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, 1997

                                       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:


                                                       Name of each exchange
  Title of each class                                   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 1, 1998 the  aggregate  market
value  of  the  voting  stock  held  by  nonaffiliates  of  the  registrant  was
$147,002,786.

     As of March 1, 1998, registrant had outstanding 20,403,996 shares of Common
Stock.

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

                       DOCUMENTS INCORPORATED BY REFERENCE

     Parts of the Proxy  Statement  for  Registrant's  1997  Annual  Meeting  of
Stockholders  to be held May 11, 1998 are  incorporated by reference in Part III
of this Form 10-K Report.



<PAGE>


<TABLE>
                                    BROADVISION, INC.

                                ANNUAL REPORT ON FORM 10-K
                              YEAR ENDED DECEMBER 31, 1997

                                    TABLE OF CONTENTS


<CAPTION>
                                                                              Page No.
                                                                              ---------
<S>                                                                             <C>
Part I

Item 1. Business ...............................................................  3
Item 2. Properties ............................................................. 20
Item 3. Legal Proceedings ...................................................... 20
Item 4. Submission of Matters to a Vote of Security Holders .................... 20


Part II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
        Matters ................................................................ 21
Item 6. Selected Consolidated Financial Data ................................... 22
Item 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operations .................................................. 23
Item 8. Financial Statements and Supplementary Data ............................ 39
Item 9. Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure ............................................... 53


Part III

Item 10. Directors and Executive Officers of the Registrant .................... 53
Item 11. Executive Compensation ................................................ 53
Item 12. Security Ownership of Certain Beneficial Owners and Management ........ 53
Item 13. Certain Relationships and Related Transactions ........................ 53


Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ...... 53


SIGNATURES ..................................................................... 54

</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

     BroadVision  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,  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  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.


Background

  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

                                        3

<PAGE>

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.

     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  "brochureware"  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,   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  brochureware  to
provide  electronic  commerce 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 scalable 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

                                        4

<PAGE>


of  today's  Web development toolkits 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 toolkits and commerce
and   merchant   servers   to   develop   and  maintain  sophisticated  Internet
applications,  such  as  managing  customer  relationships  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  create   applications   that   build   personalized,   long-term
relationships with customers,  partners, and employees. Early adopting 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  companies  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.

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

     *   Attract and retain visitors by providing  dynamic content,  interactive
         dialogs, and communities of interest

     *   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 business managers 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


The BroadVision Solution

     BroadVision  offers  a  family  of  packaged  applications  for  automating
relationship  management in the extended enterprise.  The BroadVision One-To-One
product family enables companies to use the Internet for selling, marketing, and
supporting all of their business constituents:  employees, customers, suppliers,
distributors, and others.

     The Company  develops,  markets,  and supports its  BroadVision  One-to-One
family of Internet  applications  for  relationship  management  and  associated
software tools that are used to customize and maintain these applications. These
applications  are  designed to allow  non-technical  business  managers to build
relationships  by tailoring  content to the needs and  interests  of  individual
visitors,  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 interactions,  capture
marketing information from volunteered data and observed behavior,  and generate
revenues from electronic commerce.  The Company believes that these capabilities
are needed by business managers and Internet application developers to take full
advantage  of the  potential  of the Internet as a  marketplace  for  conducting
business and for building long-term relationships with customers.

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<PAGE>

Strategy

     The Company's objective is to establish one-to-one  relationship management
as a standard  feature of Web sites  worldwide.  To achieve this objective,  the
Company has adopted the following strategies:

  Focus on Extended  Enterprise  Relationship  Management  ("EERM") by Providing
  Packaged Application Solutions

     The Company is focusing  exclusively  on  developing  packaged  application
solutions for businesses  developing Web sites as profitable  business  channels
for managing relationships 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.

  Enhance Targeted Application Solutions

     The  Company  will   continue  to  leverage  its   BroadVision   One-To-One
Application 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 at 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 Company has signed nearly 50
partnerships  to date  worldwide,  which has  expanded the  Company's  sales and
support infrastructure and post-sales implementation capabilities, and broadened
market awareness for the Company.

  Maintain Technology Leadership

     The  Company  believes  that it  offers  the most  complete  EERM  solution
available  today.  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 Java development  language,  into its products.  Utilizing  in-house
expertise and experiences  with  customers,  the Company intends to maintain its
leadership position in providing a scalable, innovative, and open architecture.

  Grow International Presence

     To  capitalize on the  emergence of the Internet as a global  network,  the
Company has established sales operations in Amsterdam, Basel, Hong Kong, London,
Munich,  Paris, and Tokyo. In addition,  the Company distributes its products in
these  and  additional  countries  through  licensed  distributors,  value-added
resellers,  and systems  integrators in Brazil,  Finland,  Korea,  South Africa,
Spain,  and Sweden.  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 single-country scope of

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<PAGE>


operations.   The   Company's   product  architecture  is  designed  to  support
international  languages,  and  the  Company  is  currently  shipping  localized
versions  of  its  BroadVision One-To-One Application System in English, German,
Japanese, Korean, and Chinese.

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


Products and Services

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

  Applications

     BroadVision offers four applications  products--the  BroadVision One-To-One
Application System,  One-To-One Commerce,  One-To-One Financial,  and One-To-One
Knowledge--that  provide a spectrum of capabilities that offer numerous business
functions and support the needs of companies in different industries.

     BroadVision One-To-One Application System is the Company's core product. It
is a  flexible,  generic  yet  robust  application  for  deploying  relationship
management processes on the Internet.  It utilizes an open, scalable application
architecture  for  Web  session  management,   secure  user  authentication  and
authorization, dynamic and personalized page generation, user profiling, content
management,  and transaction handling.  The BroadVision  One-To-One  Application
System  provides  the  following  capabilities  designed  to meet  the  needs of
companies delivering personalized relationship management on their Web sites:

         Profiling --  BroadVision  One-To-One  applications  store and maintain
     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  applications  deliver
     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  a  BroadVision   One-To-One
     application  with tools to create,  classify,  organize,  and  publish  the
     content.

         Matching  --  BroadVision  One-To-One  applications  provide  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.

         Transactions  --  BroadVision  One-To-One  applications  incorporate  a
     number  of  transactional   capabilities  required  for  merchandising  and
     financial  services  applications.  These  capabilities  include electronic
     wallets,  order  tracking,  persistent  shopping cart,  taxing and shipping
     charge computation,  discount and coupon handling,  payment  authorization,
     between- and within-account exchanges, and news and stock feeds.

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                 Features of the Broadvision One-To-One Solution


                               [GRAPHIC OMITTED]


     During 1997, the Company expanded its product line by introducing three new
applications products in the BroadVision One-To-One family: One-To-One Commerce,
One-To-One  Financial,   and  One-To-One   Knowledge.   These  three  additional
applications  products  are  built  upon and  extend  the  functionality  of the
flagship  BroadVision  One-To-One  Application System. They are designed to meet
the needs of customers  in certain  industries  and the needs of customers  with
more  specific  one-to-one  relationship  management  requirements  for  product
merchandising, retail financial services, or knowledge management.

     One-To-One Commerce is a turnkey application  solution for rapid deployment
and dynamic  personalization of high-end Internet commerce  services.  Companies
implementing  One-To-One  Commerce can rapidly implement an end-to-end  commerce
solution  offering a  personalized  storefront  to  visitors  and full  commerce
transaction  capabilities  at  the  back  end.  The  application  includes  rich
functionality for product catalog management,  electronic wallets, ordering, tax
and shipping charge  computation,  payment handling,  and discount and incentive
tracking.  One-To-One  Commerce  provides  businesses  with  a  sample  commerce
application (including reusable objects), business rules, and templates that can
be easily customized to meet critical time-to-market demands.

     One-To-One  Financial  enables banks and other  financial  institutions  to
rapidly deploy secure,  personalized,  retail  relationship  management Internet
sites to their financial  services  customers.  The product delivers a financial
transaction framework and a set of core financial services that allows customers
to access account  information and a rich set of transactions within and between
accounts.

