January 1993,  Mr. Thanos
served as Vice  President  of Sales  Operations  of  Metaphor,  Inc., a decision
support software  company.  Mr. Thanos holds a B.A. in  International  Relations
from Johns Hopkins University.

   Perry W. Thorndyke has served as Vice President, Business Development for the
Company since May,  1998.  From July 1997 to May 1998, Dr.  Thorndyke  served as
Vice  President,  Marketing of the Company.  From August 1996 to July 1997,  Dr.
Thorndyke  served as Vice  President,  Business and Channel  Development  of the
Company.  From  February  1995  to  January  1996,  Dr.  Thorndyke  served  as a
management consultant to the Vice President,  Marketing for Quintus Corporation,
a supplier of client/server solutions for customer information management.  From
February 1994 to January 1995, Dr. Thorndyke  served as a management  consultant
on  technology   strategy  for  customer   information   management  systems  to
independent  software vendors and user  organizations.  From May 1992 to January
1994, Dr.  Thorndyke  served as Vice  President and Division  Manager for retail
banking systems at Wells Fargo Bank. From 1990 to May 1992, Dr. Thorndyke served
as Director of Marketing and Business  Development at Metaphor Computer Systems,
a supplier of client/server  software applications for PC-based support decision
products.  Dr.  Thorndyke  received a B.A. in Computer and Information  Sciences
from  Yale  University  and  a  Ph.D.  in  Cognitive  Psychology  from  Stanford
University.

   Sandra J.  Vaughan has served as Vice  President,  Marketing  for the Company
since May,  1998.  From June 1996 to April  1998,  Ms.  Vaughn  served as Senior
Director and later as Vice President,  Corporate Marketing of the Company.  From
1993 to  1996,  Ms.  Vaughan  served  as Group  Director,  North  America  Field
Marketing of Sybase. From 1989 to 1993, Ms. Vaughn served as Director,  Customer
Programs  of Oracle  Corporation.  Ms.  Vaughan  received  a BS Degree  from the
University of California, Davis.


ITEM 2.    PROPERTIES

   The Company's  principal  administration,  research and  development,  sales,
consulting,  and support  facilities  are located in Redwood  City,  California,
where the Company occupies  approximately 60,000 square feet pursuant to a lease
that expires in 2007.  During March 1999, the Company  entered into an operating
lease agreement  through  December 2007 for an additional  55,000 square feet of
office space  adjacent to its corporate  headquarters  building in Redwood City,
California.


                                       22
<PAGE>

   The Company also rents space in various cities to support its sales and field
support activities,  including Atlanta, GA; Newton, MA; Schaumburg,  IL; Dallas,
TX;  Ashburn,  VA;  Irvine,  CA;  Bethesda,  MD; New York, NY;  Amersfoort,  The
Netherlands;  Courbevoie,  France; Munich,  Germany;  WanChai, Hong Kong; Tokyo,
Japan; Wheellock Place, Singapore; Bottmingen,  Switzerland; Berkshire, England;
Madrid,  Spain;  and Koeln,  Germany.  The Company  believes  that its  existing
facilities are adequate to meet its needs for the foreseeable future.


ITEM 3.    LEGAL PROCEEDINGS

   On December  11, 1998,  BroadVision  filed a lawsuit  against Art  Technology
Group,  Inc.  ("ATG") in the  Northern  District of  California.  The  complaint
alleges that ATG is infringing BroadVision's U.S. Patent No. 5,710,887 and seeks
injunctive  relief and  unspecified  damages.  On February 3, 1999, ATG filed an
answer  and  counterclaim  against  BroadVision  in which ATG seeks  declaratory
judgment for  non-interference  and  declaratory  judgment for invalidity of the
patent.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   Not applicable.


                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
           STOCKHOLDER MATTERS

   The Company's  Common Stock is traded on the Nasdaq National Market under the
symbol "BVSN."  Public  trading of the Common Stock  commenced on June 26, 1996.
Prior to that,  there was no public market for the Common Stock. As of March 12,
1999, there were  approximately 9,845 holders  of record of the Company's Common
Stock.  For the periods  indicated,  the  following  table sets forth the Nasdaq
National Market high and low sale price per share of BVSN Common Stock.

                                                   High              Low
                                             ---------------    ----------------
1998
         Fourth Quarter                           $44.25            $9.25
         Third Quarter                            $29.50           $10.06
         Second Quarter                           $25.13           $14.75
         First Quarter                            $19.00            $6.00

1997
         Fourth Quarter                            $8.69            $5.88
         Third Quarter                             $7.38            $5.00
         Second Quarter                            $9.13            $4.38
         First Quarter                            $10.38            $7.50

1996
         Fourth Quarter                            $9.06            $6.56
         Third Quarter                             $8.38            $5.38
         Second Quarter (from June 26, 1996)       $7.13            $6.88

   The Company has never  declared or paid cash  dividends on its Common  Stock,
and it is the  Company's  present  intention  to retain  earnings to finance the
expansion of its business.  In addition,  the Company's credit facility with its
commercial  lender  contains  certain  covenants  which may limit the  Company's
ability to pay cash dividends.


                                       23
<PAGE>


ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
   The selected  consolidated  financial  data set forth below should be read in
conjunction with  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations," the Consolidated Financial Statements of the Company
and Notes thereto,  and other financial  information  included elsewhere in this
Form 10-K.  Historical results are not necessarily  indicative of the results to
be expected in the future.

<CAPTION>

                                                              Years Ended December 31,
                                 -----------------------------------------------------------------------------------
                                        1998             1997            1996            1995            1994
                                 -----------------------------------------------------------------------------------
Statement of Operations Data:                          (in thousands, except per share data)
<S>                                <C>                <C>             <C>             <C>             <C>        
Revenues:
     Software licenses             $    36,067        $    18,973     $     7,464     $         -     $         -
     Services                           14,844              8,132           3,418             540               -
                                 ------------------ --------------- --------------- --------------- ---------------
       Total revenues                   50,911             27,105          10,882             540               -

Cost of revenues:
     Cost of license revenues            1,001              1,664             330               -               -
     Cost of services revenues           8,704              4,284           2,164             249               -
                                 ------------------ --------------- --------------- --------------- ---------------
       Total cost of revenues            9,705              5,948           2,494             249               -
                                 ------------------ --------------- --------------- --------------- ---------------
Gross profit                            41,206             21,157           8,388             291               -

Operating expenses:
     Research and development            9,227              7,392           4,985           2,575             748
     Sales and marketing                26,269             18,413          12,066           1,348             512
     General and administrative          3,786              2,990           2,034             846             511
       Total operating           ------------------ --------------- --------------- --------------- ---------------
         expenses                       39,282             28,795          19,085           4,769           1,771
                                 ------------------ --------------- --------------- --------------- ---------------
Operating income (loss)                  1,924             (7,638)        (10,697)         (4,478)         (1,771)
Other income and taxes, net              2,115                265             552             160             101
                                 ================== =============== =============== =============== ===============
Net income (loss)                  $     4,039        $    (7,373)    $   (10,145)    $    (4,318)    $    (1,670)
                                 ================== =============== =============== =============== ===============
Basic earnings (loss) per          $      0.17            $ (0.36)        $ (0.54)        $ (0.36)
share
===============================  ================================== =============== ===============
Diluted earnings (loss) per        $      0.16            $ (0.36)        $ (0.54)        $ (0.36)
share
===============================  ================================== =============== ===============

Shares used in per share computations:

                                 ================================== =============== ===============
   Basic                                23,346             20,208          18,815          11,976
                                 ================================== =============== ===============
   Diluted                              25,653             20,208          18,815          11,976
                                 ================================== =============== ===============

</TABLE>
<TABLE>
                                                                    December 31,
                                 -----------------------------------------------------------------------------------
                                        1998             1997            1996            1995            1994
                                 -----------------------------------------------------------------------------------
Balance Sheet Data:                                                (in thousands)
<S>                                <C>                <C>             <C>             <C>             <C>        
Cash and cash equivalents          $    61,878        $     8,277     $    17,608     $     4,311     $       808

Working capital                         64,320             11,485          18,258           3,916           2,208

Total assets                           101,562             26,539          26,714           5,857           2,640

Long-term obligations                    3,245              3,081             587             593               -

Accumulated deficit                    (19,603)           (23,642)        (16,269)         (6,124)         (1,806)

Total stockholders' equity              81,809             15,121          21,016           4,254           2,526
</TABLE>



                                       24
<PAGE>


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

Except for historical information contained or incorporated by reference herein,
the following discussion contains forward-looking  statements that involve risks
and uncertainties.  The Company's actual results could differ significantly from
those  discussed  herein.  Factors  that  could  cause  or  contribute  to  such
differences  include,  but are not limited to, those  discussed  below under the
caption "Risk Factors" and elsewhere in this Form 10-K. Any such forward-looking
statements speak only as of the date such statements are made.

       Overview..............................................................25

       Statement of Operations as a Percent of Total Revenues................26

       Results Of Operations.................................................26
         Revenues............................................................26
         Cost of revenues....................................................29
         Operating expenses and other income, net............................30
         Income taxes........................................................32
         Liquidity and capital resources.....................................33

       Quarterly Results of Operations.......................................34

       Recent Accounting Pronouncements......................................35

       Risk Factors..........................................................36


Overview

   BroadVision, Inc. develops, markets and supports fully integrated large scale
application  software  solutions   exclusively  designed  to  manage  one-to-one
relationships  for the  extended  enterprise.  The  Company's  total  end-to-end
solutions  provide  businesses with a competitive  advantage by enabling them to
capitalize  on the Internet as a unique  platform to enhance  commerce,  provide
critical self-service  functions,  and deliver highly specialized information to
customers, suppliers,  distributors,  employees, or any other constituent of the
extended enterprise through real-time interactive one-to-one relationships.

   The  BroadVision  One-To-One  product family allows  businesses to tailor Web
site content to the needs and  interests of  individual  users by  personalizing
each visit on a real-time basis.  BroadVision  One-To-One  applications  achieve
this result by interactively  capturing Web site visitor profile information and
targeting  organized   enterprise  content  to  each  visitor  based  on  easily
constructed business rules.

   The Company  believes the  benefits of these  applications  include  enhanced
customer satisfaction and loyalty,  increased business volumes, reduced costs to
service  customers  and  execute  transactions,  as  well as  enhanced  employee
productivity.

   The Company sells its products and services  worldwide through a direct sales
force, independent distributors,  value-added resellers, and system integrators.
It also  has a global  network  of  strategic  business  relationships  with key
industry  platform and Web developer  partners.  To date, the Company has signed
business alliances with over 90 systems  integration,  design,  consulting,  and
other services organizations  worldwide,  which has expanded the Company's sales
and support  infrastructure  and post-sales  implementation  capabilities  while
broadening market awareness for the Company.

   The  Company  also  places a  strategic  emphasis  on  developing  technology
alliances in order to ensure that the  Company's  products are based on industry
standards  and the  Company is  positioned  to take  advantage  of  current  and
emerging  technologies.  The  benefits of this  approach  include  enabling  the
Company  to focus on its core  competencies  while  reducing  time to market and
simplifying  the  task of  designing  and  developing  applications  by both the
Company and its customers.


                                       25
<PAGE>

<TABLE>

STATEMENT OF OPERATIONS AS A PERCENT OF TOTAL REVENUES

   The  following  table sets forth  certain  items  reflected in the  Company's
 consolidated  statements of operations expressed as a percent of total revenues
 for the periods indicated.
<CAPTION>

                                                                                 Years Ended December 31,
                                                                     -------------------------------------------
                                                                        1998           1997           1996
                                                                    -------------- -------------- --------------
<S>                                                                    <C>          <C>            <C>    
Revenues:
     Software licenses                                                  70.8%          70.0%          68.6%
     Services                                                           29.2           30.0           31.4
                                                                    -------------- -------------- --------------
         Total revenues                                                100.0          100.0          100.0

Cost of revenues:
     Cost of license revenues                                            2.0            6.1            3.0
     Cost of services revenues                                          17.1           15.8           19.9
                                                                    -------------- -------------- --------------
         Total cost of revenues                                         19.1           21.9           22.9

                                                                    -------------- -------------- --------------
              Gross profit                                              80.9           78.1           77.1

Operating expenses:
     Research and development                                           18.1           27.3           45.8
     Sales and marketing                                                51.6           67.9          110.9
     General and administrative                                          7.4           11.1           18.7
                                                                    -------------- -------------- --------------
         Total operating expenses                                       77.1          106.3          175.4

                                                                    -------------- -------------- --------------
              Operating income (loss)                                    3.8          (28.2)         (98.3)

     Other income, net                                                   4.0            1.0            5.1

                                                                    -------------- -------------- --------------
              Income (loss) before income taxes                          7.8          (27.2)         (93.2)

     Income tax benefit                                                  0.1            -              -
                                                                    -------------- -------------- --------------

              Net income (loss)                                          7.9%         (27.2)%        (93.2)%
                                                                    ============== ============== ==============

</TABLE>

RESULTS OF OPERATIONS

                                    Revenues

   The  Company's  revenues  are derived  from  software  license  fees and fees
charged for its services.

   The  Company  recognizes  software  license  revenues  when a  non-cancelable
license agreement has been signed and the customer acknowledges an unconditional
obligation  to pay,  the  software  product  has been  delivered,  there  are no
uncertainties   surrounding   product   acceptance,   the  fees  are  fixed  and
determinable, and collection is considered probable.

   Revenues allocated to software license fees, in general,  are recognized upon
consummation of the sale and the portion allocated to maintenance and support is
recognized over the contracted period, which is typically one year.

   The Company's professional services include its Strategic Services Group, its
Interactive  Services  Group,  its  Content and  Creative  Services  Group,  its
Education  Services Group,  and its Technical  Support Group.  Maintenance  fees
relating to  technical  support and  upgrades  are  recognized  ratably over the
contracted  period.  Consulting  related  services are  typically  recognized as
services are performed.

                                       26
<PAGE>

<TABLE>

   A summary of the  Company's  software  and  services  revenues by  geographic
region for the periods indicated is as follows :

<CAPTION>
   (in thousands)
   -----------------------------------------------------------------------------------------------------
   Years Ended
   December 31,                     Software     %           Services    %          Total       %
   -----------------------------------------------------------------------------------------------------
<S>                <C>               <C>        <C>       <C>         <C>       <C>         <C>
   1998:           Americas          $  19,301   54%      $ 10,029     67%      $ 29,330     58%
                   Europe               13,879   38          3,065     21         16,944     33
                   Asia/Pacific          2,887    8          1,750     12          4,637      9
   ------------------------------------------------------------------------------------------------
                   Total             $  36,067  100%      $ 14,844    100%      $ 50,911    100%
   ================================================================================================

   1997:           Americas          $   8,584   45%      $  4,288     53%      $ 12,872     48%
                   Europe                8,835   47          2,015     25         10,850     40
                   Asia/Pacific          1,554    8          1,829     22          3,383     12
   ------------------------------------------------------------------------------------------------
                   Total             $  18,973  100%      $  8,132    100%      $ 27,105    100%
   ================================================================================================

   1996:           Americas          $   3,071   41%      $  1,335     39%      $  4,406     41%
                   Europe                2,257   30          1,023     30          3,280     30
                   Asia/Pacific          2,136   29          1,060     31          3,196     29
   ------------------------------------------------------------------------------------------------
                   Total             $   7,464  100%      $  3,418    100%      $ 10,882    100%
   ================================================================================================
</TABLE>

                                1998 versus 1997

   For the year ended December 31, 1998, total revenues  increased $23.8 million
or 88% on a  year-over-year  basis which  consisted of software  license revenue
increases of $17.1 million or 90% and professional services revenue increases of
$6.7 million or 83%.

   The increase in software license revenues is attributable to continued strong
market  acceptance  of the Company's  core  technology  (BroadVision  One-To-One
Enterprise),  expanding sales volumes of its three complementary WebApp packaged
solutions  (BroadVision  One-To-One Commerce,  BroadVision One-To-One Financial,
and BroadVision  One-To-One  Knowledge),  increasingly higher deployment license
revenues;  and to a lesser extent, product pricing increases that were effective
October 1, 1998. The WebApp packaged solutions were first introduced in 1997 and
have become an integral part of the Company's total applications  solution which
has proven to be a  successful  strategy  for a highly  evolving  and  intensely
competitive marketplace.  Application license related revenues for the Company's
WebApp systems increased to $10.2 million in 1998 as compared to $2.4 million in
1997 which represents a 325% increase year over year. Deployment related license
revenues increased to $14.8 million in 1998 as compared to $8.1 million in 1997,
which  represents  a 83%  increase  year  over  year and is a result  of  repeat
business and an increasingly higher number of live site customers.

   Throughout  1998, the Company made available newly enhanced  applications and
associated  tools  specifically  designed  for certain  industries  that require
unique   one-to-one   relationship   management    functionality   for   product
merchandising,  retail financial services, and knowledge management.  During May
1998, the Company  expanded its product line by introducing a new application to
the  BroadVision  One-To-One  family  of  products:   One-To-One  Knowledge.  In
addition,  the  One-To-One  Enterprise  application  product  was  significantly
enhanced  with  Version 4, which  shipped  during  September  1998 and  enhanced
versions of One-To-One  Commerce and One-To-One  Financial Version 4 application
products  were shipped  during  December  1998.  Also during  1998,  the Company
enhanced its associated  One-To-One tools which included the One-To-One  Command
Center (used by non-technical  business  managers to make rapid changes to their
Web site without a programmer's intervention);  the One-To-One Publishing Center
(which  allows  a  distributed   team  of   non-technical   content  experts  to
collaboratively  manage every aspect of content management),  and the One-To-One
Instant Publisher (a tool designed for casual content contributors).

                                       27
<PAGE>

   Although  the  Company  has  experienced  revenue  growth in recent  periods,
historical growth rates may not be sustained and may not be indicative of future
operating  results.  The Company  anticipates that  international  revenues will
continue to account for a significant  amount of total revenues,  and management
expects to continue to commit  significant  time and financial  resources to the
maintenance and ongoing  development of direct and indirect  international sales
and support  channels.  The Company's Asia Pacific  operations have  experienced
reduced  growth  rates  over the past  year as a result  of the  generally  weak
economic  conditions of that region. As a result,  the Company would expect that
any significant growth in international revenues would most likely come from its
European operations.  There can be no assurance,  however, that the Company will
be able to maintain or increase  international  market acceptance for its family
of products.