     One-To-One  Knowledge  is  designed  to  increase  the  productivity  of  a
knowledge-intensive   extended  enterprise  in  its  management  of  information
delivery to employees,  customers,  channels,  and other  partners.  The product
enables a  repository  of  corporate  information  (e.g.,  sales  and  marketing
information, technical information, human resources information) to be organized
into customizable  channels  accessible  through Web browsers.  Documents in the
content archive are "tagged" with attributes that describe their subject matter,
content  category,   viewing   permissions,   and  other  factors  pertinent  to
determining  how to target  readers.  Business  rules used in  conjunction  with
visitors'  self-declared  preferences  determine the selection,  filtering,  and
display of "tagged"  information  presented  to the visitors on each trip to the
Web site.

     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. 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.

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     *   Scalability -- 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.

     *   Component-based,   reusable   application   code   --   object-oriented
         application   code  written  in  C++,   which  allows   developers  and
         integrators to use,  modify,  adapt,  or extend the dynamic  objects to
         rapidly customize  products to meet the specific business  requirements
         of a particular corporate customer.

     *   Support for  industry  standards  -- supports  the CORBA  standard  for
         object-oriented  computing,  to permit  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,  Windows  NT, and  HP-UX.  Databases
         supported include Oracle, Sybase, Informix, and Microsoft SQL Server.

     *   Multi-lingual -- available in English,  German,  Japanese,  Korean, and
         Chinese.


  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 called
"dynamic   objects,"   "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 follows.

     Visual Development  Center.  The BroadVision  One-To-One Visual Development
Center  (the  "VDC")  provides  advanced  Web  site  development  tools  rich in
object-oriented  features  for  building  BroadVision  One-To-One  applications.
Because  most  businesses  have little  time for  application  development,  the
BroadVision   One-To-One  VDC  supports  visual,   point-and-click   application
construction;  default  templates  for basic  business  functions  (order entry,
payment  clearing) for rapid application  creation and deployment;  and browser-
independent,  dynamic Web page  generation.  In addition,  there is an extensive
library of dynamic objects that provide access to One-To-One services, including
profile management,  electronic commerce services such as virtual shopping carts
and order processing, targeted content, and ad insertion. These features enhance
existing templates and provide an extensive amount of sub-classes,  which can be
used to build  new  objects.  Furthermore,  the VDC  supports  HTML,  Java,  and
JavaScript as well as any third-party HTML editor.

     Dynamic Command Center.  The BroadVision  One-To-One Dynamic Command Center
(the  "DCC") is a Windows  95 client  application  for  editorial,  advertising,
marketing,  and  merchandising  business  managers.  The DCC offers managers the
ability to define and manage the customer  segments,  the content  organization,
and the matching rules of a Web site in real time using familiar,  non-technical
concepts. For example, a business manager can initiate a sale or promotion, send
coupons to specifically  targeted consumers,  or change prices dynamically.  The
rules  editor of the DCC enables the  business  manager to define in English the
"if-then" relationships that determine the selection and presentation of various
types of content to the site  visitor,  based on profile  attributes  or session
information.  The DCC also provides a means for managers to monitor the activity
on Web sites,  enabling  them to  evaluate  the  effectiveness  of  content  and
services being offered on the site.

     Content Management  Center.  The BroadVision  One-To-One Content Management
Center (the "CMC") provides  workflow tools to automate the content creation and
classification  process.  The CMC is a Java-based Web  application  that enables
business people to easily manage the process of developing,  indexing,  tagging,
staging,  publishing, and updating content. This content can then be effectively
targeted and matched based on user preferences and profiles. Site administrators
can control who can create and update specific areas in the

                                        9

<PAGE>


Web  site.  Editors  can track the overall efficiency and quality of the content
while  carefully  managing a content calendar. The CMC also enables a process of
collaboration  between all authors, editors, and Web site administrators working
from remote locations.

  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"),  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 1997 and 1996.

<TABLE>
     The table below summarizes  certain  features of and price  information for
each of the Company's products:


<CAPTION>
                                                                        U.S. List Price for
             Product                     Description                      Perpetual License
-------------------------------------------------------------------------------------------------------
<S>                            <C>                                    <C>
  Application Products:        Full object-oriented environ-          * $25,000 and up per
                               ment for developing, testing,            developer seat
  * BroadVision One-To-One     and tuning EERM applications
    Application System
  * One-To-One Commerce
  * One-To-One Financial
  * One-To-One Knowledge
-------------------------------------------------------------------------------------------------------
 Deployment System             Full environment for deploying         * License fee based on num-
                               production EERM applications             ber of profiled users tracked
                                                                        by application and number
                                                                        of services accessing profiled
                                                                        user base.
                                                                      * Ranges from $30,000 mini-
                                                                        mum configuration to more
                                                                        than $1 million for large
                                                                        complex configurations
-------------------------------------------------------------------------------------------------------
 Visual Development Center     PC-based application enabling          * One copy included with
                               applications developers to               development license
                               quickly and easily build dynamic
                               Web page templates                     * Additional copies start at
                                                                        $600 per seat
-------------------------------------------------------------------------------------------------------
 Dynamic Control Command       PC-based application enabling          * $5,000 per seat
 Center                        business managers to monitor
                               state of Web applications, inter-
                               actively change business rules in
                               real time, and generate reports
-------------------------------------------------------------------------------------------------------
 Content Management Center     Browser-based application en-          * Starts at $2,500 per seat
                               abling content developers and        
                               editors to manage the publish-
                               ing of new content to the Web
                               site
-------------------------------------------------------------------------------------------------------
</TABLE>

                                                   10

<PAGE>


  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 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
storyboarding,  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

     The  Company  provides  technical  support,  including  telephone  support,
upgrade  rights to new releases,  including  patch  releases as  necessary,  and
product enhancements, under the Company's standard maintenance agreements, which
all  of  the  Company's   licensed  customers  have  entered  into.  The  annual
maintenance   fee  for  these  services  is  based  upon  a  percentage  of  the
then-current  list  price  for the  perpetual  licensed  software  fee,  payable
annually in advance.


Customers and Markets

     The  Company has  licensed  its  product to over 150  customers,  including
approximately 50 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.  Over 30 customers have commercially  deployed applications using
BroadVision  products.  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.  In 1997,
software license and service revenues from Metronet,  Kommunikationsdienste Gmbh
& Co.KG. ("Metronet")  accounted for  approximately  11% of the Company's  total
revenues.

                                       11

<PAGE>


<TABLE>
     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.

<CAPTION>
--------------------------------------------------------------------------------------------------------------
  Target                                                                                     Sample
 Industry            Sample Applications        Benefits of BroadVision Solutions           Customers
--------------------------------------------------------------------------------------------------------------
<S>                 <C>                         <C>                                       <C>
  Telecom-          * Commerce: Business-       * Selectively share visitor profiles      Hongkong Telecom
  munications         to-business and             between aggregators and content         TELUS Advanced
                      business-to-consumer        providers                                Communications
                                                                                          US West Communications
                    * Online services           * Online, real-time control of
                                                  business rules, such as pricing and
                                                  promotions
                    * Self-service
                    (e.g., call centers)
--------------------------------------------------------------------------------------------------------------
  Retail and        * Online shopping           * Create branded communities              Eastman Kodak
  distribution                                    based on visitor profiles               The Good Guys
                    * Interactive                                                         Metronet
                      catalogues                * Online, real-time control of            Phillips Electronics
                                                  business rules, such as pricing and     RS Components
                                                  promotions, by content providers
                                                * Reduce ransaction costs of direct
                                                  purchases
--------------------------------------------------------------------------------------------------------------
  Travel and        * Reservations              * Provide travel planning advice and      American Airlines
  leisure                                         transaction services without agents     Thomas Cook
                    * Travel planning             or other intermediaries

                    * Brand projection,         * Opportunity, based on user profiles,
                      loyalty programs, and       to cross-sell or up-sell services in
                      affinity                    addition to basic travel reservations
                      marketing
--------------------------------------------------------------------------------------------------------------
  Media and         * Purchasing digital        * Price digital products and              Grolier
  publishing          media                       services in real time                   Metromail
                                                                                          Milwaukee Journal
                    * Knowledge                 * Dynamically target relevant             Virgin.net
                      management                  information to individuals
--------------------------------------------------------------------------------------------------------------
  Financial         * Home banking              * Target investment content based         Banco Santander
  services                                        on profiles of visitors                 Citibank
                    * Obtaining information                                               JP Morgan
                      on and                    * Nationwide service can be locally       Liberty Financial
                      selecting:                  targeted                                Quick & Reilly
                      --Loans                   * Low-cost distribution channel
                      --Mutual funds            * Tremendous cross-selling and
                      --Insurance                 up-selling opportunity
--------------------------------------------------------------------------------------------------------------
  High              * Knowledge                 * Disseminate large amounts               Baan Company
  technology          management                  of knowledge/information in a           Hewlett-Packard
  and                                             personalized way based on               IBM
  manufacturing                                   purchaser's profile                     Micron Technology
                                                                                          Siemens-Nixdorf
                    * Business-to-business      * Maintain and make available   
                      purchasing                  up-to-date information related to
                                                  complex purchasing decisions
--------------------------------------------------------------------------------------------------------------
</TABLE>

                                                      12

<PAGE>


     The market for the Company's  products and services is at an early stage 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 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, 1997,  the Company's  direct sales  organization  included 63 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,
Chicago,  Dallas, and New York. The Company has subsidiaries in France, Germany,
Japan,  the  Netherlands,  Switzerland,  and  the  United  Kingdom  and  has  an
established sales office in Hong Kong. A component of the Company's  strategy is
continued planned 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 commissioned  agents in the Republic of Korea, Spain, and in
selected portions of the Japanese market.

     Although the Company generates leads from many sources, the majority of the
Company's  early  leads have come from  businesses  seeking  partners to develop
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, 1997, 20
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

                                       13

<PAGE>


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.

     To date,  the Company has primarily  derived sales 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, system integrators, and other third parties.


Strategic Business Alliances

     A  critical  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,
potential  for lead  generation,  and  access  to large  accounts;  and  provide
additional  marketing  expertise  in  certain  vertical  industry  segments  and
technical  expertise in the development of reusable  objects and templates.  The
Company  has  developed   business   alliances  with  approximately  50  systems
integration,  design,  consulting,  and other services organizations,  including
Andersen Consulting,  LLP, Cambridge  Technology Partners,  Cap Gemini U.K. plc,
Computer  Sciences  Corporation,  Daimler-Benz  Information  Systems AG (Debis),
Dimension AB, Gran Via, NTT Data Corporation, Sage IT Partners, Inc., Sema Group
plc,  Siemens-Nixdorf  Information  System AG, Silicon Valley Internet Partners,
and others.


Competition

     The market for online interactive  relationship  management applications is
new,  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"),  Microsoft Corporation  ("Microsoft"),  Netscape  Communications
Corporation  ("Netscape"),  and Open Market Inc. ("OMI"),  among others. Many 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,  many  current and  potential
competitors 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 Netscape  and  Microsoft,  are likely to 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, scalability, 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.

                                       14

<PAGE>


Technology

     The Company  believes  its  advanced  technology  enables  the  delivery of
robust, scalable, 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, scalable, 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.

  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.

     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  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++, a widely  accepted  standard
programming language for developing object-oriented  applications.  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

     The   BroadVision   One-To-One   application   system  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.

     *   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.

                                       15

<PAGE>


     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

     *   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


  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

     *   Enabling application  scalability 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


  Dynamic Objects 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
of two primary components,  dynamic objects 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, the dynamic
object  technology  enables business  managers to define and implement  business
rules through the BroadVision One-To-One DCC 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 dynamic  objects 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,  1997,  there were 52  employees  in the  Company's  product
development  organization.  The Company's research and development expenses were
$7.4 million, $5.0 million,

                                       16

<PAGE>


and  $2.6  million  in  1997, 1996, and 1995, respectively. To date, the Company
has  not  capitalized  any  software  development  costs. 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.  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.


Strategic Technology Alliances

     In order to  ensure  that the  Company's  products  are  based on  industry
standards and take advantage of current and emerging  technologies,  the Company
emphasizes strategic technology alliances. The benefits of this approach include
enabling the Company to focus on its core competencies, reducing time to market,
and  simplifying  the task of designing and developing  applications by both the
Company and its  customers.  Key  strategic  technology  alliances  to date have
included  alliances with Sun,  Hewlett-Packard  Company,  and Silicon  Graphics,
Inc.,  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;  and  VeriFone,  Inc. and  CyberCash,  Inc.,
providers of payment systems.  The Company's strategy is to establish 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.


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(TM) Application System. There can be assurance that this patent would
survive a legal challenge to its validity or provide significant protection.

     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

                                       17

<PAGE>


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. 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 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,  1997,  the Company  employed a total of 188  full-time
employees, including 83 in sales and marketing, 52 in product development, 34 in
professional services and client support, and 19 in finance, administration, and
operations.

     The Company believes that its future success is dependent on attracting and
retaining highly skilled engineering, sales and marketing, and senior management
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.

                                       18

<PAGE>


Executive Officers and Key Personnel

<TABLE>
     The  executive  officers and key personnel of the Company and their ages at
February 28, 1998 are as follows:


<CAPTION>
            Name                Age                                  Position
----------------------------   -----   --------------------------------------------------------------------
<S>                            <C>     <C>
Pehong Chen ................    40     Chairman of the Board, Chief Executive Officer and President
Randall Bolten .............    45     Chief Financial Officer and Vice President, Operations
Clark W. Catelain ..........    50     Vice President, Engineering
Eric J. Golin ..............    38     Vice President of Worldwide Professional Services
Michael A. Kennedy .........    35     Vice President of Global Strategic Alliances
Giuseppe Kobayashi .........    42     Vice President and General Manager of Japan/Asia-Pacific Operations
Francois Stieger ...........    48     Vice President and General Manager of European Operations
James W. Thanos ............    49     Vice President and General Manager, Americas
Perry W. Thorndyke .........    48     Vice President, 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 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 been employed at the Company since September 1994 and has
served as Vice President of Worldwide Professional Services of the Company since
September 1997. From September 1993 to September 1994, Mr. Golin was a principal
architect for OpenVision Technology.  From September 1989 to September 1993, Mr.
Golin was Assistant  Professor of Computer Science at the University of Illinois
at Champaign-Urbana. Mr. Golin received an Sc.B., Sc.M., 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.

     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

                                       19

<PAGE>


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 Senior Vice  President of Worldwide  Operations of Aurum  Software,  a
sales force automation  company.  From January 1993 to December 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,  Marketing, of the Company
since August 1996. From February 1995 to January 1996, Dr. Thorndyke served as a
management  consultant  to  and  then  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 an
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 Senior  Manager 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.


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.  The Company also rents space in various cities to support
its sale and field support  activities.  The Company  believes that its existing
facilities are adequate to meet its needs for the foreseeable future.


ITEM 3. LEGAL PROCEEDINGS

     Not applicable.


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

     Not applicable.

                                       20

<PAGE>


                                     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 2, 1998, there were  approximately  254 holders of record of the Company's
Common Stock.

     The following table sets forth, for the periods indicated, the high and low
sale price per share of the Common Stock on the Nasdaq National Market.


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

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

       1998
       ----
       First Quarter (through March 3, 1998) .........    $  15.38       $  6.00


     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 limit the Company's ability
to pay cash dividends.