   During the year ended December 31, 1998, the Company  continued to expand its
strategic  alliances  with key industry  partners to develop  additional  highly
specialized  applications.  The Company  expects to introduce  these  additional
specialized applications products during 1999 and beyond.

   Some of the  Company's  strategic  alliances  to date include  ventures  with
Macromedia  to jointly  develop the next version of its  BroadVision  One-To-One
Design  Center  product;   Hewlett-Packard  to  embed  Web  Quality  of  Service
technologies  into  BroadVision   products;   Cisco  Systems  to  create  unique
Cisco-BroadVision  One-To-One reference architecture,  configuration guides, and
performance / scaleability benchmarks; S1 to jointly develop and market products
based on VFM, S1's suite of Internet-based financial services applications;  and
Sema Group to jointly develop and market BroadVision One-To-One applications for
the telecommunications sector.

   The increase in professional  services  revenue is a result of a higher level
of consulting  related services  associated with the increased  business volumes
and a higher level of customer  support  revenues  derived from an  increasingly
larger installed customer base.  Maintenance  revenues were $5.1 million in 1998
as compared to $2.1  million in 1997.  During the year ended  December 31, 1998,
the  Company  licensed   approximately  121  new  customers   (including  system
integration / distributor partners) which compares with approximately 104 during
the year ended  December  31, 1997.  As of December 31, 1998,  the Company had a
total  installed  license  base  of  over  250  customers  which  compares  with
approximately 153 as of December 31, 1997. The Company's  professional  services
revenues  as a  percentage  of total  revenues  may  decline  to the  extent the
Company's strategy of developing business alliances with third parties,  such as
system integrators, continues to expand.

   In June 1998, the Company  re-negotiated an existing royalty arrangement with
one of its software vendors. As a result of the re-negotiation, the Company paid
the vendor a fixed fee of $1.25 million for  royalties  through 2001 and certain
internal  development  rights  through  1999.  Previously,  the  Company  had an
existing arrangement with this vendor whereby the Company made quarterly royalty
payments  based  on a  percentage  of  product  revenues.  Concurrent  with  the
re-negotiation,  the  Company  sold this  vendor  an  end-use  software  license
totaling $1.25 million,  inclusive of maintenance and support.  The sale to this
vendor  resulted in software  license  revenues of  approximately  $1.0  million
during the quarter ended June 30, 1998.

   In July 1998, the Company finalized a strategic alliance with S1, an Internet
virtual financial services company.  Accordingly,  BroadVision sold S1 specified
software  licenses  including  certain  re-seller rights in exchange for 181,610
shares of restricted S1 common stock that had a fair value of approximately $4.0
million. As part of the agreement,  the companies also agreed to jointly develop
and market a suite of  Internet-based  products  based on S1's Internet  banking
products  and  BroadVision's  One-to-One  Financial  WebApp.  As a result of the
transaction,  the Company  recognized  license  revenues of  approximately  $1.9
million and deferred  revenues of approximately  $2.1 million during the quarter
ended  September 30, 1998.  The $2.1 million of deferred  revenues  consisted of
$1,015,000 of deferred  software  license fees and joint  development  services,
$949,000 for three years of maintenance  and support,  and $175,000 of specified
training  services.  The deferred  software  license fees and joint  development
services revenue will be recognized as revenue as the joint development services
are performed.  The deferred  maintenance  will be recognized as revenue ratably
over the maintenance term, and the deferred training services will be recognized
as the training is performed.


                                       28

<PAGE>


   In addition to the strategic alliance to jointly develop product, the Company
entered into a $3.5 million license and maintenance agreement with Sema Group in
December 1998. As part of the agreement, Sema Group purchased licenses to resell
the  Company's  existing  software  products and received  expanded  territorial
rights. The licensing  agreement with this reseller resulted in software license
revenues of  approximately  $2.75 million  during the quarter ended December 31,
1998.

                                1997 versus 1996

   Total annual  revenues for the Company were $27.1 million in 1997 as compared
to $10.9 million in 1996, which  represents an increase of 149%  year-over-year.
Annual software  license revenues were $19.0 million in 1997 as compared to $7.5
million in 1996,  which  represents an increase of 154%  year-over-year.  Annual
professional  services  revenues  were $8.1  million in 1997 as compared to $3.4
million in 1996, which represents an increase of 138% year-over-year.

   The increase in license  revenues is a result of strong market  acceptance of
the Company's cornerstone product, the BroadVision One-to-One Enterprise,  which
was augmented by the introduction in 1997 of new  complementary  WebApp packaged
solutions;  One-To-One Commerce, One-To-One Financial, and One-To-One Knowledge.
The increase in  professional  services  revenue is a result of higher  business
volumes,  greater utilization of the Company's  professional  consultants and an
expanding  installed  customer  base under  maintenance  contracts.  Maintenance
revenues were $2.1 million in 1997 as compared to $599,000 in 1996.

                                Cost of Revenues

   Cost of license  revenues  includes  royalties  payable to third  parties for
software  that is either  embedded in, or bundled and sold with,  the  Company's
products; commissioned agent fees paid to distributors; and the costs of product
media, duplication, packaging and other associated manufacturing costs.

   Cost of services consists primarily of  employee-related  costs,  third-party
consultant fees incurred on consulting projects, post contract customer support,
and instructional training services.
<TABLE>
<CAPTION>

                                                              Years Ended December 31,
                                           ---------------------------------------------------------------
          (in thousands)                     1998      %        1997     %         1996         %
          --------------                     ----      -        ----     -         ----         -
<S>                                          <C>       <C>      <C>       <C>      <C>         <C>
          Cost of license revenues [1]       $1,001     3%      $1,664     9%      $  330        4%
          Cost of services revenues [2]       8,704    59        4,284    53        2,164       63
                                             ------    --       ------    ---      ------       --
                                                                                
                                                                            
          Total cost of revenues [3]         $9,705    19%      $5,948    22%      $2,494       23%
                                             ======    ==       ======    ==       ======       == 
                                                                           
<FN>
                                                                             
           [1] --  Percentage  is  calculated  based on total  software  license revenues for the period indicated

           [2] -- Percentage is calculated based on total services  revenues for the period  indicated 

           [3] -- Percentage is calculated  based on total revenues for the period indicated

</FN>
</TABLE>

                                1998 versus 1997

   For the year ended  December 31,  1998,  cost of license  revenues  decreased
$663,000  or 40% on a  year-over-year  basis.  Cost of  software  licenses  as a
percent of license  revenues  was 3% in 1998 as compared to 9% in 1997.  Cost of
services revenues during 1998 increased $4.4 million or 103% on a year-over-year
basis.  Cost of services as a percent of  services  revenues  was 59% in 1998 as
compared to 53% in 1997.

   The  decrease  in cost of  license  revenues,  in both  absolute  dollar  and
relative  percentage terms, was principally a result of lower commissioned agent
fees and third party royalty rates. The Company continues to expand its in-house
sales force  capabilities  and during 1998  Company-generated  direct sales were
higher and commissioned agent sales were lower relative to 1997.



                                       29
<PAGE>

   In addition,  royalty costs relative to total license revenues decreased as a
result of the Company  renegotiating  a  previously  existing  percentage  based
royalty arrangement into a prepaid fixed fee royalty for a period through 2001.

   The  increase in cost of services  revenues in absolute  dollar  terms during
1998 as compared to 1997 is a result of expanded  business  volumes as evidenced
by increased services revenues. Overall costs increased as a result of additions
to the  Company's  professional  services  staff and the  employment  of outside
consultants to meet short-term consulting demands.

   The  increase in cost of services as a percentage  of services  revenues is a
result of higher  utilization  of outside  consultants in relation to the extent
previously  utilized  during the prior year  period.  The Company  expects  that
services costs will continue to increase in absolute dollar terms as the Company
continues  to expand  its  services  organization  to  support  higher  business
volumes.


                                1997 versus 1996

   Cost of license revenues on an annual basis was $1.7 million or 9% of related
software  license  revenues  in 1997 as  compared  to  $330,000 or 4% of related
software license revenues in 1996.

   Cost of license  revenues  increased  in both  absolute  dollar and  relative
percentage  terms during 1997 as compared to 1996 due to expanded  sales volumes
and higher  commissioned  agent fees as a result of increased  distributor sales
volume.  Commissioned agent fees were $703,000 in 1997 as compared to $80,000 in
1996. To a lesser extent,  an increased  number of third-party  products bundled
with or embedded in the Company's products also contributed to the increases.

   Cost of  services  revenues  on an annual  basis was $4.3  million  or 53% of
related services  revenues in 1997 as compared to $2.2 million or 63% of related
services revenue in 1996.

   Cost of services revenues  increased 98% in absolute dollar terms during 1997
as compared to 1996 due to expanded business volumes, as represented by the 138%
increase  in total  services  revenues.  The higher  level of costs in  absolute
dollar terms are  attributable to additions to the Company's  consulting  staff,
the employment of outside consultants to meet short-term  consulting demands, an
increasing  number of licenses  with support or  maintenance  components,  and a
higher  level of fixed  costs  resulting  from the  Company's  expansion  of its
services  organization to meet higher business volumes.  The decrease in cost of
services  revenues as a percentage  of total  services  revenues  during 1997 as
compared  to  1996  is   principally  a  result  of  increased   utilization  of
professional staff.


                    Operating Expenses and Other Income, net

   Research   and   development   expenses   consist   primarily   of  salaries,
employee-related benefit costs, and consulting fees incurred in association with
the development of the Company's  products.  Costs incurred for the research and
development  of new software  products are expensed as incurred  until such time
that technological  feasibility,  in the form of a working model, is established
at which time such costs are capitalized  subject to  recoverability.  The costs
incurred by the Company  subsequent to the  establishment of a working model but
prior to general release have not been significant. To date, the Company has not
capitalized any software development costs.

   Sales and marketing expenses consist primarily of salaries,  employee-related
benefit  costs,  commissions  and  other  incentive  compensation,   travel  and
entertainment,  and marketing  program related  expenditures  such as collateral
materials, trade shows, public relations, and creative services.

   General  and   administrative   expenses   consist   primarily  of  salaries,
employee-related benefit costs, and professional service fees.



                                       30
<PAGE>
<TABLE>

A summary  of the  Company's  operating  expenses  and net other  income for the
periods indicated is as follows:

<CAPTION>
                                                              Years Ended December 31,
                                           ---------------------------------------------------------------
          (in thousands)                     1998      % [1]       1997      % [1]       1996      % [1]
          --------------                  --------------------  --------------------  --------------------

<S>                                       <C>            <C>    <C>           <C>     <C>            <C>
          Research and Development        $   9,227      18%    $   7,392     27%     $   4,985      46%
          Sales and Marketing                26,269      52        18,413     68         12,066     111
          General and Administrative          3,786       7         2,990     11          2,034      19
                                         --------------------  --------------------  --------------------

          Total Operating Expenses        $  39,282      77%    $  28,795    106%     $  19,085     176%
                                         ====================  ====================  ====================

          Other income, net               $  2,036        4%    $    265       1%     $    552       5%
                                         ====================  ====================  ====================
<FN>

           [1] --  Expressed as a percent of total revenues for the period indicated
</FN>
</TABLE>



                                1998 versus 1997

   Research and  development  expenses for the year were $9.2 million in 1998 as
compared  to  $7.4  million  in  1997  which   represents  an  increase  of  25%
year-over-year.

   Sales and  marketing  expenses  for the year were  $26.3  million  in 1998 as
compared  to  $18.4  million  in  1997  which  represents  an  increase  of  43%
year-over-year.

   General and administrative expenses for the year were $3.8 million in 1998 as
compared  to  $3.0  million  in  1997  which   represents  an  increase  of  27%
year-over-year.

   Net  other  income  for the year  was $2.0  million  in 1998 as  compared  to
$265,000 in 1997 which represents an increase of 668% year-over-year.

   The increase in research and development expenses in absolute dollar terms is
primarily  attributable  to  personnel  costs for added  headcount  within those
operations  involved  in  the  enhancement  of  existing  applications  and  the
development  of  the  Company's  next  generation  of  products.   Research  and
development  expenses,  as a percentage  of total  revenues,  decreased  because
revenues  have  increased  at a higher rate  relative to  expenses.  The Company
expects research and development  expenses will continue to increase in absolute
dollars terms.

   The  increases  in sales and  marketing  expenses  in absolute  dollar  terms
reflects  the cost of hiring  additional  sales  and  marketing  personnel,  the
continued  development  of sales  distribution  channels,  and the  expansion of
promotional  activities and marketing related programs. In addition,  commission
rates were higher  during 1998 as result of sales people  exceeding  their sales
quotas.  Sales  and  marketing  expenses,  as a  percentage  of total  revenues,
decreased because revenues have increased at a higher rate relative to expenses.
The Company  expects sales and  marketing  expenses will continue to increase in
absolute dollar terms.

   The increase in general and administrative  expenses in absolute dollar terms
is attributable to additional  administrative and management  personnel,  higher
professional fees and additional  infrastructure to support the expansion of the
Company's  operations.  General and administrative  expenses, as a percentage of
total  revenues,  decreased  because  revenues  have  increased at a higher rate
relative to expenses.  The Company expects general and  administrative  expenses
will continue to increase in absolute dollar terms.

   The  increase  in net  other  income  is  attributable  to a higher  level of
investment  income during the year as a result of earnings on proceeds  received
from a follow-on public stock offering in March 1998.


                                       31
<PAGE>

                                1997 versus 1996

   Research and  development  expenses for the year were $7.4 million in 1997 as
compared  to  $5.0  million  in  1996  which   represents  an  increase  of  48%
year-over-year.

   Sales and  marketing  expenses  for the year were  $18.4  million  in 1997 as
compared  to  $12.1  million  in  1996  which  represents  an  increase  of  53%
year-over-year.

   General and administrative expenses for the year were $3.0 million in 1997 as
compared  to  $2.0  million  in  1996  which   represents  an  increase  of  47%
year-over-year.

   Net other income for the year was $265,000 in 1997 as compared to $552,000 in
1996 which represents a decrease of 52% year-over-year.

   The increase in research and development  expenses is primarily  attributable
to costs  associated with additional  personnel  within those operations for the
enhancement of existing products and the development of new products.

   The overall increases in sales and marketing expenditures reflect the cost of
hiring additional sales and marketing personnel,  developing and expanding sales
distribution  channels,  new product  introductions,  and expanding  promotional
activities.

   The increases in general and administrative  expenses are attributable to the
hiring  of  additional   administrative  and  management  personnel,   increased
professional fees,  additional  provision for doubtful accounts,  and additional
infrastructure to support the expansion of the Company's operations.


                                  Income Taxes

   For the year ended December 31, 1998,  the Company  recorded a net income tax
benefit of $79,000,  comprised of a deferred tax benefit of $700,000 and current
tax expense of $621,000.

   The Company  recorded a deferred tax benefit  during 1998 due to the reversal
of a portion of the valuation allowance previously provided against its deferred
tax assets after evaluation of all available evidence about the realizability of
the deferred tax assets. In determining that it is more likely than not that the
net deferred  tax assets as of December  31, 1998 will be realized,  the Company
assumed a limited  amount of future  taxable  income  considering  all available
evidence and the Company's profitability during 1998. The Company assumed only a
limited  amount of future  taxable  income after  considering  such factors as a
history of operating  losses prior to the second  quarter of 1998, the nature of
the Company's  deferred tax assets,  the lack of significant  firm sales backlog
and the length of the sales cycle,  the competitive  market in which the Company
operates, and the lack of carryback capacity to realize the deferred tax assets.

   The Company  recorded  current tax expense during 1998  primarily  related to
foreign  withholding  and alternative  minimum taxes.  During 1997 and 1996, the
Company   generated   pre-tax   losses  of  $7.4  million  and  $10.1   million,
respectively. Due to the uncertainty about the realizability of the deferred tax
assets,  the  Company  recorded  a full  valuation  allowance  to reduce the net
deferred tax assets to zero as of both December 31, 1997 and 1996.

   As of December 31, 1998, the Company had federal and state net operating loss
carryforwards  of  approximately   $12,973,000  and  $5,539,000,   respectively,
available to offset future regular and alternative  minimum  taxable income.  In
addition,  the Company had federal and state  research  and  development  credit
carryforwards of approximately $790,000 and $666,000, respectively, available to
offset future tax liabilities.  The Company's federal net operating loss and tax
credit carryforwards expire in the years 2010 through 2012, if not utilized. The
state net operating loss carryforwards expire in the years 2000 through 2002.


                                       32
<PAGE>


   The  state  research  and   development   credits  can  be  carried   forward
indefinitely.  As of December 31, 1998, the Company's  foreign  subsidiaries had
net operating  loss  carryforwards  in foreign  jurisdictions  of  approximately
$5,400,000  that can be used to offset future foreign  income.  Of these losses,
approximately  $1,600,000  expire in the years 2001 through 2003.  Approximately
$3,800,000  of these  losses can be carried  forward  indefinitely.  Federal and
state tax laws  limit the use of net  operating  loss  carryforwards  in certain
situations where changes occur in the stock ownership of a company.  The Company
believes  such  an  ownership  change,  as  defined,   may  have  occurred  and,
accordingly,  certain of the  Company's  federal  and state net  operating  loss
carryforwards may be limited in their annual usage.