                                       21

<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>
                                                    Period from
                                                    May 13, 1993
                                                   (Inception) to                  Year Ended December 31,
                                                    December 31,    ------------------------------------------------------
                                                        1993            1994          1995          1996           1997
                                                  ---------------   -----------   -----------   ------------   -----------
                                                                   (in thousands, except per share data)
<S>                                                   <C>            <C>           <C>           <C>            <C>     
Statement of Operations Data:
Revenues:
 Software licenses ..............................     $   --         $     --      $     --      $   7,464      $ 18,973
 Services .......................................         --               --           540          3,418         8,132
                                                      ------         --------      --------      ---------      --------
   Total revenues ...............................         --               --           540         10,882        27,105
                                                      ------         --------      --------      ---------      --------
Cost of revenues:
 Cost of software licenses ......................         --               --            --            330         1,664
 Cost of services ...............................         --               --           249          2,164         4,284
                                                      ------         --------      --------      ---------      --------
   Total cost of revenues .......................         --               --           249          2,494         5,948
                                                      ------         --------      --------      ---------      --------
Gross profit ....................................         --               --           291          8,388        21,157
                                                      ------         --------      --------      ---------      --------
Operating expenses:
 Research and development .......................         12              748         2,575          4,985         7,392
 Sales and marketing ............................         31              512         1,348         12,066        18,413
 General and administrative .....................        100              511           846          2,034         2,990
                                                      ------         --------      --------      ---------      --------
   Total operating expenses .....................        143            1,771         4,769         19,085        28,795
                                                      ------         --------      --------      ---------      --------
Operating loss ..................................       (143)          (1,771)       (4,478)       (10,697)       (7,638)
Other income, net ...............................          7              101           160            552           265
                                                      ------         --------      --------      ---------      --------
Net loss ........................................     $ (136)        $ (1,670)     $ (4,318)     $ (10,145)     $ (7,373)
                                                      ======         ========      ========      =========      ========
Basic and diluted net loss per share(1) .........                                 $   (0.36)     $   (0.54)    $   (0.36)
                                                                                  =========      =========     =========
Shares used in per share computation(1) .........                                    11,976         18,815        20,208
                                                                                  =========      =========     =========
</TABLE>

<TABLE>
<CAPTION>

                                                   December 31,
                             --------------------------------------------------------
                               1993       1994        1995        1996        1997
                             --------    --------    --------    --------    --------
                                                  (in thousands)
<S>                          <C>         <C>         <C>         <C>         <C>     
Balance Sheet Data:
Cash and cash equivalents    $  1,503    $    808    $  4,311    $ 17,608    $  8,277
Working capital ..........      2,358       2,208       3,916      18,258      11,485
Total assets .............      2,634       2,640       5,857      28,930      27,342
Long-term obligations ....       --          --           593         587       3,081
Accumulated deficit ......       (136)     (1,806)     (6,124)    (16,269)    (23,642)
Total stockholders' equity      2,478       2,526       4,254      21,016      15,121

<FN>
------------
(1) See  Note  1  of  Notes to Consolidated Financial Statements for information
    concerning the computation of per share amounts.
</FN>
</TABLE>

                                       22

<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

     BroadVision  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,  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  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, 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.

     The Company's core product, the BroadVision  One-To-One Application System,
was first made  commercially  available  in  December  1995.  Version  3.0,  the
Company's  latest  version,  was released  during the fourth quarter of 1997 and
supports five languages (English,  German,  Japanese,  Chinese,  and Korean) and
four major client/server  databases (Oracle,  Sybase, Informix and Microsoft SQL
Server). In 1997, the Company released a complementary  family of three packaged
application products:  One-To-One Commerce, One-To-One Financial, and One-To-One
Knowledge.  These  products  are  built  upon and  tightly  integrated  with the
Company's core technology and provide specifically enhanced functionality.  They
are  designed  to  address  the  distinct  customer  requirements  for  managing
one-to-one  relationships with product  merchandising,  financial services,  and
knowledge management.

     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.

     The  Company's  revenues  are derived from  software  license fees and fees
charged for its services. The Company generally recognizes license fees when the
software  has  been  delivered,   the  customer  acknowledges  an  unconditional
obligation  to pay, and the Company has no  significant  obligations  remaining.
Professional   services  revenues  generally  are  recognized  as  services  are
performed. Software maintenance revenues are recognized ratably over the term of
the support period, which is typically one year.

                                       23

<PAGE>


Results of Operations

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


                                                Year Ended December 31,
                                      ------------------------------------------
                                           1995           1996           1997
                                      -------------   ------------   -----------
Revenues:
 Software licenses ..................         --%          68.6%          70.0%
 Services ...........................      100.0           31.4           30.0
                                          ------          -----          -----
   Total revenues ...................      100.0          100.0          100.0
                                          ------          -----          -----
Cost of revenues:
 Cost of software licenses ..........         --            3.0            6.1
 Cost of services ...................       46.1           19.9           15.8
                                          ------          -----          -----
   Total cost of revenues ...........       46.1           22.9           21.9
                                          ------          -----          -----
Gross profit ........................       53.9           77.1           78.1
                                          ------          -----          -----
Operating expenses:
 Research and development ...........      476.9           45.8           27.3
 Sales and marketing ................      249.6          110.9           67.9
 General and administrative .........      156.7           18.7           11.1
                                          ------          -----          -----
   Total operating expenses .........      883.2          175.4          106.3
                                          ------          -----          -----
Operating loss ......................     (829.3)         (98.3)         (28.2)
Other income, net ...................       29.7            5.1            1.0
                                          ------          -----          -----
Net loss ............................     (799.6)%        (93.2)%        (27.2)%
                                          ======          =====          =====


Revenues

     Total  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.
During 1995, the Company's  software  products were under  development and total
revenues were $540,000,  consisting principally of domestic consulting services.
In 1997 and 1996,  North American  revenues were $12.9 million and $4.4 million,
or 48% and 41% of total  revenues,  respectively;  revenues to Europe were $10.9
million and $3.3 million,  or 40% and 30% of total revenues,  respectively;  and
revenues to Asia/Pacific  were $3.4 million and $3.2 million,  or 12% and 29% of
total  revenues,  respectively.  The 149% increase in total revenues for 1997 as
compared  to 1996 is a result  of  strong  market  acceptance  of the  Company's
cornerstone  product, the BroadVision  One-to-One  Application System, which was
facilitated  by  the  introduction  in  1997  of new  complementary  application
products,  One-To-One Commerce,  One-To-One Financial, and One-To-One Knowledge.
The  significant  increase  for  1996 as  compared  to 1995 is a  result  of the
introduction of the BroadVision One-To-One Application System in late 1995.

     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. There can be no assurance,  however, that the Company will
be able to maintain or increase  international  market acceptance for its family
of products.

     Software  Licenses.  The  Company's  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.  There were no software  license  revenues in
1995.  In 1997 and 1996,  North  American  software  license  revenues were $8.6
million and $3.1 million, or 45% and 41% of the Company's total software license
revenues,  respectively;  software  license revenues to Europe were $8.8 million
and  $2.3  million,  or 47%  and 30% of the  Company's  total  software  license
revenues,  respectively; and software license revenues to Asia/Pacific were $1.6
million and $2.1 million,  or 8% and 29% of the Company's total software license
revenues, respectively.

                                       24

<PAGE>


     Services.  Services revenues consist primarily of professional services and
maintenance.  The Company's professional services include its Strategic Services
Group, its Interactive  Services Group, its Content and Creative  Services Group
and its Education Services Group. Professional services are generally offered on
a time and materials basis. Maintenance revenue is generally derived from annual
service  agreements and is recognized  ratably over the period of the agreement.
Maintenance  fees are based on a  percentage  of the list price for the  related
software.

     Total  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.  During
1995, the Company was in its early stages of development  and services  revenues
were  $540,000.  In 1997 and 1996,  North American  services  revenues were $4.3
million  and  $1.3  million,  or 53% and  39% of the  Company's  total  services
revenues,  respectively;  services revenues in Europe were $2.0 million and $1.0
million, or 25% and 30% of the Company's total services revenues,  respectively;
and services revenues in Asia/Pacific were $1.8 million and $1.1 million, or 22%
and 31% of the Company's total services revenues, respectively.

     Professional  services  revenues  were $6.0  million in 1997 as compared to
$2.8 million in 1996,  which represents an increase of 114%  year-over-year.  In
1995,  professional services revenues were $540,000 and related principally to a
single domestic contract development project.  Professional services revenues as
a percentage of total services  revenues were 74%, 83%, and 100% in 1997,  1996,
and 1995, respectively.  The 114% increase in professional services revenues for
1997 as  compared  to 1996 is a result of higher  business  volumes  and greater
utilization of the Company's professional consultants.  The significant increase
for 1996 as compared to 1995 is primarily the result of comparing a full year of
operations  during  1996 with the 1995  period,  which was a  development  stage
period.  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.