                         Liquidity and Capital Resources

The Company's liquidity along with selected ratios are set forth below:

                                                  Years Ended December 31,
                                           -------------------------------------
(Dollars in thousands)                       1998           1997         1996
                                           ---------      ---------      -------

Cash and cash equivalents                  $  61,878      $   8,277      $17,608
                                           =========      =========      =======

Working capital                            $  64,320      $  11,485      $18,258
                                           =========      =========      =======

Working capital ratio                      4.9 : 1        2.4 : 1        3.5 : 1
                                           =========      =========      =======


   At  December  31,  1998,  the  Company  had  $61.9  million  in cash and cash
equivalents  which  represents  an  increase  of $53.6  million as  compared  to
December 31, 1997. The Company currently has no significant  capital commitments
other than  obligations  under  equipment and operating  leases and $3.5 million
outstanding  under a term debt credit  facility with its  commercial  bank.  The
Company has funded its operations by cash generated from operations, the private
placement of Common and Preferred Stock and public offerings of its Common Stock
(through May 1996,  private  placements  provided net  proceeds  totaling  $15.5
million and public  stock  offerings  during June 1996 and March 1998 netted the
Company proceeds of $20.7 million and $53.7 million, respectively).

   Cash provided by operating  activities was $1.4 million in 1998 and cash used
for  operating  activities  was $8.7  million and $8.4 million in 1997 and 1996,
respectively.  Cash used for investing activities was $6.6 million, $3.6 million
and $4.4 million in 1998,  1997 and 1996,  respectively,  and was  primarily for
capital  expenditures  and the acquisition of long-term  strategic  investments.
Cash provided by financing activities was $58.8 million,  $2.9 million and $26.1
million  in 1998,  1997,  and 1996,  respectively,  and  consists  primarily  of
proceeds  from the  issuance of stock and,  to a lesser  extent,  proceeds  from
borrowings.

   The Company  believes that its available cash resources,  cash generated from
operations and amounts  available under its commercial credit facilities will be
sufficient  to  meet  its  expected  working  capital  and  capital  expenditure
requirements for at least the next 12 months. This estimate is a forward-looking
statement that involves risks and uncertainties,  and actual results may vary as
a result of a number of factors,  including those discussed under "Risk Factors"
and elsewhere herein. The Company may need to raise additional funds in order to
support  more rapid  expansion,  develop  new or enhanced  services,  respond to
competitive  pressures,  acquire  complementary  businesses or technologies,  or
respond to unanticipated requirements.  The Company may seek to raise additional
funds through  private or public sales of securities,  strategic  relationships,
bank debt,  financing under leasing  arrangements,  or otherwise.  If additional
funds are raised  through the  issuance  of equity  securities,  the  percentage
ownership of the  stockholders of the Company will be reduced,  stockholders may
experience  additional  dilution,  or such equity  securities  may have  rights,
preferences,  or  privileges  senior to those of the  holders  of the  Company's
Common  Stock.  There can be no  assurance  that  additional  financing  will be
available on acceptable terms, if at all. If adequate funds are not available or
are not available on acceptable  terms,  the Company may be unable to develop or
enhance its  products,  take  advantage of future  opportunities,  or respond to
competitive pressures or unanticipated requirements, which could have a material
adverse effect on the Company's  business,  financial  condition,  and operating
results.


                                       33
<PAGE>

<TABLE>

QUARTERLY RESULTS OF OPERATIONS
<CAPTION>

                                                             Statement of Operations
                              --------------------------------------------------------------------------------------
                                         1998 Quarter Ended                          1997 Quarter Ended
                              ------------------------------------------  ------------------------------------------
(in thousands)                 Dec 31     Sept 30   June 30    Mar 31      Dec 31     Sept 30   June 30    Mar 31
                              ---------- -------------------- ----------  ---------- -------------------- ----------
<S>                            <C>        <C>       <C>        <C>         <C>        <C>       <C>        <C>    
Revenues:
   Software licenses           $11,612    $ 9,158   $ 8,018    $ 7,279     $ 6,213    $ 5,513   $ 4,098    $ 3,148
   Services                      4,404      4,273     3,367      2,800       2,420      1,641     1,929      2,143
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Total revenues                  16,016     13,431    11,385     10,079       8,633      7,154     6,027      5,291

Cost of revenues:
   Cost of software licenses       364        237       213        187         566        460       425        214
   Cost of services              2,439      2,553     2,092      1,620       1,130      1,010     1,001      1,143
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Total cost of revenues           2,803      2,790     2,305      1,807       1,696      1,470     1,426      1,357
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Gross profit                    13,213     10,641     9,080      8,272       6,937      5,684     4,601      3,934

Operating expenses:
   Research and development      2,751      2,394     2,049      2,033       1,797      2,113     1,802      1,680
   Sales and marketing           7,880      6,285     6,243      5,861       5,323      4,630     4,257      4,204
   General and administrative    1,225        977       760        824         780        763       700        746
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Total operating expenses        11,856      9,656     9,052      8,718       7,900      7,506     6,759      6,630
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Operating income (loss)          1,357        985        28       (446)       (963)    (1,822)   (2,158)    (2,696)

Other income (expense), net        655        769       665        (53)       (123)       131        49        209
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Income (loss) before tax         2,012      1,754       693       (499)     (1,086)    (1,691)   (2,109)    (2,487)

Income tax benefit                  79          -         -          -           -          -         -          -
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Net income (loss)              $ 2,091    $ 1,754   $   693    $  (499)    $(1,086)   $(1,691)  $(2,109)   $(2,487)
                              ========== ==================== ==========  ========== ==================== ==========

As a Percentage of Revenues

Revenues:
   Software licenses              72.5%     68.2%     70.4%       72.2%       72.0%     77.1%     68.0%      59.5%
   Services                       27.5      31.8      29.6        27.8        28.0      22.9      32.0       40.5
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Total revenues                   100.0     100.0     100.0       100.0       100.0     100.0     100.0      100.0

Cost of revenues:
   Cost of software licenses       2.3       1.8       1.8         1.8         6.6       6.4       7.1        4.0

   Cost of services               15.2      19.0      18.4        16.1        13.1      14.1      16.6       21.6
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Total cost of revenues            17.5      20.8      20.2        17.9        19.6      20.5      23.7       25.6
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Gross profit                      82.5      79.2      79.8        82.1        80.4      79.5      76.3       74.4

Operating expenses:
   Research and development       17.2      17.8      18.0        20.2        20.8      29.5      29.9       31.8
   Sales and marketing            49.2      46.8      54.8        58.1        61.7      64.7      70.6       79.4
   General and administrative      7.6       7.3       6.7         8.2         9.0      10.7      11.6       14.1
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Total operating expenses          74.0      71.9      79.5        86.5        91.5     104.9     112.1      125.3
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Operating income (loss)            8.5       7.3       0.3        (4.4)      (11.1)    (25.4)    (35.8)     (50.9)

Other income (expense), net        4.1       5.8       5.8        (0.6)       (1.4)      1.8       0.8        3.9
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Income (loss) before tax          12.6      13.1       6.1        (5.0)      (12.6)    (23.6)    (35.0)     (47.0)

Income tax benefit                 0.5       -         -           -           -         -     -              -
                              ---------- -------------------- ----------  ---------- -------------------- ----------
Net income (loss)                 13.1%     13.1%      6.1%       (5.0)%     (12.6)%   (23.6)%   (35.0)%    (47.0)%
                              ========== ==================== ==========  ========== ==================== ==========
</TABLE>

   The above  tables  set forth  certain  unaudited  consolidated  statement  of
operations  data for the eight quarters ended December 31, 1998, as well as such
data  expressed as a percentage of the Company's  total  revenues for the period
indicated.  This data has been derived  from  unaudited  consolidated  financial
statements  that,  in  the  opinion  of  management,   include  all  adjustments
(consisting  only  of  normal  recurring   adjustments)  necessary  for  a  fair
presentation of such  information when read in conjunction with the Consolidated
Financial Statements and Notes thereto.

                                       34
<PAGE>

   The unaudited quarterly  information above should be read in conjunction with
the Consolidated  Financial Statements of the Company and Notes thereto included
elsewhere  in  this  Form  10-K.  The  Company  believes  that  period-to-period
comparisons of its financial  results are not  necessarily  indicative of future
results and should not be relied upon as an  indication  of future  performance.
The Company expects to experience  significant  fluctuations in future quarterly
operating  results that may be caused by many factors  including,  among others,
the timing of  introductions  or  enhancements  of products  and services by the
Company or its  competitors,  the length of the  Company's  sales cycle,  market
acceptance of new  products,  the pace of  development  of the market for online
commerce,  the mix of the  Company's  products  sold,  the  size and  timing  of
significant orders and the timing of customer  production or deployment,  demand
for the Company's  products,  changes in pricing  policies by the Company or its
competitors, changes in the Company's sales incentive plans, budgeting cycles of
its  customers,  customer  order  deferrals in  anticipation  of new products or
enhancements  by  the  Company  or  its   competitors,   nonrenewal  of  service
agreements,  product life cycles,  software  defects and other  product  quality
problems,  changes  in  strategy,  changes  in  key  personnel,  the  extent  of
international  expansion,  seasonal  trends,  the mix of  distribution  channels
through  which the Company's  products are sold,  the mix of  international  and
domestic sales,  changes in the level of operating expenses to support projected
growth, and general economic conditions.

   The Company  anticipates  that a significant  portion of its revenues will be
derived  from a  limited  number  of  orders,  and the  timing  of  receipt  and
fulfillment of any such orders is expected to cause material fluctuations in the
Company's  operating  results,  particularly on a quarterly  basis. As with many
software companies,  the Company anticipates that it will make the major portion
of each  quarter's  deliveries  near the end of each  quarter  and, as a result,
short  delays in delivery of  products at the end of a quarter  could  adversely
affect operating results for that quarter. In addition,  the Company intends, in
the near term, to increase  significantly its personnel,  including its domestic
and international  direct sales force. The timing of such expansion and the rate
at  which  new  sales  people  become   productive  could  also  cause  material
fluctuations in the Company's quarterly operating results.

   Due to the foregoing  factors,  quarterly  revenues and operating results are
difficult  to  forecast,   and  the  Company   believes  that   period-to-period
comparisons  of its operating  results will not  necessarily  be meaningful  and
should not be relied upon as any indication of future performance.  It is likely
that the Company's future quarterly operating results from time to time will not
meet the expectations of market analysts or investors, which may have an adverse
effect on the price of the Company's Common Stock.


RECENT ACCOUNTING PRONOUNCEMENTS

   In June 1998,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 133,  Accounting  for
Derivative Instruments and Hedging Activities, effective for all fiscal quarters
of fiscal years  beginning  after June 15, 1999.  Accordingly,  the Company will
adopt SFAS No. 133  beginning  on  January  1,  2000.  SFAS No. 133  establishes
standards for the accounting and reporting of derivative instruments and hedging
activities,   including  certain  derivative   instruments   embedded  in  other
contracts.  Under SFAS No. 133,  entities are  required to carry all  derivative
instruments at fair value on their balance sheets. The accounting for changes in
the fair value  (i.e.,  gains or losses) of a derivative  instrument  depends on
whether it has been  designated and qualifies as part of a hedging  activity and
the underlying purpose for it. The Company does not believe that the adoption of
SFAS No.  133 will  have a  significant  impact  on the  Company's  consolidated
financial statements or related disclosures.

   In March  1998,  the  American  Institute  of  Certified  Public  Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires that
certain costs related to the development or purchase of internal-use software be
capitalized  and amortized over the estimated  useful life of the software.  SOP
98-1  is  effective  for  fiscal  years   beginning  after  December  15,  1998.
Accordingly,  the Company will adopt SOP 98-1  beginning on January 1, 1999. The
Company does not believe  that the adoption of SOP 98-1 will have a  significant
impact  on  the   Company's   consolidated   financial   statements  or  related
disclosures.

                                       35
<PAGE>

   In December 1998, the Accounting  Standards  Executive Committee ("AcSEC") of
the AICPA issued SOP 98-9 Software Revenue Recognition,  With Respect to Certain
Transactions,  which requires recognition of revenue using the "residual method"
in a multiple-element arrangement when fair value does not exist for one or more
of the delivered elements in the arrangement.  Under the "residual method",  the
total  fair value of the  undelivered  elements  is  deferred  and  subsequently
recognized in accordance  with SOP 97-2.  The Company does not expect a material
change to its revenue accounting as a result of the provisions of SOP 98-9.


RISK FACTORS

This  Form 10-K  contains  forward-looking  statements  that  involve  risks and
uncertainties.  The  Company's  actual  results may differ  materially  from the
results discussed in the  forward-looking  statements.  Factors that might cause
such a difference  include,  but are not limited to, those  discussed  below and
elsewhere in this Form 10-K.

Limited Operating History; Fluctuations in Quarterly Operating Results

   The  Company's  limited  operating  history  makes the  prediction  of future
results of operations difficult and, accordingly, there can be no assurance that
the  Company  will  achieve  or  sustain  revenue  growth or  profitability.  In
addition,  the Company has only limited historical  financial data for quarterly
periods on which to base  planned  operating  expenses.  The  Company's  expense
levels are based in part on its product development  requirements as well as its
expectations as to future revenues.  The Company  anticipates that its operating
expenses will increase  substantially for the foreseeable  future as the Company
continues  to develop and market its initial  products,  increase  its sales and
marketing  activities,  create  and  expand the  distribution  channels  for its
products, and broaden its customer support capabilities.

   The  Company  expects  to  experience  significant   fluctuations  in  future
quarterly operating results that may be caused by many factors including,  among
others,  the timing of introductions or enhancements of products and services by
the Company or its competitors,  the length of the Company's sales cycle, market
acceptance of new  products,  the pace of  development  of the market for online
commerce,  the mix of the  Company's  products  sold,  the  size and  timing  of
significant orders and the timing of customer  production or deployment,  demand
for the Company's  products,  changes in pricing  policies by the Company or its
competitors, changes in the Company's sales incentive plans, budgeting cycles of
its  customers,  customer  order  deferrals in  anticipation  of new products or
enhancements  by  the  Company  or  its   competitors,   nonrenewal  of  service
agreements,  product life cycles,  software  defects and other  product  quality
problems,  changes  in  strategy,  changes  in  key  personnel,  the  extent  of
international  expansion,  seasonal  trends,  the mix of  distribution  channels
through  which the Company's  products are sold,  the mix of  international  and
domestic sales,  changes in the level of operating expenses to support projected
growth,  and  general  economic  conditions.  The  Company  anticipates  that  a
significant  portion of its revenues  will be derived  from a limited  number of
orders, and the timing of receipt and fulfillment of any such orders is expected
to cause material fluctuations in the Company's operating results,  particularly
on a quarterly basis. As with many software  companies,  the Company anticipates
that it will make the major portion of each quarter's deliveries near the end of
each quarter  and, as a result,  short delays in delivery of products at the end
of a quarter could  adversely  affect  operating  results for that  quarter.  In
addition,  the Company intends, in the near term, to increase  significantly its
personnel,  including  its domestic and  international  direct sales force.  The
timing  of such  expansion  and the  rate  at  which  new  sales  people  become
productive  could also cause material  fluctuations  in the Company's  quarterly
operating results.

   Due to the foregoing  factors,  quarterly  revenues and operating results are
difficult  to  forecast,   and  the  Company   believes  that   period-to-period
comparisons  of its operating  results will not  necessarily  be meaningful  and
should not be relied upon as any indication of future performance.  It is likely
that the Company's future quarterly operating results from time to time will not
meet the expectations of market analysts or investors, which may have an adverse
effect on the price of the Company's Common Stock. See "Management's  Discussion
and Analysis of Financial Condition and Results of Operations."


                                       36
<PAGE>

Early Stage of Market Development; Dependence on the Internet

   The  Company's  products and services  facilitate  online  communication  and
commerce over public and private networks. The market for the Company's products
and services is in its early stages of development and is rapidly  evolving.  As
is typical for new and rapidly evolving industries, demand and market acceptance
for  recently  introduced  products  and services are subject to a high level of
uncertainty,  especially  where,  as is true of the Company,  acquisition of the
product requires a large capital  commitment or other significant  commitment of
resources.  With respect to the Company,  this  uncertainty is compounded by the
risks that  consumers and  enterprises  will not adopt  electronic  commerce and
knowledge management and that an appropriate infrastructure necessary to support
increased  commerce and  communication on the Internet will fail to develop,  in
each case,  to a sufficient  extent and within an adequate  time frame to permit
the  Company  to  succeed.   Adoption  of  electronic   commerce  and  knowledge
management,   particularly  by  those  individuals  and  enterprises  that  have
historically  relied upon traditional means of commerce and communication,  will
require  a  broad  acceptance  of new and  substantially  different  methods  of
conducting business and exchanging information. Moreover, the Company's products
and services  involve a new approach to the conduct of online business and, as a
result,  intensive  marketing  and sales  efforts  may be  necessary  to educate
prospective  customers regarding the uses and benefits of the Company's products
and services in order to generate demand for the Company's systems. For example,
enterprises that have already invested substantial resources in other methods of
conducting  business may be  reluctant or slow to adopt a new approach  that may
replace, limit, or compete with their existing systems.

   Similarly,  individuals  with  established  patterns of purchasing  goods and
services may be reluctant to alter those  patterns or may otherwise be resistant
to  providing  the personal  data which is  necessary  to support the  Company's
consumer profiling  capability.  Moreover,  the security and privacy concerns of
existing and potential users of the Company's  products and services may inhibit
the growth of online  business  generally  and the  market's  acceptance  of the
Company's  products and  services in  particular.  Accordingly,  there can be no
assurance  that a viable  market for the  Company's  products  will emerge or be
sustainable.  Sales of most of the  Company's  products and services will depend
upon the  adoption of the  Internet as a widely  used  medium for  commerce  and
communication.  The  Internet  has  experienced,  and is expected to continue to
experience,  significant  growth in the number of users and  amount of  traffic.
There can be no assurance that the Internet  infrastructure  will continue to be
able to support the demands placed on it by this continued  growth. In addition,
the  Internet  could  lose its  viability  due to delays in the  development  or
adoption of new standards and protocols to handle  increased  levels of Internet
activity or due to increased governmental regulation.  Moreover,  certain issues
concerning the commercial use of the Internet (such as,  security,  reliability,
cost,  ease of use,  accessibility,  and quality of service) and the  subsequent
outcomes of such issues may negatively  affect the growth of Internet use or the
attractiveness  of commerce and  communication  on the Internet.  Because global
commerce and online  exchange of  information  on the Internet and other similar
open  wide  area  networks  are  relatively  new and  evolving,  there can be no
assurance that the Internet will prove to be a viable commercial marketplace. If
critical issues  concerning the commercial use of the Internet are not favorably
resolved,  if the necessary  infrastructure  and complementary  products are not
developed,  or if the Internet does not become a viable commercial  marketplace,
the Company's  business,  financial  condition,  and  operating  results will be
materially adversely affected.