     Maintenance  revenues  were $2.1 million in 1997 as compared to $599,000 in
1996,  which  represents  an  increase  of 251%  year-over-year.  There  were no
maintenance  revenues in 1995.  Maintenance  revenues as a  percentage  of total
services  revenues were 26%, 18%, and 0% in 1997, 1996, and 1995,  respectively.
The increase in maintenance revenues is a result of expanding software sales and
the  corresponding  maintenance  fees  relating  to a larger  installed  base of
software  licenses.   As  the  Company's   installed  license  base  grows,  its
maintenance revenues as a percentage of total revenues may increase.


Operating Expenses

     Cost of Software  Licenses.  Cost of software licenses  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.  In 1997 and  1996,  cost of  software  licenses  was $1.7
million  and  $330,000,  or 9%  and 4% of  related  software  license  revenues,
respectively,  consisting  principally of third-party royalties and commissioned
agent  fees.  There were no  software  license  costs in 1995.  Cost of software
licenses  increased in both absolute dollar and 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.  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.  Cost of services consists primarily of  employee-related
costs and fees of  third-party  consultants  incurred in  providing  consulting,
post-contract  customer support, and training services. In 1997, 1996, and 1995,
cost of services were $4.3 million, $2.2 million, and $249,000, or 53%, 63%, and
46% of related services revenues,  respectively.  Cost of services increased 98%
in absolute  dollars  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 is attributable  to additions to the Company's  consulting
staff,  the  employment of outside  consultants  to meet  short-term  consulting
arrangements,  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 as a percentage of total services  revenues in 1997
as compared to 1996 is a result of increased  utilization of professional  staff
and overall higher business volumes in relation to fixed overhead costs.  During
1995, the Company was in its development

                                       25

<PAGE>


stage   and   generally   in  the  process  of  building  its  support  services
infrastructure.  The  Company  expects  that  services  costs  will  continue to
increase  in  absolute  dollars  as the Company continues to expand its services
organization to support anticipated higher levels of business.

     Research  and  Development.   Research  and  development  expenses  consist
primarily  of  salaries,  other  employee-related  costs,  and  consulting  fees
relating to the development of the Company's products.  In 1997, 1996, and 1995,
research and  development  expenses  were $7.4 million,  $5.0 million,  and $2.6
million,  respectively.  Research and development  expenses  increased by 48% in
1997 as compared to 1996 and  increased by 94% in 1996 as compared to 1995.  The
increases in research and  development  expenses are primarily  attributable  to
costs  associated  with  additional  personnel  within those  operations for the
enhancement  of existing  products  and the  development  of new  products.  The
Company  anticipates  that  research and  development  expenses will continue to
increase in absolute  dollars for 1998.  Development  costs incurred in 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.  As of
December 31, 1997, no software development costs had been capitalized.

     Sales and  Marketing.  Sales and marketing  expenses  consist  primarily of
salaries  and other  employee-related  costs,  commissions  and other  incentive
compensation,  travel and entertainment, and expenditures for marketing programs
such as  collateral  materials,  trade  shows,  public  relations,  and creative
services.  In 1997,  1996,  and 1995,  sales and  marketing  expenses were $18.4
million,  $12.1  million,  and $1.3 million,  respectively.  Sales and marketing
expenses  increased by 53% in 1997 as compared to 1996 and  increased by 795% in
1996 as compared to 1995.  During 1995, the Company was still in the development
stage  and  sales  and  marketing   expenses  in  percentage   terms   increased
significantly  year-over-year.  The  overall  increases  in sales and  marketing
expenditures   reflect  the  cost  of  hiring  additional  sales  and  marketing
personnel,  developing and expanding its sales distribution channels,  deploying
new  products,  and expanding  promotional  activities.  The Company  expects to
continue to expand its direct sales and marketing  efforts and expects sales and
marketing expenses to continue to increase in absolute dollars.

     General and  Administrative.  General and  administrative  expenses consist
primarily of salaries,  other  employee-related  costs, and professional service
fees.  In 1997,  1996,  and 1995 general and  administrative  expenses were $3.0
million,  $2.0 million, and $846,000,  respectively.  General and administrative
expenses  increased by 47% in 1997 as compared to 1996 and  increased by 140% in
1996 as compared to 1995. 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.  The Company  expects to  continue to add  administrative
staff to support  broadened  operations.  As a result,  the Company expects that
general  and  administrative  expenses  will  continue  to  increase in absolute
dollars.

     Prior to the Company's  initial  public  offering in June 1996, the Company
recorded deferred compensation for the difference between the exercise price and
the deemed fair value of the  Company's  Common  Stock with respect to 1,794,000
shares  issuable  upon  exercise of options.  The total  amount was  recorded as
deferred  compensation and is being amortized to cost of services,  research and
development, selling and marketing, and general and administrative expenses over
the vesting periods of the options,  generally 60 months.  Deferred compensation
amortization  for 1997,  1996,  and 1995 was $428,000,  $513,000,  and $100,000,
respectively.  The  amortization of deferred  compensation  will have an adverse
effect on the Company's  reported  results of operations  through 2003, but such
effect will be significantly reduced beginning in the third quarter of 2001.

     Income  taxes.  Deferred  taxes are  recognized  as a result  of  temporary
differences  that arise between the tax basis of assets and  liabilities and the
related financial  statement  carrying amounts,  as measured using the tax rates
that are expected to be in effect when the temporary differences reverse. During
1997,  1996,  and 1995,  the Company  generated  pre-tax losses of $7.4 million,
$10.1 million,  and $4.3 million,  respectively.  The Company has  approximately
$10.0  million in net  deferred  tax assets,  however,  it has not  reported any
associated  income tax  benefit  because the net  deferred  tax assets are fully
reserved due to uncertainties regarding the realization of the assets, given the
lack of  earnings  history  for the  Company.  See "Risk  Factors--Deferred  Tax
Assets" and Note 6 to Consolidated Financial Statements.

     At December 31, 1997,  the Company had federal and state net operating loss
carryforwards of approximately $17.1 million and $6.4 million,  respectively. In
addition, the Company had federal and state research

                                       26

<PAGE>

and  development  credit  carryforwards  of approximately $585,000 and $451,000,
respectively,  available  to  offset  future  tax liabilities. The Company's net
operating  loss and tax credit carryforwards expire in 1999 through 2013, if not
utilized.  Utilization  of the carryforwards may be subject to annual limitation
due  to  changes  in  the  Company's  ownership  resulting  from  the  Company's
preferred stock financings and its public stock offerings.

Liquidity and Capital Resources

     The Company has funded its operations to date primarily through the private
placement  of Common and  Preferred  Stock and an  initial  public  offering  of
3,360,000 shares of Common Stock.  Through May 1996, private placements provided
net  proceeds  totaling  $15.5  million,  and in June  1996 the  initial  public
offering  yielded net  proceeds of $20.7  million.  At December  31,  1997,  the
Company had $10.5 million in cash and cash  equivalents,  restricted  cash,  and
restricted short-term  investments,  which represents a decrease of $9.2 million
as compared to $19.7 million at December 31, 1996. The Company  currently has no
significant  capital  commitments  other than  obligations  under  equipment and
operating leases and $2.7 million  outstanding under a term debt credit facility
with its commercial bank. Effective February 1998, the Company's commercial bank
increased  its credit  facility  to provide for total  borrowings  of up to $6.5
million.

     Cash used in operating activities was $8.7 million,  $8.4 million, and $3.7
million  in 1997,  1996,  and 1995,  respectively.  The  primary  use of cash in
operating activities was to fund ongoing operations and support higher levels of
trade  receivables  as a  result  of  significant  year-over-year  increases  in
revenues. Cash used in investing activities was $3.6 million and $4.4 million in
1997 and 1996,  respectively,  and was primarily for the acquisition of property
and equipment,  net of $2.1 million of short-term  investment maturities in 1997
and inclusive of uses for the purchase of $2.1 milion of short-term  investments
in 1996.  Cash  provided by  investing  activities  was $614,000 in 1995 and was
primarily attributable to the maturity of short-term investments net of property
and equipment  acquisitions of $679,000.  Cash provided by financing  activities
was $2.9  million,  $26.1  million,  and $6.6 million in 1997,  1996,  and 1995,
respectively.  The primary  source of cash provided by financing  activities was
proceeds from the issuance of stock and, to a lesser extent, 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.  

     On March 4, 1998, the Company filed a registration statement on Form S-3 in
connection with a proposed public  offering of the Company's  Common Stock.  The
registration  statement  covers  3,795,000  shares  of  Common  Stock  of  which
3,000,000 shares are being sold by the Company, 300,000 shares are being sold by
certain  stockholders  of the  Company  and  495,000  shares are  issuable  upon
exercise of the underwriters'  over-allotment  option. There can be no assurance
that the proposed public offering will be sucessfully completed.

     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.

Quarterly Results of Operations

     The following tables set forth certain unaudited  consolidated statement of
operations  data for the eight quarters ended December 31, 1997, 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.  The unaudited  quarterly  information
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  meaningful and should not be relied upon as an indication of future
performance.

                                       27

<PAGE>


<TABLE>
<CAPTION>
                                                        1996 Quarter Ended
                                      -------------------------------------------------------
                                         Mar. 31       June 30       Sep. 30       Dec. 31
                                      ------------- ------------- ------------- -------------
                                                          (in thousands)
<S>                                     <C>            <C>           <C>           <C>    
Statement of Operations Data:
Revenues:
 Software licenses ..................   $  1,099       $ 1,564       $ 2,074       $ 2,727
 Services ...........................        299           738         1,026         1,356
                                        --------       -------       -------       -------
   Total revenues ...................      1,398         2,302         3,100         4,083
                                        --------       -------       -------       -------
Cost of revenues:
 Cost of software licenses ..........         96            93            72            69
 Cost of services ...................        165           331           520         1,148
                                        --------       -------       -------       -------
   Total cost of revenues ...........        261           424           592         1,217
                                        --------       -------       -------       -------
Gross profit ........................      1,137         1,878         2,508         2,866
                                        --------       -------       -------       -------
Operating expenses:
 Research and development ...........        917         1,277         1,320         1,472
 Sales and marketing ................      1,585         2,486         3,574         4,421
 General and administrative .........        340           320           592           782
                                        --------       -------       -------       -------
   Total operating expenses .........      2,842         4,083         5,486         6,675
                                        --------       -------       -------       -------
Operating loss ......................     (1,705)       (2,205)       (2,978)       (3,809)
Other income, net ...................          7            25           304           216
                                        --------       -------       -------       -------
Net loss ............................   $ (1,698)      $(2,180)      $(2,674)      $(3,593)
                                        ========       =======       =======       =======

                                                        1997 Quarter Ended
                                      -------------------------------------------------------
                                         Mar. 31       June 30       Sep. 30       Dec. 31
                                      ------------- ------------- ------------- -------------
                                                          (in thousands)
Statement of Operations Data:
Revenues:
 Software licenses ..................    $ 3,148       $ 4,098       $ 5,513      $ 6,213
 Services ...........................      2,143         1,929         1,641        2,420
                                         -------       -------       -------      -------
   Total revenues ...................      5,291         6,027         7,154        8,633
                                         -------       -------       -------      -------
Cost of revenues:
 Cost of software licenses ..........        214           425           460          566
 Cost of services ...................      1,143         1,001         1,010        1,130
                                         -------       -------       -------      -------
   Total cost of revenues ...........      1,357         1,426         1,470        1,696
                                         -------       -------       -------      -------
Gross profit ........................      3,934         4,601         5,684        6,937
                                         -------       -------       -------      -------
Operating expenses:
 Research and development ...........      1,680         1,802         2,113        1,797
 Sales and marketing ................      4,204         4,257         4,630        5,323
 General and administrative .........        746           700           763          780
                                         -------       -------       -------      -------
   Total operating expenses .........      6,630         6,759         7,506        7,900
                                         -------       -------       -------      -------
Operating loss ......................     (2,696)       (2,158)       (1,822)        (963)
Other income (expense), net .........        209            49           131         (123)
                                         -------       -------       -------      -------
Net loss ............................    $(2,487)      $(2,109)      $(1,691)     $(1,086)
                                         =======       =======       =======      =======

                                                        1996 Quarter Ended
                                      -------------------------------------------------------
                                         Mar. 31       June 30       Sep. 30       Dec. 31
                                      ------------- ------------- ------------- -------------
                                                          (in thousands)
As a Percentage of Revenues:
Revenues:
 Software licenses ..................       78.7%         67.9%         66.9%         66.8%
 Services ...........................       21.3          32.1          33.1          33.2
                                        --------       -------       -------       -------
   Total revenues ...................      100.0         100.0         100.0         100.0
                                        --------       -------       -------       -------
Cost of revenues:
 Cost of software licenses ..........        6.9           4.0           2.3           1.7
 Cost of services ...................       11.8          14.4          16.8          28.1
                                        --------       -------       -------       -------
   Total cost of revenues ...........       18.7          18.4          19.1          29.8
                                        --------       -------       -------       -------
Gross profit ........................       81.3          81.6          80.9          70.2
                                        --------       -------       -------       -------
Operating expenses:
 Research and development ...........       65.6          55.5          42.6          36.1
 Sales and marketing ................      113.5         108.0         115.3         108.3
 General and administrative .........       24.3          13.9          19.1          19.2
                                        --------       -------       -------       -------
   Total operating expenses .........      203.4         177.4         177.0         163.5
                                        --------       -------       -------       -------
Operating loss ......................     (122.1)        (95.8)        (96.1)        (93.3)
Other income, net ...................        0.5           1.1           9.8           5.3
                                        --------       -------       -------       -------
Net loss ............................     (121.6)%       (94.7)%       (86.3)%       (88.0)%
                                        ========       =======       =======       =======

                                                        1997 Quarter Ended
                                      -------------------------------------------------------
                                         Mar. 31       June 30       Sep. 30       Dec. 31
                                      ------------- ------------- ------------- -------------
                                                          (in thousands)
As a Percentage of Revenues:
Revenues:
 Software licenses ..................       59.5%         68.0%         77.1%        72.0%
 Services ...........................       40.5          32.0          22.9         28.0
                                         -------       -------       -------      -------
   Total revenues ...................      100.0         100.0         100.0        100.0
                                         -------       -------       -------      -------
Cost of revenues:
 Cost of software licenses ..........        4.0           7.1           6.4          6.6
 Cost of services ...................       21.6          16.6          14.1         13.1
                                         -------       -------       -------      -------
   Total cost of revenues ...........       25.6          23.7          20.5         19.6
                                         -------       -------       -------      -------
Gross profit ........................       74.4          76.3          79.5         80.4
                                         -------       -------       -------      -------
Operating expenses:
 Research and development ...........       31.8          29.9          29.5         20.8
 Sales and marketing ................       79.4          70.6          64.7         61.7
 General and administrative .........       14.1          11.6          10.7          9.0
                                         -------       -------       -------      -------
   Total operating expenses .........      125.3         112.1         104.9         91.5
                                         -------       -------       -------      -------
Operating loss ......................      (50.9)        (35.8)        (25.4)       (11.1)
Other income (expense), net .........        3.9           0.8           1.8        ( 1.4)
                                         -------       -------       -------      -------
Net loss ............................      (47.0)%       (35.0)%       (23.6)%      (12.6)%
                                         =======       =======       =======      =======
</TABLE>


     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,  cancellation of orders prior to
customer  deployment  or during  the  warranty  period,  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

                                       28

<PAGE>


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.

                                       29

<PAGE>


                                  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.


Operating Losses and Accumulated Deficit

     Since  its  inception,  the  Company  has  incurred  substantial  costs  to
research, develop, and enhance its technology and products, to recruit and train
a marketing and sales group, and to establish an administrative organization. As
a result,  the Company has  incurred  net losses in each  fiscal  quarter  since
inception  and, as of December 31,  1997,  had an  accumulated  deficit of $23.6
million. To the extent such losses continue,  the Company's  accumulated deficit
would increase, and stockholders' equity would decrease. The Company anticipates
that its  operating  expenses  will increase  substantially  in the  foreseeable
future as it continues the  development of its  technology,  increases its sales
and marketing  activities,  and creates and expands its  distribution  channels.
Accordingly,  the Company expects to incur additional  losses. In addition,  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.   See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."