Potential Impact of Privacy Concerns

   One of the  principal  features of the  BroadVision  One-To-One  applications
products  is the ability to develop and  maintain  profiles  for use by business
managers  in  determining  the  nature of the  content  to be  provided  to that
customer.  Typically,  profile  information  is often  captured when  consumers,
business  customers,  and  employees  visit  a site  on the  Web  and  volunteer
information  in  response  to survey  questions  concerning  their  backgrounds,
interests,  and  preferences.  Profiles  are  augmented  over time  through  the
collection of usage data. Although BroadVision  One-To-One products are designed
to enable the  development  of  applications  that  permit Web site  visitors to
prevent the  distribution of any of their personal data beyond that specific Web
site,  privacy  concerns  may  nevertheless  cause  visitors to be  resistant to
providing  the personal  data  necessary to support this  profiling  capability.
Moreover,  even the  perception of  substantial  security and privacy  concerns,
whether or not valid, may indirectly  inhibit market acceptance of the Company's
products.  In  addition,  such  concerns may be  heightened  by  legislative  or
regulatory  requirements  that require  notification  to Web site users that the
data  captured  as a result of  visitation  of certain  Web sites may be used by
marketing entities to unilaterally  address product promotion and advertising to
that user.

                                       37
<PAGE>

   While  the  Company  is not  aware  of any  such  legislation  or  regulatory
requirements  currently in effect in the United States,  certain other countries
and  political  entities,  such as the  European  Community,  have  adopted such
legislation  or  regulatory  requirements,  and no  assurance  can be given that
similar legislation or regulator  requirements will not be adopted in the United
States. If the privacy concerns of consumers are not adequately  addressed,  the
Company's  business,   financial  condition,  and  operating  results  could  be
materially adversely affected.

Competition

   The market for online  interactive  relationship  management  applications is
rapidly evolving, and intensely competitive.  The Company expects competition to
persist and intensify in the future.  The Company's  primary  competition  comes
from  in-house  development  efforts by potential  customers  or  partners.  The
Company's  competitors  also  include  other  vendors  of  application  software
directed  at  interactive  commerce  and  financial  services  and  Web  content
developers  engaged to develop custom software or to integrate other application
software  into  custom  solutions.   The  Company  currently  encounters  direct
competition   from   Edify   Corporation   ("Edify"),   InterWorld   Corporation
("InterWorld"),   International   Business  Machines  Inc.  ("IBM"),   Microsoft
Corporation  ("Microsoft"),  Open Market Inc. ("OMI"),  and Vignette Corporation
("Vignette"),  among others.  Some of these  competitors  have longer  operating
histories, and significantly greater financial,  technical, marketing, and other
resources  than the Company and thus may be able to respond  more quickly to new
or  changing  opportunities,  technologies,  and  customer  requirements.  Also,
current and potential  competitors  may have greater name  recognition  and more
extensive  customer bases that could be leveraged,  thereby gaining market share
to the  Company's  detriment.  Such  competitors  may be able to undertake  more
extensive promotional  activities,  adopt more aggressive pricing policies,  and
offer more attractive terms to purchasers than the Company. Moreover, certain of
the Company's current and potential competitors,  such as IBM and Microsoft, may
bundle  their  products in a manner that may  discourage  users from  purchasing
products offered by the Company. In addition,  current and potential competitors
have established or may establish cooperative  relationships among themselves or
with third parties to enhance their products.  Accordingly,  it is possible that
new  competitors or alliances  among  competitors may emerge and rapidly acquire
significant market share.

   The  principal  competitive  factors  affecting  the market for the Company's
products are depth and breadth of  functionality  offered,  ease of  application
development,  time required for  application  development,  reliance on industry
standards, reliability, scaleability, maintainability, personalization and other
features,  product quality, price, and customer support. The Company believes it
presently competes favorably with respect to each of these factors. However, the
Company's  market is still  evolving,  and there  can be no  assurance  that the
Company will be able to compete successfully with current or future competitors,
or that  competitive  pressures  faced by the  Company  will not have a material
adverse effect on the Company's  business,  financial  condition,  and operating
results.

Product and Customer Concentration

   To date,  substantially all of the Company's  revenues have been attributable
to sales of licenses of the BroadVision One-To-One Enterprise and related WebApp
packaged  solutions and associated  services.  The Company currently expects the
BroadVision One-To-One Applications Products and related services to account for
most of its future revenues.  Accordingly, if any of the Company's customers are
not  able to  successfully  develop  and  deploy  an  online  marketplace  using
BroadVision One-To-One  Applications Products, the Company's reputation could be
damaged,  which could have a material adverse effect on the Company's  business,
financial  condition,  and operating  results.  In addition,  factors  adversely
affecting the pricing of or demand for the BroadVision  One-To-One  Applications
Products,  such as competition or  technological  change,  could have a material
adverse effect on the Company's  business,  financial  condition,  and operating
results. The Company's future financial  performance will depend, in significant
part, on the successful  development,  introduction,  and customer acceptance of
new and enhanced versions of the BroadVision  One-To-One  Applications  Products
and other new products the Company may develop.  There can be no assurance  that
the  Company  will be  successful  in  upgrading  and  continuing  to market the
BroadVision   One-To-One   Applications   Products  or  that  the  Company  will
successfully  develop new products or that any new products will achieve  market
acceptance.


                                       38
<PAGE>

   During 1998, no customer  accounted for more than 10% of the Company's  total
revenues.  In 1997,  software  license and service  revenues  from one  customer
accounted for  approximately 11% of the Company's total revenues and during 1996
one different customer accounted for 10% of the Company's total revenues.

Lengthy Sales and Implementation Cycles

   The license of the Company's  software  products is often an  enterprise-wide
decision by prospective customers,  requiring the Company to engage in a lengthy
sales cycle to provide a significant level of education to prospective customers
regarding  the use and benefits of the  Company's  products.  In  addition,  the
implementation of the Company's  products  involves a significant  commitment of
resources by  customers  or by the  Company's  Worldwide  Professional  Services
Organization consultants over an extended period of time.

   As a result,  the  Company's  sales and  customer  implementation  cycles are
subject to a number of  significant  delays over which the Company has little or
no  control.  In many  cases,  the Company  expects to  recognize a  substantial
portion of the revenue  related to the sale of its products  upon  deployment or
production  by the  customer  of the  products.  As a result,  delays in license
transactions  due to lengthy  sales cycles or delays in customer  production  or
deployment  of a product could have a material  adverse  effect on the Company's
business,  financial  condition,  and  operating  results and can be expected to
cause the  Company's  operating  results to vary  significantly  from quarter to
quarter.

Risks Associated with Expanding Distribution

   To date, the Company has sold its products primarily through its direct sales
force. The Company's ability to achieve significant revenue growth in the future
will depend in large part on its success in recruiting  and training  sufficient
direct sales  personnel and  establishing  and  maintaining  relationships  with
distributors, resellers, systems integrators, and other third parties.

   Although the Company is currently investing, and plans to continue to invest,
significant  resources  to expand its sales  force and to  develop  distribution
relationships  with third-party  distributors and resellers,  the Company may at
times  experience  difficulty in  recruiting  qualified  sales  personnel and in
establishing necessary third-party alliances. There can be no assurance that the
Company  will be able to  successfully  expand its direct  sales  force or other
distribution  channels or that any such  expansion will result in an increase in
revenues.  Any failure by the Company to expand its direct  sales force or other
distribution  channels would materially adversely affect the Company's business,
financial condition, and operating results.

Dependence on Systems Integrators

   The Company's potential customers may rely on third-party systems integrators
to develop,  deploy, and manage online marketplaces.  If the Company were unable
to adequately  train a sufficient  number of systems  integrators or if, for any
reason, a large number of such integrators were to adopt a different  product or
technology  instead of the BroadVision  One-To-One  Applications  Products,  the
Company's  business,   financial  condition,  and  operating  results  could  be
materially and adversely affected.

Rapid Technological Change; New Product Delays

   The  information  services,   software,  and  communications  industries  are
characterized by rapid technological change,  changes in customer  requirements,
frequent new product and service  introductions and  enhancements,  and emerging
industry  standards.  The  introduction  of products and services  embodying new
technologies  and the  emergence of new industry  standards  and  practices  can
render existing products and services  obsolete and unmarketable.  The Company's
future  success  will  depend,  in  part,  on its  ability  to  develop  leading
technologies,  enhance its existing products and services,  develop new products
and services that address the increasingly sophisticated and varied needs of its
prospective  customers,  and  respond to  technological  advances  and  emerging
industry standards and practices on a timely and cost-effective basis.

                                       39
<PAGE>

   There can be no assurance  that the Company will be successful in effectively
using new technologies,  adapting its products to emerging  industry  standards,
developing,  introducing, and marketing product and service enhancements, or new
products and services,  or that it will not experience  difficulties  that could
delay or prevent the successful development, introduction, or marketing of these
products and  services,  or that its new product and service  enhancements  will
adequately  meet  the   requirements  of  the  marketplace  and  achieve  market
acceptance. If the Company is unable, for technical or other reasons, to develop
and introduce new products and services or enhancements of existing products and
services  in a timely  manner in  response  to  changing  market  conditions  or
customer  requirements,  or if new products  and services do not achieve  market
acceptance,  the Company's business,  financial condition, and operating results
will be materially and adversely affected.

Risks of Product Defects

   Sophisticated  software products,  such as those of the Company,  may contain
undetected  errors or  failures  that  become  apparent  when the  products  are
introduced or when the volume of services  provided  increases.  There can be no
assurance that, despite testing by the Company and potential  customers,  errors
will not be found in the  Company's  products,  resulting  in loss of  revenues,
delay in market acceptance,  diversion of development  resources,  damage to the
Company's reputation,  or increased service and warranty costs, which would have
a material adverse effect on the Company's business,  financial  condition,  and
operating results.

Year 2000 Compliance

Background and Risks - Many currently  installed  computer  systems and software
and devices with imbedded  technology are coded to two digits for time sensitive
dating purposes.  Beginning with the year 2000, these date code fields will need
to be four digit  functional in order to distinguish  between 21st century dates
and 20th century dates. For example,  computer programs that have date sensitive
software  may  incorrectly  recognize  a date using "00" as the year 1900 rather
than the year 2000. As a result, in less than a year, computer systems, software
products and devices with imbedded technology used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. This type of Year 2000
error could  potentially  cause system  failures or  miscalculations  that could
disrupt  operations,  including  among  other  things a temporary  inability  to
process  transactions,  issue  invoices  or engage in  similar  normal  business
activities.  The most likely worst case scenarios could include hardware failure
and the failure of infrastructure  services provided by government  agencies and
other third parties (e.g.,  electricity,  telephone  service,  water  transport,
Internet services, etc.).

   Although the Company's products are Year 2000 compliant, the Company believes
that the purchasing  patterns of customers could potentially be affected by Year
2000 issues as companies expend significant  resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase  software  products such as those offered
by the  Company,  which could have a material  adverse  effect on the  Company's
business,  financial condition,  and operating results. In addition, even if the
Company's  products are Year 2000  compliant,  other systems or software used by
the  Company's  customers  may not be Year 2000  compliant.  The failure of such
noncompliant   third-party  software  or  systems  could  affect  the  perceived
performance  of the  Company's  products,  which  could have a material  adverse
effect on the Company's business, financial condition, and operating results.

State of  Readiness - The Company  utilizes  various  financial  and  managerial
information systems within its operations in the United States,  Europe and Asia
which the Company believes to be or will be Year 2000 compliant.  As part of its
normal  course  of  business,   the  Company  analyzes  its  information  system
requirements  in  relation  to  its  business   operating  goals  and  strategic
objectives  and expects to implement  new systems  during 1999 that will be Year
2000 compliant.  The Company is also analyzing its other systems to identify any
potential Year 2000 issues and will take appropriate  corrective action based on
the  results  of such  analysis.  Such  other  systems  include  non-information
technology  systems  and  services  utilized  by the  Company  in  its  business
operations, such as power, telecommunications,  security and general facilities.
The Company is in the process of assessing  whether its material  suppliers  and
vendors are Year 2000 compliant. The Company expects to complete its analysis of
these other systems and the  assessment  of its third party vendor  readiness by
June 30, 1999.


                                       40
<PAGE>

Costs for Year 2000  Compliance  - Costs  that may be  incurred  by the  Company
pertaining to Year 2000 compliance  issues include  identification,  assessment,
remediation  and testing  efforts,  as well as potential costs to be incurred by
the Company  with  respect to Year 2000 issues of third  parties.  To date,  the
costs  incurred  by the Company  directly  related to Year 2000 issues have been
minimal, even in cases where non-compliant  information  technology systems were
redeployed or replaced. Although the Company has not completed its assessment of
all specific costs, if any, related to achieving  complete Year 2000 compliance,
management  believes such costs will not be material to the Company's  financial
condition or results of operations based on its analysis to date.

Contingency  Plans - The Company  continues  to assess  certain of its Year 2000
exposure  areas  in order to  determine  what  additional  steps,  beyond  those
identified by the Company's internal review to date, are advisable.  The Company
is currently in the process of developing a  contingency  plan for handling Year
2000 problems that are not detected and corrected prior to their occurrence. The
Company  expects to complete  its plan by June 30, 1999.  The Company  presently
believes that the Year 2000 issue will not pose significant operational problems
for the Company.  However,  any failure of the Company to adequately address any
unforeseen  Year 2000  issue  could  adversely  affect the  Company's  business,
financial condition, and results of operations.  In addition, if all of the Year
2000 issues are not properly identified, or adequate assessment, remediation and
testing are not  effected  timely with  respect to Year 2000  problems  that are
identified,  there can be no assurance that the Year 2000 issue would not have a
material  adverse  impact on the  Company's  results of  operations or adversely
affect the Company's relationships with customers,  vendors, partners or others.
Additionally,  there  can be no  assurance  that the Year  2000  issues of other
entities will not have a material  adverse  impact on the  Company's  systems or
results of operations.

Risks Associated with Encryption Technology

   A  significant  barrier to online  commerce and  communication  is the secure
exchange of value and confidential information over public networks. The Company
relies  on  encryption  and  authentication  technology,  including  public  key
cryptography   technology  licensed  from  RSA,  to  provide  the  security  and
authentication necessary to effect the secure exchange of value and confidential
information.  There can be no assurance that advances in computer  capabilities,
new  discoveries in the field of  cryptography  or other events or  developments
will not result in a compromise or breach of the RSA or other algorithms used by
the Company to protect customer  transaction data. If any such compromise of the
Company's security were to occur, it could have a material adverse effect on the
Company's business, financial condition, and operating results.

Dependence on Intellectual Property Rights

   The  Company's  success and ability to compete are dependent to a significant
degree on its  proprietary  technology.  Although  the  Company  holds a patent,
issued in January 1998, on elements of its  BroadVision  One-To-One  Application
System,  there can be no  assurance  as to the degree of  intellectual  property
protection  the  patent  will  provide.  Such  as  with  the  lawsuit  filed  by
BroadVision against ATG on December 11, 1998. The complaint filed by BroadVision
alleges that ATG is infringing BroadVision's U.S. Patent No. 5,710,887 and seeks
injunctive  relief and  unspecified  damages.  On February 3, 1999, ATG filed an
answer  and  counterclaim  against  BroadVision  in which ATG seeks  declaratory
judgment for  non-interference  and  declaratory  judgment for invalidity of the
patent.

   The Company has relied  primarily on copyright,  trade secret,  and trademark
law to protect its technology and has registered  "BroadVision"  and applied for
registration of "BroadVision  One-To-One" as trademarks in the United States. It
is possible that  competitors  of the Company or others will adopt product names
similar to "One-To-One,"  thereby impeding the Company's  ability to build brand
identity and possibly  leading to customer  confusion.  The Company provides its
products to end users generally  under  nonexclusive,  nontransferable  licenses
during the term of the relevant agreement, which is usually in perpetuity. Under
the general terms and conditions of the Company's  standard  license  agreement,
the licensed  software may be used solely for  internal  operations  pursuant to
BroadVision's  published  licensing  practices.  The Company  makes  source code
available  for  certain  portions  of its  products.  The  source  code  for the
Company's  proprietary  software is  protected  both as a trade  secret and as a
copyrighted  work.  The provision of source code may increase the  likelihood of
misappropriation by third parties.

                                       41
<PAGE>

   The  Company's  policy  is  to  enter  into  confidentiality  and  assignment
agreements with its employees, consultants, and vendors and generally to control
access to and distribution of its software, documentation, and other proprietary
information.  Notwithstanding these precautions,  it may be possible for a third
party  to copy or  otherwise  obtain  and use the  Company's  software  or other
proprietary  information  without  authorization  or to develop similar software
independently. Policing unauthorized use of the Company's products is difficult,
particularly  because the global  nature of the  Internet  makes it difficult to
control  the  ultimate  destination  or  security  of  software  or  other  data
transmitted.  The laws of other  countries  may afford the Company  little or no
effective  protection of its  intellectual  property.  There can be no assurance
that the  steps  taken  by the  Company  will  prevent  misappropriation  of its
technology or that agreements entered into for that purpose will be enforceable.
In addition, litigation such as the lawsuit against ATG, may be necessary in the
future to enforce the Company's  intellectual  property  rights,  to protect the
Company's trade secrets,  to determine the validity and scope of the proprietary
rights of others,  or to defend  against claims of  infringement  or invalidity.
Such litigation, whether successful or unsuccessful, could result in substantial
costs and diversions of resources, either of which could have a material adverse
effect on the Company's business,  financial  condition,  and operating results.
See "Business--Intellectual Property and Other Proprietary Rights."