Fluctuations in Quarterly Operating Results

     As a result  of the  Company's  relatively  short  operating  history,  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,  increases  its sales and  marketing
activities,  creates and expands the distribution channels for its products, and
broadens 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

                                       30

<PAGE>


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."


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 at an early stage 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  may not prove to be a viable  commercial  marketplace  because of
inadequate  development  of the  necessary  infrastructure,  such as a  reliable
network backbone, or non-timely development of complementary  products,  such as
high speed modems. 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, critical issues
concerning the commercial use of the Internet (including security,  reliability,
cost, ease of use, accessibility,  and quality of service) remain unresolved and
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 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  Application
System is the  ability to develop  and  maintain  profiles  for use by  business
managers in determining the nature of the content to be provided to

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<PAGE>


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. 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
new,  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, InterWorld, Microsoft,  Netscape, and OMI, among others.
Many 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,  many  current and  potential
competitors 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 Netscape  and  Microsoft,  are likely to 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.  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.
See "Business--Competition."


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  Application  System  and
related  services.  The Company  currently  expects the  BroadVision  One-To-One
Application  System  and  related  services  to  account  for most of its future
revenues.  Accordingly,  if any of  the  Company's  customers  is  not  able  to
successfully  develop  and deploy an online  marketplace  using the  BroadVision
One-To-One  Application System, 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 Application System, 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 Application System and of new products the Company
develops.  There can be no  assurance  that the Company  will be  successful  in
upgrading and continuing to market the BroadVision One-To-One Application System
or that the Company will successfully

                                       32

<PAGE>


develop  new  products  or that any new products will achieve market acceptance.
In  1997,  software  license  and  service revenues from  Metronet accounted for
approximately 11% 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 Application System,
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. 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

                                       33

<PAGE>


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

     Many currently  installed  computer systems and software products are coded
to accept two digit entries in the date code field.  These date code fields will
need to accept four digit  entries to  distinguish  21st century dates from 20th
century  dates.  As a  result,  in less than two  years,  computer  systems  and
software  used by many  companies  may need to be  upgraded  to comply with such
"Year  2000"  requirements.  Although  the  Company's  products  are  Year  2000
compliant,  the Company  believes that the purchasing  patterns of customers and
potential  customers  may 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.


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  such  patent will  provide.  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 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.  The Company's
policy is to enter  into  confidentiality  and  assignment  agreements  with its
employees, consultants, and vendors and generally to control access

                                       34

<PAGE>


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 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."


Risks Associated with International Strategy

     In 1997,  approximately  52% 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. There

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<PAGE>


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.  See
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations."


Deferred Tax Assets

     Deferred taxes are recognized as a result of timing  differences that arise
between  the tax basis of  assets  and  liabilities  and the  related  financial
statement  carrying  amounts,  as measured using the tax rates and laws that are
expected to be in effect when the timing  differences  reverse.  The Company has
approximately  $10.0  million in net  deferred tax assets,  however,  it has not
reported any  associated  income tax benefit  because the Company has provided a
valuation allowance for all of its deferred tax assets as it is presently unable
to conclude that it is more likely than not that the deferred tax assets will be
realized.  The  Company's  accounting  for  deferred  taxes under  Statement  of
Financial  Accounting  Standard No. 109 involves the  evaluation  of a number of
factors concerning the realizability of deferred tax assets. Some of the factors
that were taken into  consideration  include the Company's  stage of development
and related  history of operating  losses,  the  competitive  market in which it
operates,  the nature of the  deferred  tax  assets,  and the lack of  carryback
capacity to realize these assets. Although management's operating plans indicate
the company will be profitable in future periods, management's evaluation of all
available  evidence in assessing  the  realizability  of the deferred tax assets
indicates that such plans are not  considered  sufficient to overcome the weight
of existing  negative  factors.  See  "Management's  Discussion  and Analysis of
Financial  Condition  and  Results  of  Operations"  and  Note  6  of  Notes  to
Consolidated Financial Statements.


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

                                       36

<PAGE>


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.


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.

     On March 4, 1998, the Company filed a registration statement on Form S-3 in
connection with a proposed public  offering of the Company's  Common Stock.  The
registration  statement  covers  3,795,000  shares  of  Common  Stock  of  which
3,000,000 shares are being sold by the Company, 300,000 shares are being sold by
certain  stockholders  of the  Company  and  495,000  shares are  issuable  upon
exercise of the underwriters'  over-allotment  option. There can be no assurance
that the proposed public offering will be sucessfully completed.

     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 Resouces."


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 1998 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

                                       37

<PAGE>


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.   See   "Market  for  Registrant's  Common  Equity  and  Related
Stockholder Matters."

                                       38

<PAGE>


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, 1997 and 1996, 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, 1997.
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, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1997,  in  conformity  with  generally  accepted  accounting
principles.


                                          KPMG PEAT MARWICK LLP


Mountain View, California
January 28, 1998, except as to note 11,
which is as of March 4, 1998

                                       39

<PAGE>


<TABLE>
                                      BROADVISION, INC. AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEETS
                                     (in thousands, except per share data)


<CAPTION>
                                                                                          December 31,
                                                                                   --------------------------
                                                                                       1997          1996
                                                                                   -----------   ------------
<S>                                                                                 <C>           <C>      
ASSETS
Current assets:
   Cash and cash equivalents .....................................................  $   8,277     $  17,608
   Restricted cash ...............................................................      1,400            --
   Short-term investments, restricted in 1997 ....................................        796         2,112
   Accounts receivable, less allowance for doubtful accounts and returns of
    $671 and $191, for 1997 and 1996, respectively................................      9,586         5,548
   Prepaid expenses and other current assets .....................................        566           317
                                                                                    ---------     ---------
      Total current assets .......................................................     20,625        25,585
Property and equipment, net ......................................................      6,467         3,024
Other assets .....................................................................        250           321
                                                                                    ---------     ---------
      Total assets ...............................................................  $  27,342     $  28,930
                                                                                    =========     =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable ..............................................................  $   1,863     $     958
   Accrued expenses ..............................................................      2,168         2,526
   Unearned revenue ..............................................................      1,335         2,625
   Deferred maintenance ..........................................................      2,552           924
   Current portion of capital lease obligations ..................................        773           294
   Current portion of long-term debt .............................................        449            --
                                                                                    ---------     ---------
      Total current liabilities ..................................................      9,140         7,327
Capital lease obligations, excluding current portion .............................        803           495
Long-term debt, excluding current portion ........................................      2,202            --
Other liabilities ................................................................         76            92
                                                                                    ---------     ---------
      Total liabilities ..........................................................     12,221         7,914
                                                                                    ---------     ---------
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; 20,343 and 19,908
   shares issued and outstanding in 1997 and 1996, respectively. .................          2             2
 Additional paid-in capital ......................................................     40,366        39,316
 Deferred compensation ...........................................................     (1,605)       (2,033)
 Accumulated deficit .............................................................    (23,642)      (16,269)
                                                                                    ---------     ---------
      Total stockholders' equity .................................................     15,121        21,016
                                                                                    ---------     ---------
      Total liabilities and stockholders' equity .................................  $  27,342     $  28,930
                                                                                    =========     =========

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

                                                      40

<PAGE>


<TABLE>
                                      BROADVISION, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (in thousands, except per share data)