Risk of Infringement

   The Company may, in the future,  receive notices of claims of infringement of
other parties' trademark,  copyright, and other proprietary rights. There can be
no  assurance  that  claims  for  infringement  or  invalidity  (or  claims  for
indemnification  resulting  from  infringement  claims)  will not be asserted or
prosecuted against the Company. In particular,  claims could be asserted against
the Company for violation of trademark,  copyright, or other laws as a result of
the use by the Company,  its customers,  or other third parties of the Company's
products  to  transmit,  disseminate,  or  display  information  over  or on the
Internet.  Any such claims,  with or without  merit,  could be time consuming to
defend,  result  in  costly  litigation,   divert  management's   attention  and
resources,  cause product shipment delays,  or require the Company to enter into
royalty or licensing  agreements.  There can be no assurance  that such licenses
would  be  available  on  reasonable  terms,  if at all,  and the  assertion  or
prosecution  of any such  claims  could  have a material  adverse  effect on the
Company's   business,   financial   condition,   and  operating   results.   See
"Business--Intellectual Property and Other Proprietary Rights."

Dependence on Certain Licenses

   The Company relies in part on certain technology which it licenses from third
parties, including RDBMSs from Oracle and Sybase, object request broker software
from IONA, database access technology from Rogue Wave, and other software, which
is  integrated  with  internally  developed  software and used in the  Company's
software to perform key functions. In this regard, all of the Company's services
incorporate  data encryption and  authentication  technology  licensed from RSA.
There can be no assurance  that the Company's  third-party  technology  licenses
will continue to be available to the Company on commercially  reasonable  terms,
if at all. The loss or inability  to maintain any of these  technology  licenses
could result in delays in  introduction  of the Company's  products and services
until  equivalent  technology,  if  available,  is  identified,   licensed,  and
integrated,  which  could  have a  material  adverse  effect  on  the  Company's
business, financial condition, and operating results.

Dependence on Key Personnel

   The Company's  performance is  substantially  dependent on the performance of
its  executive  officers  and key  employees.  The Company is  dependent  on its
ability  to retain and  motivate  highly  qualified  personnel,  especially  its
management and highly skilled  development teams. The Company does not have "key
person"  life  insurance  policies  on any of its  employees.  The  loss  of the
services  of any of its  key  employees,  particularly  its  founder  and  Chief
Executive  Officer,  Pehong Chen,  could have a material  adverse  effect on the
Company's business,  financial  condition,  and operating results. The Company's
future success also depends on its continuing ability to identify,  hire, train,
and  retain  other  highly   qualified   technical  and  managerial   personnel.
Competition  for such  personnel is intense.  There can be no assurance that the
Company will be able to attract,  assimilate,  or retain qualified technical and
managerial  personnel  in the  future,  and the  failure of the Company to do so
would  have a  material  adverse  effect on the  Company's  business,  financial
condition,  and operating  results.  See  "Business--Executive  Officers and Key
Personnel."

                                       42
<PAGE>

Risks Associated with International Strategy

   In 1998,  approximately 42% of the Company's total revenues were derived from
sales outside of North  America.  A component of the  Company's  strategy is its
planned  expansion of its international  activities.  The Company's Asia Pacific
operations have experienced  reduced growth rates over the past year as a result
of the generally  weak  economic  conditions  of that region.  As a result,  the
Company would expect that any significant growth in international revenues would
most likely come from its European  operations.  There can be no assurance  that
the Company will be able to maintain and expand its activities in  international
markets.  In addition,  there are certain  risks  inherent in doing  business in
international  markets,  such as unexpected changes in regulatory  requirements,
export controls relating to encryption technology and other export restrictions,
tariffs and other trade barriers,  difficulties in staffing and managing foreign
operations,  political  instability,  fluctuations  in currency  exchange rates,
reduced protection for intellectual property rights in some countries,  seasonal
reductions in business  activity  during the summer months in Europe and certain
other parts of the world, and potentially adverse tax consequences, any of which
could adversely  impact the success of the Company's  international  operations.
There  can be no  assurance  that  one or more of such  factors  will not have a
material  adverse  effect  on the  Company's  current  or  future  international
operations and,  consequently,  on the Company's business,  financial condition,
and operating results.

Government Regulation

   There can be no assurance that a federal,  state,  or foreign agency will not
attempt to regulate the Company's  activities.  The Company  anticipates that it
may be required to comply with additional regulations,  if enacted by federal or
state authorities,  as the market for online commerce evolves.  The Company also
may be subject to foreign laws and state and foreign  sales and use tax laws. If
enacted or deemed  applicable to the Company,  such laws,  rules, or regulations
could be imposed on the Company's activities or its business,  thereby rendering
the Company's business or operations more costly or burdensome,  less efficient,
or  impossible,  any of  which  could  have a  material  adverse  effect  on the
Company's  business,  financial  condition,  and operating  results.  Due to the
increasing  popularity of the Internet, it is possible that laws and regulations
may be  enacted  with  respect to the  Internet,  covering  issues  such as user
privacy,  pricing,  content, and quality of products and services.  For example,
because the  Company's  products  involve  the  solicitation  of  personal  data
regarding  individual  consumers,  the  Company's  business  could be  adversely
affected by laws regulating the solicitation,  collection, or processing of such
data. The Telecommunications Act of 1996 (the  "Telecommunications  Act"), which
was enacted in January  1996,  prohibits the  transmission  over the Internet of
certain  types of  information  and content.  The scope of the  prohibition  and
liability  associated  with  any  violation  of the  Telecommunications  Act are
currently  unsettled.  The  imposition  upon the Company and other  software and
service  providers  of  potential   liability  for  information  carried  on  or
disseminated  through  its  application  systems  could  require  the Company to
implement  measures to reduce its exposure to such liability,  which may require
the expenditure of substantial  resources,  or to discontinue  certain services.
The increased  attention  focused upon these liability issues as a result of the
Telecommunications Act could adversely affect the growth of Internet and private
network use. Any costs  incurred by the Company as a result of such liability or
asserted  liability  could  have a  material  adverse  effect  on the  Company's
business,  financial condition, and operating results. In addition, the adoption
of other laws or  regulations  may  reduce  the rate of growth of the  Internet,
which could in turn decrease the demand for the Company's  services and increase
the Company's cost of doing business, or could otherwise have a material adverse
effect on the Company's business, financial condition, and operating results.

   The Company's software utilizes encryption technology, the export of which is
regulated by the United States government. There can be no assurance that export
regulations,  either in their  current form or as may be  subsequently  enacted,
will not limit the Company's  ability,  to distribute  its software  outside the
United States. Moreover,  federal or state legislation or regulation may further
limit levels of encryption or authentication technology that the Company is able
to utilize in its software. While the Company takes precautions against unlawful
exportation  of its  software,  the  global  nature  of the  Internet  makes  it
difficult to effectively control the distribution of software. Any revocation or
modification  of the Company's  export  authority,  unlawful  exportation of the
Company's  software,  or adoption of new  legislation or regulation  relating to
exportation of software and encryption  technology could have a material adverse
effect on the Company's business, financial condition, and operating results.

                                       43
<PAGE>

Future Capital Needs; Uncertainty of Additional Financing

   The Company  currently  anticipates  that its available cash resources,  cash
generated from  operations,  and amounts  available under its commercial  credit
facilities will be sufficient to meet its presently  anticipated working capital
and capital expenditure requirements for at least the next 12 months.

   The Company may need to raise additional funds in order to support more rapid
expansion,  develop new or enhanced services,  respond to competitive pressures,
acquire  complementary  businesses or technologies,  or respond to unanticipated
requirements.  If  additional  funds are raised  through the  issuance of equity
securities,  the percentage ownership of the stockholders of the Company will be
reduced,  stockholders  may  experience  additional  dilution,  or  such  equity
securities may have rights,  preferences,  or privileges  senior to those of the
holders of the Company's Common Stock. There can be no assurance that additional
financing will be available when needed on terms favorable to the Company, if at
all. If adequate  funds are not  available or are not  available  on  acceptable
terms,  the  Company  may be unable to  develop or enhance  its  products,  take
advantage  of future  opportunities,  or respond  to  competitive  pressures  or
unanticipated  requirements,  which could have a material  adverse effect on the
Company's   business,   financial   condition,   and  operating   results.   See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations--Liquidity and Capital Resources."

Management of a Changing Business

   The Company has experienced  substantial change and expansion in its business
and operations since its inception in 1993 and expects to continue to experience
periods of rapid change. The Company's past expansion has placed, and any future
expansion  would place,  significant  demands on the  Company's  administrative,
operational,  financial,  and other  resources.  The Company  expects  operating
expenses  and  staffing  levels to  increase  substantially  in the  future.  In
particular,  the  Company  intends to hire a  significant  number of  additional
personnel in 1999 and later years.  Competition  for such  personnel is intense,
and  there  can be no  assurance  that  the  Company  will be  able to  attract,
assimilate,  or retain additional highly qualified  personnel in the future. The
Company also expects to expend resources with respect to future expansion of its
accounting and internal  management  systems and the implementation of a variety
of new systems and  procedures.  In  addition,  the Company  expects that future
expansion will continue to challenge the Company's  ability to train,  motivate,
and manage its employees and to attract and retain qualified senior managers and
technical persons, such as programmers and software architects. If the Company's
revenues do not increase in proportion to its operating expenses,  the Company's
management systems do not expand to meet increasing  demands,  the Company fails
to  attract,  assimilate,  and  retain  qualified  personnel,  or the  Company's
management otherwise fails to manage the Company's expansion effectively,  there
would  be a  material  adverse  effect  on  the  Company's  business,  financial
condition, and operating results.

Volatility of Stock Price

   The market price of the Company's Common Stock is highly volatile and subject
to wide fluctuations in response to quarterly  variations in operating  results,
announcements  of  technological  innovations or new software or services by the
Company  or its  competitors,  changes  in  financial  estimates  by  securities
analysts,  or other  events or factors,  many of which are beyond the  Company's
control.

   In addition,  the stock market has experienced  significant  price and volume
fluctuations  that  have  particularly  affected  the  market  prices  of equity
securities of many high technology  companies and that often have been unrelated
to the operating performance of such companies.  These broad market fluctuations
may  adversely  affect the market price of the Company's  Common  Stock.  In the
past,  following  periods  of  volatility  in the market  price for a  company's
securities,  securities class action litigation has often been instituted.  Such
litigation  could  result in  substantial  costs and a diversion  of  management
attention  and  resources,  which  could have a material  adverse  effect on the
Company's  business,  financial  condition,  and operating results. It is likely
that the Company's future quarterly operating results from time to time will not
meet the expectations of market analysts or investors, which may have an adverse
effect on the price of the Company's Common Stock.


                                       44
<PAGE>


ITEM 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

   The Company's  exposure to market risk for changes in interest  rates relates
primarily to its investment  portfolio.  The Company had no derivative financial
instruments as of December 31, 1998 and 1997. The Company places its investments
in instruments that meet high credit quality  standards and the amount of credit
exposure to any one issue, issuer and type of instrument is limited. The Company
does not expect any material loss with respect to its investment portfolio.

   The  Company's  financial  instrument  holdings as of December  31, 1998 were
analyzed to  determine  their  sensitivity  to  interest  rate  changes.  In our
sensitivity  analysis,  we assumed an adverse  change in  interest  rates of 500
basis points and the expected effect on net income was insignificant.



ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
BroadVision, Inc.:

We have audited the  accompanying  consolidated  balance sheets of  BroadVision,
Inc.  and  subsidiaries  as of  December  31,  1998 and  1997,  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the years in the  three-year  period  ended  December  31,  1998.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial  position of BroadVision,  Inc.
and  subsidiaries  as of December  31,  1998 and 1997,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1998,  in  conformity  with  generally  accepted  accounting
principles.

                                                              KPMG LLP

Mountain View, California
January 26, 1999


                                       45
<PAGE>

<TABLE>

                                    BROADVISION, INC. AND SUBSIDIARIES
                                        CONSOLIDATED BALANCE SHEETS
                                   (In thousands, except per share data)

<CAPTION>
                                                                                     December 31,
                                                                       -----------------------------------------
                                                                              1998                 1997
                                                                       -------------------- --------------------

<S>                                                                       <C>                  <C>          
                               ASSETS
Current assets:
   Cash, and cash equivalents                                             $     61,878         $       8,277
   Restricted cash                                                                   -                 1,400
   Restricted short-term investments                                                 -                   796
   Accounts receivable, less allowance for doubtful accounts
     of $788 and $671 for 1998 and 1997, respectively                           15,361                 8,783
   Prepaids and other                                                            3,589                   566
                                                                       -------------------- --------------------
       Total current assets                                                     80,828                19,822

Property and equipment, net                                                      8,034                 6,467
Long-term investments                                                           11,546                     -
Other assets                                                                     1,154                   250
                                                                       ==================== ====================
       Total assets                                                       $    101,562         $      26,539
                                                                       ==================== ====================


                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                       $      2,243        $        1,863
   Accrued expenses                                                              4,933                 2,168
   Unearned revenue                                                              1,918                   532
   Deferred maintenance                                                          6,157                 2,552
   Current portion of capital lease obligations                                    709                   773
   Current portion of long-term debt                                               548                   449
                                                                       -------------------- --------------------
       Total current liabilities                                                16,508                 8,337

Capital lease obligations                                                          270                   803
Long-term debt                                                                   2,924                 2,202
Other liabilities                                                                   51                    76
                                                                       -------------------- --------------------
       Total liabilities                                                        19,753                11,418

Commitments

Stockholders' equity:
   Convertible preferred stock, $0.0001 par value; 5,000 shares
     authorized; none issued and outstanding
   Common stock, $0.0001 par value; 50,000 shares authorized; 24,796
     and 20,343 shares issued and outstanding in 1998 and 1997,                      2                     2
      respectively
   Additional paid-in capital                                                   98,767                40,366
   Deferred compensation                                                          (555)               (1,605)
   Accumulated other comprehensive income                                        3,198                     -
   Accumulated deficit                                                         (19,603)              (23,642)
                                                                       -------------------- --------------------
       Total stockholders' equity                                               81,809                15,121
                                                                       -------------------- --------------------
       Total liabilities and stockholders' equity                        $     101,562         $      26,539
                                                                       -------------------- --------------------
<FN>

                                      See accompanying notes to consolidated financial statements
</FN>
</TABLE>


                                       46
<PAGE>


<TABLE>

                                                              BROADVISION, INC. AND SUBSIDIARIES
                                                             CONSOLIDATED STATEMENTS OF OPERATIONS
                                                           (In thousands, except per share amounts)

<CAPTION>

                                                                                                  Years Ended December 31,
                                                                                        --------------------------------------------
                                                                                          1998             1997              1996
                                                                                        --------         --------          --------

<S>                                                                                     <C>              <C>               <C>     
Revenues:
     Software licenses                                                                  $ 36,067         $ 18,973          $  7,464
     Services                                                                             14,844            8,132             3,418
                                                                                        --------         --------          --------
         Total revenues                                                                   50,911           27,105            10,882

Cost of revenues:
     Cost of license revenues                                                              1,001            1,664               330
     Cost of services revenues                                                             8,704            4,284             2,164
                                                                                        --------         --------          --------
         Total cost of revenues                                                            9,705            5,948             2,494

                                                                                        --------         --------          --------
              Gross profit                                                                41,206           21,157             8,388

Operating expenses:
     Research and development                                                              9,227            7,392             4,985
     Sales and marketing                                                                  26,269           18,413            12,066
     General and administrative                                                            3,786            2,990             2,034
                                                                                        --------         --------          --------
         Total operating expenses                                                         39,282           28,795            19,085

                                                                                        --------         --------          --------
              Operating income (loss)                                                      1,924           (7,638)          (10,697)

Other income, net                                                                          2,036              265               552

                                                                                        --------         --------          --------
              Income (loss) before income taxes                                            3,960           (7,373)          (10,145)

Income tax benefit                                                                            79             --                --

                                                                                        ========         ========          ========
              Net income (loss)                                                         $  4,039         $ (7,373)         $(10,145)
                                                                                        ========         ========          ========


Basic earnings (loss) per share                                                         $   0.17         $  (0.36)         $  (0.54)
                                                                                        ========         ========          ========

Diluted earnings (loss) per share                                                       $   0.16         $  (0.36)         $  (0.54)
                                                                                        ========         ========          ========

Shares used in computing basic earnings (loss) per share                                  23,346           20,208            18,815
                                                                                        ========         ========          ========

Shares used in computing diluted earnings (loss) per share                                25,653           20,208            18,815
                                                                                        ========         ========          ========

<FN>

                                     See accompanying notes to consolidated financial statements

</FN>
</TABLE>

                                                                 47
<PAGE>


<TABLE>

                                                 BROADVISION, INC. AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                              (in thousands, except per share amounts)
<CAPTION>

                                                                                          
                                                         Convertible          Common                                  Accumulated  
                                                       Preferred Stock        Stock        Additional                    Other     
                                                      ------------------ -----------------  Paid-in     Deferred     Comprehensive 
                                                     Shares    Amount   Shares   Amount     Capital   Compensation      Income     
                                                    -------------------------------------------------------------------------------
<S>                                                  <C>          <C>     <C>        <C>   <C>          <C>                 <C>    
  Balances as of December 31, 1995                     8,601        $ 1    6,308      $ 1  $ 11,412     $ (1,036)          $   -  
  Net loss and comprehensive loss                          -          -        -        -         -             -              -  
                                                                                                                                  
  Issuance of Series C convertible preferred ($2.00        3          -        -        -         6             -              -  
  per share)
  Issuance of Series E convertible preferred ($8.00      634          -        -        -     5,055             -              -  
  per share)
  Conversion of Series A, B, C and E preferred to    (9,238)        (1)    9,258        1         -             -              -  
  common stock
  Issuance of common stock from public offering,           -          -    3,360        -    20,755             -              -  
  net of costs
  Issuance of stock under employee stock purchase          -          -        -        -       394             -              -  
  plan
  Issuance of common stock from exercise of options        -          -    1,112        -       205             -              -  
  Common stock repurchased                                 -          -    (130)        -      (21)             -              -  
  Deferred compensation on stock options                   -          -        -        -     1,510       (1,510)              -  
  Amortization of deferred compensation                    -          -        -        -         -           513              -  

                                                    ------------------------------------------------------------------------------

  Balances as of December 31, 1996                         -          -   19,908        2    39,316       (2,033)              - 
  Net loss and comprehensive loss                          -          -        -        -         -             -              - 
                                                                                                                                 
  Issuance of stock under employee stock purchase          -          -      242        -       979             -              - 
  plan
  Issuance of common stock from exercise of options        -          -      255        -        81             -              - 
  Common stock repurchased                                 -          -     (62)        -      (10)             -              - 
  Amortization of deferred compensation                    -          -        -        -         -           428              - 

                                                    -----------------------------------------------------------------------------

  Balances as of December 31, 1997                         -          -   20,343        2    40,366       (1,605)              - 
  Comprehensive income:
   Net income                                                                                                                    
   Unrealized gain on equity securities                                                                                    3,198 
                                                                                                                                  
     Total comprehensive income                                                                                                   
                                                                                                                                  
  Issuance of common stock from public offering,           -          -    3,456        -    53,745             -              - 
  net of costs
  Issuance of common stock for long-term investments       -          -      123        -     1,322             -              - 
  Issuance of common stock from exercise of warrants       -          -       29        -         -             -              - 
  Issuance of stock under employee stock purchase          -          -      228        -     1,599             -              - 
  plan
  Issuance of common stock from exercise of options        -          -      633        -     2,190             -              - 
  Common stock repurchased                                 -          -     (16)        -       (2)             -              - 
  Deferred compensation forfeited due to voluntary         -          -        -        -     (693)           693              - 
  terminations
  Deferred compensation on stock options                   -          -        -        -       240         (240)              - 
  Amortization of deferred compensation                    -          -        -        -         -           597              - 

                                                    ==============================================================================
  Balances as of December 31, 1998                         -          -   24,796      $ 2   $98,767       $ (555)        $ 3,198  
                                                    ==============================================================================

</TABLE>


<TABLE>
<CAPTION>
                                                                                          
                                                                                                  
                                                                                      Total       
                                                      Accumulated  Comprehensive  Stockholders'   
                                                      Deficit      Income (loss)     Equity
                                                    ---------------------------------------------
<S>                                                     <C>          <C>            <C>    
  Balances as of December 31, 1995                      $ (6,124)                  $  4,254
  Net loss and comprehensive loss                        (10,145)    $ (10,145)     (10,145)
                                                                   ==============
  Issuance of Series C convertible preferred ($2.00             -                         6
  per share)
  Issuance of Series E convertible preferred ($8.00             -                     5,055
  per share)
  Conversion of Series A, B, C and E preferred to               -                       ---
  common stock
  Issuance of common stock from public offering,                -                    20,755
  net of costs
  Issuance of stock under employee stock purchase               -                       394
  plan
  Issuance of common stock from exercise of options             -                       205
  Common stock repurchased                                      -                      (21)
  Deferred compensation on stock options                        -                       ---
  Amortization of deferred compensation                         -                       513
                                                    ---------------------------------------------

  Balances as of December 31, 1996                       (16,269)                     21,016
  Net loss and comprehensive loss                         (7,373)     $ (7,373)      (7,373)
                                                                   ==============
  Issuance of stock under employee stock purchase               -                        979
  plan
  Issuance of common stock from exercise of options             -                         81
  Common stock repurchased                                      -                       (10)
  Amortization of deferred compensation                         -                        428
                                                    ---------------------------------------------
  Balances as of December 31, 1997                       (23,642)                     15,121
  Comprehensive income:
   Net income                                               4,039      $ 4,039         4,039
   Unrealized gain on equity securities                                  3,198         3,198
                                                                   ==============
     Total comprehensive income                                        $ 7,237
                                                                   ==============
  Issuance of common stock from public offering,                -                     53,745
  net of costs
  Issuance of common stock for long-term investments            -                      1,322
  Issuance of common stock from exercise of warrants            -                        ---
  Issuance of stock under employee stock purchase               -                      1,599
  plan
  Issuance of common stock from exercise of options             -                      2,190
  Common stock repurchased                                      -                        (2)
  Deferred compensation forfeited due to voluntary              -                        ---
  terminations
  Deferred compensation on stock options                        -                        ---
  Amortization of deferred compensation                         -                        597
                                                    ================            =================
  Balances as of December 31, 1998                     $ (19,603)                   $ 81,809
                                                    ================            =================


<FN>

           See accompanying notes to consolidated financial statements
</FN>
</TABLE>


                                       48
<PAGE>


<TABLE>

                                 BROADVISION, INC. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (in thousands)
<CAPTION>

                                                                               Years Ended December 31,
                                                                   --------------------------------------------------
                                                                       1998              1997             1996
                                                                  ---------------   ---------------  ----------------
<S>                                                                  <C>               <C>              <C>      
Cash flows from operating activities:
   Net income (loss)                                                 $    4,039        $ (7,373)        $(10,145)

   Adjustments to reconcile net income (loss) to net cash
     provided by (used for) operating activities:

   Depreciation and amortization                                          2,947           1,613              753
     Amortization of deferred compensation                                  597             428              513
     Provision for doubtful accounts and returns                            458             515              196
     Revenue resulting from non-monetary transactions                    (2,917)              -                -
     Amortization of prepaid royalties                                      250               -                -

   Changes in operating assets and liabilities:
     Accounts receivable                                                 (7,036)         (3,750)          (3,133)
     Prepaid expenses and other                                          (2,716)           (194)            (536)
     Accounts payable and accrued expenses                                3,145             547            2,996
     Unearned revenue and deferred maintenance                            2,633            (465)             978
                                                                  ---------------   ---------------  ----------------
       Net cash provided by (used for) operating activities               1,400          (8,679)          (8,378)

Cash flows from investing activities:
   Purchase of property and equipment                                    (4,198)         (4,878)          (2,529)
   Purchase of long-term investments                                     (3,000)              -                -
   Increase other assets                                                   (237)              -                -
   Purchase of short-term investments                                         -            (796)          (2,112)
   Maturity of short-term investments                                       796           2,112              196
                                                                  ---------------   ---------------  ----------------
       Net cash used for investing activities                            (6,639)         (3,562)          (4,445)

Cash flows from financing activities:
   Proceeds from sale/leaseback                                               -             987                -
   Net change in restricted cash                                          1,400          (1,400)               -
   Proceeds from borrowings, net                                            821           2,651                -
   Payments on capital lease obligations                                   (913)           (378)            (274)
   Proceeds from issuance of common stock, net                           57,532           1,050           21,333
   Proceeds from issuance of preferred stock                                  -               -            5,061
                                                                  ---------------   ---------------  ----------------
       Net cash provided by financing activities                         58,840           2,910           26,120

Net increase (decrease) in cash and cash equivalents                     53,601          (9,331)          13,297

Cash and cash equivalents, beginning of year                              8,277          17,608            4,311
                                                                  ===============   ===============  ================
Cash and cash equivalents, end of year                               $   61,878        $  8,277         $ 17,608
                                                                  ===============   ===============  ================


Supplemental cash flow disclosures:
  Prepaids and other assets acquired through non-monetary            $    1,250        $      -         $      -
   transactions
                                                                  ===============   ===============  ================
  Investments acquired through non-monetary transactions             $    4,025        $      -         $      -
                                                                  ===============   ===============  ================
  Unearned revenue and deferred maintenance from non-monetary        $    2,358        $      -         $      -
transactions
                                                                  ===============   ===============  ================
  Cash paid for interest                                             $      394        $    108         $     86
                                                                  ===============   ===============  ================
  Cash paid for income taxes                                         $      428        $    156         $     66
                                                                  ===============   ===============  ================
  Equipment acquired under capital leases                            $      316        $  1,165         $    380
                                                                  ===============   ===============  ================
  Long-term investment acquired in exchange for common stock         $    1,322        $      -         $      -
                                                                  ===============   ===============  ================
  Deferred compensation on stock options                             $      240        $      -         $  1,510
                                                                  ===============   ===============  ================
  Deferred compensation forfeited due to voluntary terminations      $      693        $      -         $      -
                                                                  ===============   ===============  ================
  Unrealized gain on long-term investments                           $    3,198        $      -         $      -
                                                                  ===============   ===============  ================

<FN>
           See accompanying notes to consolidated financial statements
</FN>
</TABLE>

                                       49
<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                        December 31, 1998, 1997, and 1996

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

BroadVision,   Inc.  (the  "Company")  develops,   markets  and  supports  fully
integrated large scale application  software solutions  exclusively  designed to
manage one-to-one relationships for the extended enterprise. The Company's total
end-to-end solutions enable businesses to capitalize on the Internet as a unique
platform  which  empowers  businesses  to  enhance  commerce,  provide  critical
self-service functions, and deliver highly specialized information to customers,
suppliers,  distributors,  employees,  or any other  constituent of the extended
enterprise  through  real-time   interactive   one-to-one   relationships.   The
BroadVision  One-To-One  product  family  allows  businesses  to tailor Web site
content to the needs and interests of  individual  users by  personalizing  each
visit on a real-time basis.  BroadVision  One-To-One  applications  achieve this
result by  interactively  capturing  Web site visitor  profile  information  and
targeting  organized   enterprise  content  to  each  visitor  based  on  easily
constructed business rules.

Basis of Presentation and Use of Estimates

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany accounts
and  transactions  have been  eliminated in  consolidation.  The  preparation of
consolidated   financial   statements  in  conformity  with  generally  accepted
accounting  principles  requires  management  to make  certain  assumptions  and
estimates that affect reported  amounts of assets and liabilities as of the date
of the financial  statements  and the reported  amounts of revenues and expenses
during  the  reporting  period.  The  actual  results  could  differ  from those
estimates.

Revenue Recognition

The Company's revenue  recognition  policies are in accordance with Statement of
Position ("SOP") 97-2,  Software Revenue  Recognition,  which was adopted by the
Company effective January 1, 1998. There was no material change to the Company's
accounting  for  revenues as a result of the  adoption of SOP 97-2.  In general,
software license revenues are recognized when a non-cancelable license agreement
has been signed and the customer  acknowledges  an  unconditional  obligation to
pay,  the  software  product  has been  delivered,  there  are no  uncertainties
surrounding  product  acceptance,  the  fees are  fixed  and  determinable,  and
collection is considered probable; professional services revenues are recognized
as such services are performed;  and maintenance  revenues,  including  revenues
bundled  with  software  agreements  which  entitle the  customers  to technical
support and future  unspecified  enhancements  to the  Company's  products,  are
deferred and  recognized  ratably over the related  contract  period,  generally
twelve months.  Revenues recognized from multiple-elemnet  software arrangements
are allocated to each element of the arrangement based on the fair values of the
elements,  such as software  products,  upgrades,  enhancements,  post  contract
customer support,  installation, or training. The determination of fair value is
based on objective  evidence which is specific to the Company.  If such evidence
of fair value for each element of the  arrangement  does not exist,  all revenue
from the  arrangement  is deferred  until such time that  evidence of fair value
does exist or until all elements of the arrangement are delivered.

The Company records  unearned  revenue for software  arrangements  when cash has
been received from the customer and the arrangement does not qualify for revenue
recognition under the Company's revenue  recognition policy. The Company records
accounts receivable for software arrangements when the arrangement qualifies for
revenue  recognition and cash or other  consideration has not been received from
the customer.

In February 1998, the Accounting  Standards Executive Committee ("AcSEC") of the
American  Institute of Certified Public  Accountants  ("AICPA") issued SOP 98-4,
Deferral of the Effective  Date of SOP 97-2.  The SOP defers the effective  date
for  applying  the  provisions  regarding   vendor-specific  objective  evidence
("VSOE") of fair value until AcSEC can reconsider  what  constitutes  such VSOE.
There was no  material  change to the  Company's  accounting  for  revenues as a
result of the adoption of SOP 98-4.

                                       50
<PAGE>

In December  1998,  AcSEC issued SOP 98-9  Software  Revenue  Recognition,  With
Respect to Certain Transactions, which requires recognition of revenue using the
"residual  method" in a  multiple-element  arrangement  when fair value does not
exist for one or more of the delivered  elements in the  arrangement.  Under the
"residual method",  the total fair value of the undelivered elements is deferred
and  subsequently  recognized in accordance  with SOP 97-2. The Company does not
expect a  material  change to its  accounting  for  revenues  as a result of the
provisions of SOP 98-9.

Research and Development and Software Development Costs

Development  costs  incurred in the  research  and  development  of new software
products are expensed as incurred until technological feasibility in the form of
a working model has been  established at which time such costs are  capitalized,
subject to  recoverability.  Products are made  available  for limited  release,
concurrent  with the  achievement  of  technological  feasibility.  Accordingly,
software   development  costs  incurred   subsequent  to  the  establishment  of
technological  feasibility  have not been  significant,  and the Company has not
capitalized any software development costs to date.

Prepaid Royalties

Prepaid  royalties  relating to purchased  software to be incorporated  and sold
with the Company's  software  products are amortized as a cost of revenue either
on a straight-line  basis over the remaining term of the royalty agreement or on
the  basis  of  projected  product   revenues,   whichever  results  in  greater
amortization.

Cash Equivalents

The Company  considers all debt  securities  with remaining  maturities of three
months or less at the date of purchase  to be cash  equivalents.  The  Company's
cash equivalents as of December 31, 1998, consisted of approximately $48,900,000
of money market funds and  $11,000,000 of commercial  paper.  The Company's cash
equivalents  as of December 31, 1997,  consisted of  $7,708,000  of money market
funds.

Short-term Investments

Short-term  investments  as  of  December  31,  1997  consisted  of  a  one-year
certificate  of  deposit  maintained  with the  Company's  commercial  bank as a
guarantee  for a standby  letter  of  credit  issued by the bank in favor of the
Company's   landlord.    The   short-term   investments   were   classified   as
available-for-sale,  had  maturities  of one year or less and  were  carried  at
amortized cost which approximates fair value.

Concentrations of Credit Risk and

Financial   assets  that   potentially   subject  the  Company  to   significant
concentrations  of credit risk consist  principally of cash,  cash  equivalents,
short-term investments,  and trade accounts receivable. The Company's cash, cash
equivalents  and  short-term  investments  are held with a commercial  bank. The
Company markets and sells its product  throughout the world and performs ongoing
credit  evaluations  of its  customers.  The Company  generally does not require
collateral  on accounts  receivable  as the majority of its customers are large,
well-established  companies. The Company maintains reserves for potential credit
losses but  historically  has not experienced any significant  losses related to
individual  customers  or groups of  customers  in any  particular  industry  or
geographic area.

Fair Value of Financial Instruments

The Company's  financial  instruments  consist of cash  equivalents,  short-term
investments,  accounts  receivable,  accounts payable and debt. The Company does
not have any derivative financial instruments.

The Company believes the reported carrying amounts of its financial  instruments
approximates  fair value,  based upon the short  maturity  of cash  equivalents,
short-term  investments,  accounts  receivable  and  payable,  and  based on the
current rates available to the Company on similar debt issues.



                                       51
<PAGE>

Property and Equipment

Property and equipment  are stated at cost and  depreciated  on a  straight-line
basis  over  their  estimated  useful  lives  (two  to  five  years).  Leasehold
improvements are amortized over the corresponding  lease term or their estimated
useful lives, whichever is shorter.

The Company evaluates long-lived assets and certain identifiable intangibles for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets is
measured by a comparison  of the carrying  amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the property and equipment exceeds its fair market value.

Long-term Investments

As of December  31,  1998,  the  Company's  long-term  investments  consisted of
investments in nonmarketable  equity  securities and an investment in marketable
equity  securities.  The Company currently has no plans or intentions to dispose
of  the  investments  during  1999.  Accordingly,   the  investments  have  been
classified as long term.

The Company  accounts for its  investments in  nonmarketable  equity  securities
based  on the  cost  method  as  the  Company  does  not  have  the  ability  to
significantly  influence the operating and financial  policies of the investees.
Any  decline  in value,  which is other  than a  temporary  decline,  is charged
immediately  to  earnings  in the  period in which the  impairment  occurs.  The
carrying value of the investments in nonmarketable equity securities amounted to
$3,000,000  at December 31,  1998.  The Company  classifies  its  investment  in
marketable equity securities as available for sale. Accordingly,  the investment
is recorded at its fair value with any  unrealized  gains or losses  reported as
accumulated other  comprehensive  income in stockholders'  equity and changes in
the  unrealized  gain or loss are reported as other  comprehensive  income.  Any
decline  in  value,  which  is  other  than  a  temporary  decline,  is  charged
immediately  to earnings  in the period in which the  impairment  occurs.  As of
December 31, 1998, the Company's  investment in marketable equity securities had
a fair value of $8,546,000,  a cost basis of $5,348,000,  and an unrealized gain
of $3,198,000.

Income Taxes

The Company  utilizes the asset and liability  method of  accounting  for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are  established  to  recognize  the future  tax  consequences  attributable  to
differences  between the financial statement carrying amounts of existing assets
and  liabilities  and their  respective  tax  bases.  Deferred  tax  assets  and
liabilities  are measured using enacted tax rates expected to apply in the years
in which  temporary  differences  are expected to be  recovered or settled.  The
effects  on  deferred  tax assets  and  liabilities  of a change in tax rates is
recognized in income in the period that includes the enactment date.

Employee Stock Option and Purchase Plans

The Company  accounts for employee  stock-based  awards in  accordance  with the
provisions of Accounting  Principles Board (APB) Opinion No. 25,  Accounting for
Stock Issued to Employees,  and related  interpretations.  As such, compensation
expense is recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. Pursuant to Statement of Financial
Accounting Standard ("SFAS") No. 123,  Accounting for Stock-Based  Compensation,
the Company  discloses  the pro forma  effects of using the fair value method of
accounting for stock-based compensation arrangements.

Per Share Information

Basic earnings (loss) per share is computed using the weighted-average number of
shares  of  common  stock  outstanding.  Diluted  earnings  (loss)  per share is
computed using the weighted-average number of shares of common stock outstanding
and, when dilutive,  common equivalent shares from outstanding stock options and
warrants using the treasury stock method.



                                       52
<PAGE>


Excluded from the computation of diluted earnings per share for 1997 are options
to acquire  3,702,000  shares of Common Stock with a  weighted-average  exercise
price of $4.41 and  warrants  to acquire  93,750  shares of Common  Stock with a
weighted-average  exercise  price  of  $6.16  because  their  effects  would  be
anti-dilutive.  Excluded from the computation of diluted  earnings per share for
1996  are  options  to  acquire   1,522,000   shares  of  Common  Stock  with  a
weighted-average  exercise  price of $1.13 and warrants to acquire 13,000 shares
of Common Stock with a  weighted-average  exercise  price of $2.00 because their
effects would be  anti-dilutive.  The  following  table sets forth the basic and
diluted earnings (loss) per share computational data for the periods presented.

<TABLE>
<CAPTION>
                                                                                             Years Ended December 31,
                                                                                  --------------------------------------------------
(In thousands, except per share amounts)                                            1998                 1997                1996
                                                                                  --------            --------             -------- 
<S>                                                                               <C>                 <C>                  <C>      
Net income (loss) for basic and diluted
earnings (loss) per share                                                         $  4,039            $ (7,373)            $(10,145)
                                                                                  ========            ========             ======== 

Weighted-average common shares outstanding
 utilized for basic earnings (loss) per share                                       23,346              20,208               18,815

Weighted-average common equivalent shares
outstanding:
  Employee common stock options                                                      2,288                -[1]                 -[1]
  Common stock warrant                                                                  19                -[1]                 -[1]
                                                                                  --------            --------             -------- 

   Total weighted-average common and common
    equivalent shares outstanding utilized for
    diluted earnings (loss) per share                                               25,653              20,208               18,815
                                                                                  ========            ========             ======== 

Basic earnings (loss) per share                                                   $   0.17            $  (0.36)            $  (0.54)
                                                                                  ========            ========             ======== 

Diluted earnings (loss) per share                                                 $   0.16            $  (0.36)            $  (0.54)
                                                                                  ========            ========             ======== 

<FN>

[1]  The Company incurred a net loss for the indicated period.  Accordingly,  common equivalent shares are excluded from the diluted
     loss per share calculation because they are antidilutive.
</FN>
</TABLE>

Foreign Currency Transactions

The  functional  currency  of the  Company's  foreign  subsidiaries  is the U.S.
dollar.  Resulting  foreign  exchange  gains  and  losses  are  included  in the
consolidated results of operations and, to date, have not been significant.

Comprehensive Income (Loss)

The Company  adopted  SFAS No. 130,  Reporting  Comprehensive  Income  effective
January 1, 1998.  SFAS No.  130  establishes  standards  for the  reporting  and
disclosure  of  comprehensive  income (loss) and its  components.  Comprehensive
income  (loss)  includes  all  changes in equity  during a period  except  those
resulting from investments by or distributions to owners.

Comprehensive  income for the year ended December 31, 1998 was  $7,237,000.  The
Company's  only component of accumulated  other  comprehensive  income and other
comprehensive  income as of and for the year ended  December 31, 1998 related to
the  unrealized  gain  on  available-for-sale   investments.   As  a  result  of
unrecognized tax benefits  represented by a valuation allowance for deferred tax
assets,   no  incremental  tax  effects  were  attributed  to  unrealized  gain.
Accordingly,  the unrealized gain is the same on a pre-tax and net of tax basis.
The Company did not have any significant  components of other comprehensive loss
for the years ended December 31, 1997 and 1996 and, thus, the comprehensive loss
is the same as net loss for those periods.

Reclassifications

Certain prior period  amounts have been  reclassified  to conform to the current
period presentation.


                                       53
<PAGE>

Recent Accounting Pronouncements

In  June  1998,  the  FASB  issued  SFAS  No.  133,  Accounting  for  Derivative
Instruments and Hedging Activities,  effective for all fiscal quarters of fiscal
years  beginning after June 15, 1999.  Accordingly,  the Company will adopt SFAS
No. 133 beginning on January 1, 2000. SFAS No. 133 establishes standards for the
accounting  and  reporting of  derivative  instruments  and hedging  activities,
including certain derivative instruments embedded in other contracts. Under SFAS
No. 133, entities are required to carry all derivative instruments at fair value
on their balance  sheets.  The  accounting  for changes in the fair value (i.e.,
gains or  losses)  of a  derivative  instrument  depends  on whether it has been
designated  and  qualifies  as part of a  hedging  activity  and the  underlying
purpose for it. The Company  does not believe  that the adoption of SFAS No. 133
will  have  a  significant  impact  on  the  Company's   consolidated  financial
statements or related disclosures.

In March 1998,  the AICPA issued SOP 98-1,  Accounting for the Costs of Computer
Software  Developed or Obtained for Internal Use. SOP 98-1 requires that certain
costs  related to the  development  or  purchase  of  internal-use  software  be
capitalized  and amortized over the estimated  useful life of the software.  SOP
98-1  is  effective  for  fiscal  years   beginning  after  December  15,  1998.
Accordingly,  the Company will adopt SOP 98-1  beginning on January 1, 1999. The
Company does not believe  that the adoption of SOP 98-1 will have a  significant
impact  on  the   Company's   consolidated   financial   statements  or  related
disclosures.


NOTE 2--PROPERTY AND EQUIPMENT (in thousands):
                                                               December 31,
                                                          ----------------------
                                                             1998        1997  
                                                           --------    --------
         Furniture and fixtures                            $  1,001    $    636
         Computer and software                                8,662       5,458
         Leasehold improvements                               3,725       2,780
                                                           --------    --------
                                                             13,388       8,874
         Less accumulated depreciation and amortization      (5,354)     (2,407)
                                                           --------    --------
                                                           $  8,034    $  6,467
                                                           ========    ========
                                                         
As of  December  31,  1998 and  1997,  leased  equipment  totaled  approximately
$2,572,000  and $2,256,000  respectively.  Accumulated  depreciation  for leased
equipment totaled approximately  $1,750,000 and $927,000 as of December 31, 1998
and 1997, respectively.


NOTE 3--ACCRUED EXPENSES (in thousands):
                                                               December 31,
                                                         -----------------------
                                                          1998             1997
                                                         ------           ------
         Employee benefits                               $  678           $  420
         Commissions and bonuses                           2013              833
         Taxes payable                                      785              366
         Other                                            1,457              549
                                                         ------           ------
                                                         $4,933           $2,168
                                                         ======           ======
                                                                 

NOTE 4--UNEARNED REVENUE (in thousands):
                                                               December 31,
                                                         -----------------------
                                                          1998             1997
                                                         ------           ------
         Software licenses                               $1,023           $ --
         Services                                           895              532
                                                         ------           ------
                                                         $1,918           $  532
                                                         ======           ======



                                       54
<PAGE>
                                                                        
NOTE 5--DEBT                                           
                                                       
As of December 31,  1998,  the Company has a credit  facility  with a commercial
lender  which  includes  outstanding  borrowings  of $3.5  million  under a note
payable. Borrowings bear interest at the bank's prime rate (7.75% as of December
31, 1998). Principal and interest is due in consecutive monthly payments through
maturity based on the term of the facility.  Principal  payments of $548,000 are
due  annually  from 1999  through  2004 with a final  payment of $183,000 due in
2005. The credit facility includes  covenants which impose certain  restrictions
on the payment of dividends and other  distributions and requires the Company to
maintain monthly financial covenants,  including a minimum quick ratio, tangible
net worth ratio and minimum cash reserves. The minimum cash reserves covenant is
replaced  with a  minimum  debt  service  coverage  ratio  upon six  consecutive
quarters of profitability.  Borrowings are collateralized by a security interest
in  substantially  all  of  the  Company's  owned  assets.  The  Company  was in
compliance  with  all  of its  financial  covenants  as of  December  31,  1998.
Available credit under the Company's credit facilities include an available term
debt  credit  facility  of $1.0  million  and a  revolving  line of credit  that
provides for up to $2.3 million of total borrowings  (based on eligible accounts
receivable).  As of December 31, 1998, the Company has  outstanding  commitments
totaling  $2.2  million  in the form of  standby  letters  of  credit  under its
revolving line of credit (see Note 7).


NOTE 6--INCOME TAXES

Income before taxes  includes  losses from foreign  operations of  approximately
$2,906,000,  $1,567,000 and $986,000 for the years ended December 31, 1998, 1997
and 1996  respectively.  The  components of income tax expense  (benefit) are as
follows (in thousands):

                                                   Years Ended December 31,
                                            ------------------------------------
                                              1998           1997          1996
                                             -----           ----          ----
         Current:
              Federal                        $ 192           $--           $-- 
              State                             13            --            --
              Foreign                          416            --            --
                                             -----           ----          ----
                  Total current              $ 621           $--           $--
                                                                         
         Deferred:                                                       
              Federal                         (600)           --            --
              State                           (100)           --            --
                                             -----           ----          ----
                  Total deferred             $(700)          $--           $--
                                                                         
                                             =====           ====          ====
                                             $ (79)          $--           $--
                                             =====           ====          ====
                                                                     
The differences between the income tax expense (benefit) computed at the federal
statutory rate of 34% and the Company's actual income tax expense  (benefit) for
the periods presented are as follows (in thousands):

                                                     Years Ended December 31,
                                                --------------------------------
                                                   1998       1997       1996
                                                  -------    -------    ------- 
        Expected income tax expense               $ 1,346    $(2,507)   $(3,449)
        State income taxes,
          net of federal tax benefit                  (58)      --         --
        Foreign taxes                                 416       --         --
        Alternative minimum tax                        97       --         --
        Utilization of net operating loss            --         --
          carryforwards                            (2,471)
        Decrease in beginning of year
          valuation allowance                        (600)
        Foreign losses not benefited                  988       --         --
        Net operating losses not benefited           --        2,507      3,449
        Other                                         203       --         --
                                                  -------    -------    ------- 
        Income tax benefit                        $   (79)   $  --      $  --
                                                  =======    =======    ======= 


                                       55
<PAGE>


The  individual  components of the Company's deferred tax assets and liabilities
are as follows (in thousands):


                                                               December 31,
                                                           ---------------------
                                                             1998        1997
                                                           --------    --------
         Deferred Tax Assets:
            Depreciation and amortization                  $    766    $    401
            Accrued liabilities                                 723         887
            Capitalized research and development                721       1,024
            Net operating losses                              6,737       6,408
            Tax credits                                       2,180       1,258
                                                           --------    --------
                 Total deferred tax assets                   11,127       9,978

            Less valuation allowance                         (9,153)     (9,978)
                                                           --------    --------
                                                              1,974        --
            Deferred tax liabilities-unrealized gain on
              marketable securities                          (1,274)       --
                                                           --------    --------
                 Net deferred tax assets                   $    700    $   --
                                                           ========    ========

The total deferred tax assets as of December 31, 1998 include approximately $1.9
million  relating to the tax benefit arising from the exercise of stock options,
which will be credited to stockholders'  equity when recognized in the form of a
reduction  of  the  valuation  allowance.  In  addition,  as  a  result  of  the
intraperiod  income tax allocation  provisions of SFAS No. 109, the deferred tax
liability related to the unrealized gain on marketable  securities decreased the
valuation  allowance  for  the  deferred  tax  assets  and was  not  charged  to
accumulated other comprehensive income in stockholders'  equity. The Company has
provided a valuation  allowance for a significant portion of its deferred tax as
of December 31, 1998. The total valuation allowance decreased $825,000 from 1997
to 1998,  of which  $700,000  relates  to a change in the  beginning-of-the-year
valuation allowance.

As of December 31, 1998,  the Company had federal and state net  operating  loss
carryforwards  of  approximately   $12,973,000  and  $5,539,000,   respectively,
available to offset future regular and alternative  minimum  taxable income.  In
addition,  the Company had federal and state  research  and  development  credit
carryforwards of approximately $790,000 and $666,000, respectively, available to
offset future tax liabilities.  The Company's federal net operating loss and tax
credit carryforwards expire in the years 2010 through 2012, if not utilized. The
state net operating  loss  carryforwards  expire in the years 2000 through 2002.
The state research and development credits can be carried forward  indefinitely.
As of December 31, 1998, the Company's  foreign  subsidiaries  had net operating
loss carryforwards in foreign jurisdictions of approximately $5,400,000 that can
be  used to  offset  future  foreign  income.  Of  these  losses,  approximately
$1,600,000  expire in the years 2001 through 2003.  Approximately  $3,800,000 of
these losses can be carried forward indefinitely.

Federal and state tax laws limit the use of net operating loss  carryforwards in
certain situations where changes occur in the stock ownership of a company.  The
Company believes such an ownership  change,  as defined,  may have occurred and,
accordingly,  certain of the  Company's  federal  and state net  operating  loss
carryforwards may be limited in their annual usage.


NOTE 7-- COMMITMENTS

Leases

The Company  entered into its  headquarters  facility  lease  during  1997.  The
Company leases this and its other facilities under noncancelable operating lease
agreements  expiring  through the year 2007.  Under the terms of the agreements,
the Company is required to pay property taxes,  insurance and normal maintenance
costs.  The Company also leases certain  equipment under capital leases expiring
through the year 2000.

Subsequently,  during March 1999,  the Company  entered into an operating  lease
agreement  through December 2007 for an additional  55,000 square feet of office
space  adjacent  to  its  corporate   headquarters  building  in  Redwood  City,
Californi with annual rental payments of approximately $1.5 million.


                                       56
<PAGE>

A summary of future minimum lease payments is as follows (in thousands):


                                                             Capital   Operating
Year Ended December 31,                                       leases     leases
                                                             -------     -------
 1999                                                        $   849     $ 2,236
 2000                                                            330       1,734
 2001                                                           --         1,297
 2002                                                           --         1,346
 2003                                                           --         1,426
  Thereafter                                                    --         6,018
                                                             -------     -------

Total minimum lease payments                                   1,179     $14,057
                                                                         =======

Less amount representing imputed interest                        200
                                                             -------

Present value of net minimum capital lease payments              979
Less current portion                                            (709)
                                                             -------

Capital leases, excluding current portion                    $   270
                                                             =======

Rental  expense  relating  to  operating  leases was  approximately  $1,101,000,
$1,161,000,  and $571,000 for the years ended December 31, 1998,  1997 and 1996,
respectively. Total minimum sublease payments to be received in the future under
noncancelable subleases total $1,093,000 through May, 2000.

Standby Letter of Credit Commitments

As of December 31, 1998, the Company had outstanding  commitments in the form of
two standby  letters of credit.  A letter for  $1,400,000 was issued in favor of
the Company's  equipment leasing financier on November 12, 1997; with provisions
for automatic  annual renewals not to extend beyond April 10, 2000. A letter for
$794,000 was issued in favor of the  Company's  corporate  facility  landlord to
secure obligations under the Company's corporate headquarters facility lease.

Subsequently,  during  March 1999,  a standby  letter of credit in the amount of
$498,000 was issued in favor of the  Company's  corporate  facility  landlord to
secure obligations relating to a lease for additional facility office space.


NOTE 8--STOCKHOLDERS' EQUITY

Convertible Preferred Stock

All outstanding convertible preferred stock and warrants to purchase convertible
preferred  stock were converted to common stock and warrants to purchase  common
stock at the time of the Company's initial public offering in June 1996.

Warrants

As of December 31,  1998,  there were  warrants  outstanding  to acquire  60,000
shares of common stock at $8.50 per share related to a facilities  lease. At the
date these  warrants  were  granted,  the fair value of these  warrants  was not
significant.

Common Stock

The Company applies APB Opinion No. 25 and related interpretations in accounting
for its stock  option and stock  purchase  plans.  Accordingly,  the Company has
recorded  deferred  compensation of $240,000 and  $1,510,000,  in 1998 and 1996,
respectively,  for the difference  between the exercise price and the fair value
of the common stock  underlying  options granted.  The deferred  compensation is
being  amortized to expense over the vesting period of the  individual  options,
generally five years.


                                       57
<PAGE>

The Company has reserved 5,975,000 shares of common stock for issuance under its
Equity Incentive Plan. In May, 1998, The Board of Directors  increased the total
shares  authorized  and available for grant under the Equity  Incentive  Plan by
975,000 shares.

Under this plan,  the Board of Directors  may grant  incentive  or  nonqualified
stock  options  at prices not less than 100% or 85%,  respectively,  of the fair
market  value of the  Company's  common  stock,  as  determined  by the Board of
Directors,  at the date of grant. The vesting of individual options may vary but
in each case at least 20% of the total number of shares  subject to options will
become  exercisable per year. These options generally expire ten years after the
grant date. When an employee option is exercised prior to vesting,  any unvested
shares so  purchased  are subject to  repurchase  by the Company at the original
purchase price of the stock upon termination of employment.  The Company's right
to repurchase  lapses at a minimum rate of 20% per year over five years from the
date the option was granted or, for new employees,  the date of hire. Such right
is  exercisable  only  within  90  days  following  termination  of  employment.
Approximately  16,000 unvested  shares of stock were  repurchased by the Company
during the year ended December 31, 1998. As of December 31, 1998, 235,515 shares
were subject to repurchase at a weighted-average price of $0.44.

The Company's  President and Chief Executive Officer holds an option to purchase
500,000  shares of common  stock at an  exercise  price of $4.00 per share.  The
shares subject to option vest ratably on a monthly basis over a 60-month  period
commencing April 1, 1995. As of December 31, 1998,  approximately 367,000 shares
were vested.

<TABLE>
Activity in the Company's stock option plan is as follows:
<CAPTION>

                                              1998                           1997                           1996
                                     ---------------------------    ---------------------------   ----------------------------
                                                     Weighted-                      Weighted-                      Weighted-
                                     Shares          Average         Shares          Average       Shares          Average
       Fixed Options                 (000's)      Exercise Price    (000's)      Exercise Price    (000's)      Exercise Price
--------------------------------     -------      --------------    -------      --------------    -------      --------------
<S>                                   <C>            <C>             <C>            <C>            <C>            <C>     
Outstanding at beginning of year      2,907          $    4.50       2,393          $   2.75       1,924          $   0.13
Granted                               1,588              13.67       1,346              6.69       1,849              3.98
Exercised                              (577)              3.62        (255)             0.31      (1,092)             0.18
Forfeited                              (420)              5.73        (577)             4.19        (288)             2.83
                                      -----                          -----                         -----                  
Outstanding at end of year            3,498               8.66       2,907              4.50       2,393              2.75
                                      =====                          =====                         =====              

Options  vested  at  end  of year       803          $    4.28         641              2.64         309              0.22
                                      =====                          =====                         =====              

Weighted-average fair value
of options granted                                   
during the year                                      $    8.89                      $   6.70                       $   2.29
                                                     =========                      ========                       ========
</TABLE>


<TABLE>
The following  table  summarizes  stock options  outstanding  as of December 31, 1998:
<CAPTION>

                                      Options Outstanding                          Options Vested
                            ----------------------------------------        -----------------------------
                                       Weighted-Avg.
                           Number        Remaining                            Number
                        Outstanding     Contractual                         Exercisable
       Range of         At 12/31/98        Life        Weighted-Avg.        At 12/31/98   Weighted-Avg.
   Exercise Prices        (000's)        In Years      Exercise Price         (000's)     Exercise Price
   ---------------        -------        --------      --------------         -------     --------------
<S>                          <C>           <C>             <C>                  <C>           <C>  
    $ 0.06 - $ 5.31          646           7.15            $0.93                348           $0.65
      5.50 -   6.94          788           7.40             5.99                206            5.90
      7.00 -   7.81          762           8.25             7.42                192            7.24
      7.88 -  12.63          623           9.05            11.28                 48            8.25
     12.94 -  27.81          679           9.57            18.09                  9           24.18
                           -----                                               ----
    $ 0.06 - $27.81        3,498           8.25            $8.66                803           $4.28
                           =====                                               ====

</TABLE>




                                       58
<PAGE>

<TABLE>

The Company grants options outside of the Company's stock option plan. A summary
of options outside of the plan is presented below:
<CAPTION>

                                         1998                       1997                  1996
                                ------------------------    ---------------------  ---------------------
                                           Weighted-                 Weighted-                Weighted-
                                 Shares     Average        Shares     Average       Shares     Average
    Performance Options         (000's)  Exercise Price   (000's)  Exercise Price  (000's)  Exercise Price
-----------------------------   -------  --------------   -------  --------------  -------  --------------
<S>                                 <C>      <C>             <C>       <C>             <C>      <C>  
Outstanding  at beginning of year   795      $4.07           711       $3.52           20       $0.20
Granted                              --         --           154        5.50          727        3.46
Exercised                           (56)      1.87           ---        ---           (20)       0.20
Forfeited                            --         --           (70)       0.80          (16)       0.80
                                    ---                      ---                      ---
Outstanding at end of year          739       4.23           795        4.07          711        3.52
                                    ===                      ===                      ===

Options vested at year-end          497       4.01           395        3.60          197        4.35
                                    ===                      ===                      ===

Weighted-average  fair value
of  options  granted  during                   ---                     $5.50                    $2.03
the year                                       ===                     =====                    =====

</TABLE>

The 739,000  options  outstanding  as of December 31, 1998 have exercise  prices
ranging  from  $0.80 to $7.00 and a  weighted-average  contractual  life of 6.22
years. As of December 31, 1998, no shares were subject to repurchase.

Employee Stock Purchase Plan

The Board of  Directors  has  reserved  800,000  shares for  issuance  under the
Company's  Employee Stock Purchase Plan (the "Purchase Plan"). In May, 1998, The
Board of Directors increased the total shares authorized and available for grant
under the Purchase Plan by 200,000  shares.  The Purchase Plan permits  eligible
employees to purchase common stock  equivalent to a percentage of the employee's
earnings, not to exceed 15%, at a price equal to 85% of the fair market value of
the common stock at dates specified by the Board of Directors as provided in the
Plan.  Under the Purchase  Plan,  the Company  issued 228,000 shares and 242,000
shares to employees in 1998 and 1997, respectively.

Under SFAS No. 123,  compensation  cost is recognized  for the fair value of the
employees'  purchase rights,  which was estimated using the Black-Scholes  model
with the  following  assumptions  in 1998,  1997,  and 1996: an expected life of
seven months; expected volatility of 112%, 67%, and 60%, respectively; risk-free
interest  rate  of  4.48%,   5.05%,   and  6.5%;  and  no  dividend  yield.  The
weighted-average  fair value of the purchase  rights granted in 1998,  1997, and
1996 was $4.18, $2.16, and $2.61, respectively.

Pro Forma Disclosure

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  for  grants  in 1998,  1997,  1996:  no  dividend  yield;  expected
volatility of 112% in 1998,  67% in 1997,  and 60% in 1996;  risk-free  interest
rate of 4.70 % in 1998, 5.91% in 1997, and 6.50% in 1996; and expected life of 3
years in 1998, 2.8 years in 1997, and 5 years in 1996.

Had  compensation  cost for the Company's  stock option plan and stock  purchase
plan been determined  consistent  with SFAS No. 123, the Company's  reported net
income of $4,039,000 and diluted  earnings per share of $0.16 for the year ended
December 31, 1998,  would have been decreased to a net loss $1,885,000 and a net
loss of $0.08 per  share,  respectively,  on a pro forma  basis.  The  Company's
reported  net loss of  $7,373,000  and net loss per  share of $0.36 for the year
ended  December 31, 1997,  would have been  increased to  $9,551,000  and $0.47,
respectively,  on a  pro  forma  basis.  The  Company's  reported  net  loss  of
$10,145,000  and net loss per share of $0.54  for the year  ended  December  31,
1996, would have been increased to $11,270,000 and $0.60, respectively, on a pro
forma basis. The effects of these pro forma  disclosures are not  representative
of the pro forma  effects on future  periods  because they only include  options
granted in 1995 and subsequent years.




                                       59
<PAGE>



NOTE 9--EMPLOYEE BENEFIT PLAN

In November 1994, the Company  adopted a 401(k)  employee  retirement plan under
which eligible employees may contribute up to 20% of their annual  compensation,
subject to a limitation of $10,000 in 1998.  Employees vest immediately in their
contributions and earnings  thereon.  The plan allows for, but does not require,
Company  matching  contributions.  As of December 31, 1998,  the Company has not
made any such matching contributions.


NOTE 10--GEOGRAPHIC, SEGMENT AND SIGNIFICANT CUSTOMER INFORMATION

The Company adopted the provisions of SFAS No. 131, Disclosure about Segments of
an Enterprise and Related  Information,  during 1998.  SFAS No. 131  establishes
standards for the reporting by public business  enterprises of information about
operating  segments,   products  and  services,   geographic  areas,  and  major
customers. The method for determining what information to report is based on the
way that  management  organizes  the operating  segments  within the Company for
making  operational  decisions and  assessments  of financial  performance.  The
Company's chief operating decision maker is considered to be the Company's Chief
Executive Officer ("CEO"). The CEO reviews financial  information presented on a
consolidated  basis  accompanied by disaggregated  information about revenues by
geographic region and by product for purposes of making operating  decisions and
assessing financial performance.

The disaggregated  financial  information on a product basis reviewed by the CEO
is as follows (in thousands):

                                                     1998       1997       1996
                                                   -------    -------    -------
         Software licenses                      
            One-To-One Enterprise                  $17,799    $14,479    $ 7,464
            One-To-One WebApps                      18,268      4,494       --
         Services                                    9,739      5,981      2,819
         Maintenance                                 5,105      2,151        599
                                                   =======    =======    =======
         Total Company                             $50,911    $27,105    $10,889
                                                   =======    =======    =======
                                       
The Company sells its products and provides services  worldwide through a direct
sales  force,  independent  distributors,   value-added  resellers,  and  system
integrators.  It currently operates in three primary regions, the Americas which
includes  North and South  America,  Europe which  includes  Eastern and Western
Europe and the Middle East, and Asia/Pacific  which includes the Pacific Rim and
the Far East. Information regarding the business operations of these regions are
as follows:

    (In thousands)                         1998            1997           1996 
                                         --------       --------       --------
             Revenues                                                
                Americas                 $ 29,330       $ 12,872       $  4,406
                Europe                     16,944         10,850          3,280
                Asia/Pacific                4,637          3,383          3,196
                                         --------       --------       --------
                Total Company            $ 50,911       $ 27,105       $ 10,882
                                         ========       ========       ========
                                                                     
                                                                 
             Identifiable assets:                                    
                                                                
                Americas                 $ 99,343       $ 25,362     
                Europe                      1,754            822     
                Asia/Pacific                  465            355     
                                         --------       --------     
                Total Company            $101,562       $ 26,539     
                                         ========       ========     
                                                                     
In 1998, no customer  accounted for 10% or more of the  Company's  revenues.  In
1997 ,  approximately  11% of the Company's  revenues were  attributable  to one
customer  and  approximately  10% of the  Company's  revenues  during  1996 were
attributable to a different customer.



                                       60
<PAGE>

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE

Not applicable


                                    PART III

Certain  information  required by Part III is  incorporated by reference in this
Report from the Company's definitive proxy statement for its 1999 Annual Meeting
of Stockholders to be filed pursuant to Regulation 14A (the "Proxy Statement").

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  information  with respect to the Company's  directors and  compliance  with
Section 16(a) of the  Securities  Exchange Act of 1934,  as amended  required by
this Item is incorporated by reference from the Proxy Statement. The information
for the  Company's  executive  officers  required by this Item appears under the
caption "Executive Officers and Key Personnel" at Item 1 of this report.

ITEM 11.   EXECUTIVE COMPENSATION
The  information  required by this Item is  incorporated  by reference  from the
Proxy Statement.

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT The
information  required by this Item is  incorporated  by reference from the Proxy
Statement.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The  information  required by this Item is  incorporated  by reference  from the
Proxy Statement.


                                     PART IV

ITEM 14. EXHIBITS,  FINANCIAL STATEMENT  SCHEDULES,  AND REPORTS ON FORM 8-K (a)
     The following documents are filed as a part of this Report.

        1.  Consolidated   Financial  Statements.   The  following  Consolidated
            Financial Statements of the Company are included at Part II, Item 8,
            of this Annual Report on Form 10-K.

        Independent Auditors' Report

        Consolidated Balance Sheets as of December 31, 1998 and 1997

        Consolidated  Statements  of  Operations  for  each of the  years in the
        three-year period ended December 31, 1998.

        Consolidated Statements of Stockholders' Equity for each of the years in
        the three-year period ended December 31, 1998.

        Consolidated  Statements  of Cash  Flows  for  each of the  years in the
        three-year period ended December 31, 1998.

        Notes to Consolidated Financial Statements

        2.  Financial Statement Schedule. Attached to this Annual Report on Form
            10-K.  Report  on  Financial   Statement  Schedule  and  Consent  of
            Independent   Auditors  Schedule  II  --  Valuation  and  Qualifying
            Accounts

        3.  Exhibits.  The exhibits listed on the accompanying Index to Exhibits
            immediately following the consolidated  financial statement schedule
            are filed as part of, or incorporated by reference into, this Annual
            Report on Form 10-K.

     (b)Reports on Form 8-K.

        No  reports  on Form 8-K were filed by the  Company  during the  quarter
        ended December 31, 1998.


                                       61
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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, in Redwood City, State of
California, on this 29th day of March 1999.

                                            BroadVision, Inc.

                                            By: /s/ Pehong Chen
                                               -------------------------
                                               Pehong Chen
                                               Chairman of the Board and
                                               Chief Executive Officer

<TABLE>
                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears below
constitutes and appoints Pehong Chen and Randall C. Bolten his attorney-in-fact,
with the power of substitution,  for him in any and all capacities,  to sign any
amendments  to this  Report on Form 10-K,  and to file the same,  with  exhibits
thereto and other  documents in connection  therewith,  with the  Securities and
Exchange  Commission,   hereby  ratifying  and  confirming  all  that  the  said
attorneys-in-fact,  or his substitute or substitutes, may do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

<CAPTION>
            Signature                              Title                                     Date
            ---------                              -----                                     ----
<S>                                    <C>                                              <C>
         /s/ Pehong Chen                 Chairman of the Board and                      March 29, 1999
         ---------------                                                                        
           Pehong Chen                    Chief Executive Officer
                                       (Principal Executive Officer)

      /s/ Randall C. Bolten             Vice President, Operations,                     March 29, 1999
      ---------------------                                                                     
        Randall C. Bolten                 Chief Financial Officer
                                           (Principal Financial
                                          and Accounting Officer)

      /s/ David L. Anderson                      Director                               March 29, 1999
      ---------------------                                                                     
        David L. Anderson

       /s/ Yogen K. Dalal                        Director                               March 29, 1999
       ------------------                                                                       
         Yogen K. Dalal

        /s/ Koh Boon Hwee                        Director                               March 29, 1999
        -----------------                                                                       
          Koh Boon Hwee

       /s/ Carl Pascarella                       Director                               March 29, 1999
        -----------------                                                                       
         Carl Pascarella

       /s/ Todd A. Garrett                       Director                               March 29, 1999
       -------------------                                                                            
         Todd A. Garrett

</TABLE>

                                       62
<PAGE>



                   REPORT ON FINANCIAL STATEMENT SCHEDULE AND
                         CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
BroadVision, Inc.:

The audits  referred to in our report  dated  January  26,  1999,  included  the
related financial  statement  schedule as of December 31, 1998 and 1997, and for
each of the years in the three-year period ended December 31, 1998,  included in
the  annual  report on Form 10-K for the year  ended  December  31,  1998.  This
financial statement schedule is the responsibility of the Company's  management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion,  such financial  statement  schedule,  when
considered in relation to the basic consolidated financial statements taken as a
whole,  presents  fairly,  in all material  respects,  the information set forth
therein.

We consent to  incorporation  by reference in the  registration  statements (No.
333-62619  and No.  333-3844)  on Form S-8 of  BroadVision,  Inc. of our reports
dated  January  26,  1999,  relating  to  the  consolidated  balance  sheets  of
BroadVision,  Inc. and  subsidiaries  as of December 31, 1998 and 1997,  and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the years in the  three-year  period ended  December 31, 1998,
and the related schedule,  which reports appear in the December 31, 1998, annual
report on Form 10-K of BroadVision, Inc.

                                                                        KPMG LLP

Mountain View, California
March 26, 1999



                                       63
<PAGE>


<TABLE>
                                 BROADVISION, INC. AND SUBSIDIARIES

                          SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
     
                                           (in thousands)
<CAPTION>


                                        Balance at       Charged to
                                       Beginning of      Costs and                        Balance at
                                          Period          Expenses     Deductions (1)   End of Period
                                      ---------------  --------------- ---------------  ---------------
<S>                                     <C>              <C>              <C>             <C>        
Year Ended December 31, 1996            $        -       $      196       $        5      $       191
                                      ===============  =============== ===============  ===============

Year Ended December 31, 1997            $      191       $      515       $       35      $       671
                                      ===============  =============== ===============  ===============

Year Ended December 31, 1998            $      671       $      458       $      341      $       788
                                      ===============  =============== ===============  ===============
<FN>


(1) Represents net charge-offs of specific receivables.

</FN>
</TABLE>


                                       64
<PAGE>



<TABLE>
                                BROADVISION, INC.
                           ANNUAL REPORT ON FORM 10-K
                                DECEMBER 31, 1998

                                INDEX TO EXHIBITS
<CAPTION>

        Exhibit        Description
        -------        -----------
<S>                    <C>
        3.1*           Amended and Restated Certificate of Incorporation.
        3.2*           Amended and restated Bylaws.
        4.1*           References are hereby made to Exhibits 3.1 to 3.2.
        4.3*           Second Amended and restated Investor's Rights Agreement dated April 15, 1997 among
                       the Company and certain of its stockholders.
       10.1* (1)       Form of Indemnity Agreement between the Company and each of its directors.
       10.2* (1)       Equity Incentive Plan (the "Equity Incentive Plan").
       10.3* (1)       Form of Incentive Stock Option under the Equity Incentive Plan.
       10.4* (1)       Form of Nonstatutory Stock Option under the Equity Incentive Plan.
       10.5* (1)       Form of Nonstatutory Stock Option (Performance-Based).
       10.6* (1)       1997 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan").
       10.7* (1)       Employee Stock Purchase Plan Offering (Initial Offering).
       10.8* (1)       Employee Stock Purchase Plan Offering (Subsequent Offering).
       10.9*           Master Equipment Lease Agreement dated May 23, 1997 between the Company and
                       Lighthouse Capital Partners, L.P.
       10.10*+         Terms and Conditions dated January 1, 1997 between IONA Technologies LTD and the
                       Company.
       10.11*          Series D Preferred Stock Option Agreement dated February 27, 1997 between the
                       Company and Pehong Chen.
       10.12*          Standard Office Lease dated February 8, 1996 between the Company and GVE Distel
                       Associates, a California General Partnership.
       10.13*(1)       Stock Option Plan.
       10.14*(1)       Form of Incentive Stock Option under the Stock Option Plan.
       10.15*(1)       Form of Nonstatutory Stock Option under the Stock Option Plan.
       10.16*          Lease dated February 5, 1997 between the Company and Martin/Campus Associates, L.P.
       10.17**         Loan and Security, dated July 2, 1997, between Silicon Valley Bank and the Company.
       10.18***        First Amendment to Loan and Security Agreement, dated as of February 5, 1998 between
                       the Company and Silicon Valley Bank.
       21.1            Subsidiaries of the Company.
       23.1            Consent of KPMG LLP. Reference is hereby made to page 55.
       24.1            Power of Attorney. Reference is hereby made to page 54.
       27.1            Financial Data Schedule.
<FN>

*    Incorporated  by  reference to the  Company's  Registration  Statement  on Form S-1 filed on April 19, 1996,  as amended on May
     9,1996, May 29, 1996 and June 17, 1996.

**   Incorporated by reference to the Company's 10-Q for the quarter ended September 30, 1997 filed on November 12, 1997.

***  Incorporated by reference to the Company's Registration Statement on Form S-3 filed on March 4, 1998.

(1)  Represents a management contract or compensatory plan or arrangement.

+    Confidential treatment requested.
</FN>
</TABLE>


                                       65