<CAPTION>
                                                                                  Years Ended December 31,
                                                                        --------------------------------------------
                                                                            1997           1996             1995
                                                                        -----------   --------------   -------------
<S>                                                                      <C>           <C>           <C>   
Revenues:
   Software licenses ...............................................     $ 18,973      $  7,464      $   --
   Services ........................................................        8,132         3,418           540
                                                                         --------      --------      --------
      Total revenues ...............................................       27,105        10,882           540
Cost of revenues:
   Cost of software licenses .......................................        1,664           330          --
   Cost of services ................................................        4,284         2,164           249
                                                                         --------      --------      --------
      Total cost of revenues .......................................        5,948         2,494           249
                                                                         --------      --------      --------
         Gross profit ..............................................       21,157         8,388           291
Operating expenses:
   Research and development ........................................        7,392         4,985         2,575
   Sales and marketing .............................................       18,413        12,066         1,348
   General and administrative ......................................        2,990         2,034           846
                                                                         --------      --------      --------
    Total operating expenses .......................................       28,795        19,085         4,769
                                                                         --------      --------      --------
         Operating loss ............................................       (7,638)      (10,697)       (4,478)
Other income, net ..................................................          265           552           160
                                                                         --------      --------      --------
         Net loss ..................................................     $ (7,373)     $(10,145)     $ (4,318)
                                                                         ========      ========      ========
Basic and diluted net loss per share ...............................     $  (0.36)     $  (0.54)     $  (0.36)
                                                                         ========      ========      ========
Shares used in computing basic and diluted net loss per share ......       20,208        18,815        11,976
                                                                         ========      ========      ========

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

                                                      41

<PAGE>


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


<CAPTION>
                                                          Convertible
                                                        Preferred Stock       Common Stock
                                                      -------------------- -------------------
                                                         Shares    Amount    Shares    Amount
                                                      ----------- -------- ---------- --------
<S>                                                       <C>       <C>       <C>        <C>
Balances as of December 31, 1994 ....................     5,600     $ 1       6,720      $ 1
Issuance of Series C convertible preferred stock
 at $2.00 per share, net of issuance costs of $49....     3,001      --          --       --
Issuance of common stock at $ 0.05 to
 $ 0.12 per share....................................        --      --         334       --
Common stock repurchased ............................        --      --        (746)      --
Deferred compensation related to grant of stock
 options ............................................        --      --          --       --
Amortization of deferred compensation ...............        --      --          --       --
Net loss ............................................        --      --          --       --
                                                          -----     ----      -----      ---
Balances as of December 31, 1995 ....................     8,601       1       6,308        1
Issuance of Series C convertible preferred stock
 at $2.00 per share .................................         3      --          --       --
Issuance of Series E convertible preferred stock
 at $8.00 per share..................................       634      --          --       --
Conversion of preferred Series A, B, C and E to
 common stock .......................................    (9,238)       (1)    9,258        1
Issuance of common stock through initial public
 offering ...........................................        --      --       3,360       --
Issuance of stock under employee stock
 purchase plan ......................................        --      --          --       --
Issuance of common stock from exercise
 of options .........................................        --      --       1,112       --
Common stock repurchased ............................        --      --        (130)      --
Deferred compensation related to grant of stock
 options ............................................        --      --          --       --
Amortization of deferred compensation ...............        --      --          --       --
Net loss ............................................        --      --          --       --
                                                         ------     -----     -----      ---
Balances as of December 31, 1996 ....................        --      --      19,908        2
Issuance of stock under employee stock
 purchase plan ......................................        --      --         242       --
Issuance of common stock from exercise
 of options .........................................        --      --         255       --
Common stock repurchased ............................        --      --         (62)      --
Amortization of deferred compensation ...............        --      --          --       --
Net loss ............................................        --      --          --       --
                                                         ------     -----    ------      ---
Balances as of December 31, 1997 ....................        --     $--      20,343      $ 2
                                                         ======     =====    ======      ===
</TABLE>


<TABLE>
<CAPTION>
                                                                                                          Total
                                                          Additional     Accumulated     Deferred     Stockholders'
                                                       Paid-in Capital     Deficit     Compensation      Equity
                                                      ----------------- ------------- -------------- --------------
<S>                                                       <C>            <C>            <C>            <C>      
Balances as of December 31, 1994 ....................     $  4,330       $   (1,806)    $      --      $   2,526
Issuance of Series C convertible preferred stock
 at $2.00 per share, net of issuance costs of $49....        5,952               --            --          5,952
Issuance of common stock at $ 0.05 to
 $ 0.12 per share....................................           31               --            --             31
Common stock repurchased ............................          (37)              --            --            (37)
Deferred compensation related to grant of stock
 options ............................................        1,136               --        (1,136)            --
Amortization of deferred compensation ...............           --               --           100            100
Net loss ............................................           --           (4,318)           --         (4,318)
                                                          --------       ----------     ---------      ---------
Balances as of December 31, 1995 ....................       11,412           (6,124)       (1,036)         4,254
Issuance of Series C convertible preferred stock
 at $2.00 per share .................................            6               --            --              6
Issuance of Series E convertible preferred stock
 at $8.00 per share..................................        5,055               --            --          5,055
Conversion of preferred Series A, B, C and E to
 common stock .......................................           --               --            --             --
Issuance of common stock through initial public
 offering ...........................................       20,755               --            --         20,755
Issuance of stock under employee stock
 purchase plan ......................................          394               --            --            394
Issuance of common stock from exercise
 of options .........................................          205               --            --            205
Common stock repurchased ............................          (21)              --            --            (21)
Deferred compensation related to grant of stock
 options ............................................        1,510               --        (1,510)            --
Amortization of deferred compensation ...............           --               --           513            513
Net loss ............................................           --          (10,145)           --        (10,145)
                                                          --------       ----------     ---------      ---------
Balances as of December 31, 1996 ....................       39,316          (16,269)       (2,033)        21,016
Issuance of stock under employee stock
 purchase plan ......................................          979               --            --            979
Issuance of common stock from exercise
 of options .........................................           81               --            --             81
Common stock repurchased ............................          (10)              --            --            (10)
Amortization of deferred compensation ...............           --               --           428            428
Net loss ............................................           --           (7,373)           --         (7,373)
                                                          --------       ----------     ---------      ---------
Balances as of December 31, 1997 ....................     $ 40,366       $  (23,642)    $  (1,605)     $  15,121
                                                          ========       ==========     =========      =========

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

                                               42

<PAGE>


<TABLE>

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

<CAPTION>
                                                                                     Years Ended December 31,
                                                                          ----------------------------------------------
                                                                               1997            1996             1995
                                                                          -------------   --------------   -------------
<S>                                                                         <C>             <C>              <C>       
Cash flows from operating activities:
 Net loss ...............................................................   $  (7,373)      $  (10,145)      $  (4,318)
 Adjustments to reconcile net loss to net cash used
   in operating activities:
   Depreciation and amortization ........................................       1,613              753             120
   Amortization of deferred compensation ................................         428              513             100
   Allowance for doubtful accounts and returns ..........................         515              196              --
 Changes in operating assets and liabilities:
   Accounts receivable ..................................................      (4,553)          (5,349)           (395)
   Prepaid expenses and other assets ....................................        (178)            (551)            (53)
   Accounts payable and accrued expenses ................................         547            2,996             374
   Unearned revenue and deferred maintenance ............................         338            3,194             355
   Other liabilities ....................................................         (16)              15              77
                                                                            ---------       ----------       ---------
    Net cash used in operating activities ...............................      (8,679)          (8,378)         (3,740)
                                                                            ---------       ----------       ---------
Cash flows from investing activities:
 Purchase of property and equipment .....................................      (4,878)          (2,529)           (679)
 Purchase of short-term investments .....................................        (796)          (2,112)           (196)
 Maturity of short-term investments .....................................       2,112              196           1,489
                                                                            ---------       ----------       ---------
    Net cash provided by (used in) investing activities .................      (3,562)          (4,445)            614
                                                                            ---------       ----------       ---------
Cash flows from financing activities:
 Proceeds from sale/leaseback ...........................................         987               --             748
 Net change in restricted cash ..........................................      (1,400)              --              --
 Proceeds from borrowings ...............................................       2,651               --              --
 Payments on capital lease ..............................................        (378)            (274)            (65)
 Proceeds from issuance of common stock .................................       1,060           21,354              31
 Proceeds from issuance of preferred stock ..............................          --            5,061           5,952
 Repurchase of common stock .............................................         (10)             (21)            (37)
                                                                            ---------       ----------       ---------
Net cash provided by financing activities ...............................       2,910           26,120           6,629
                                                                            ---------       ----------       ---------
Net increase (decrease) in cash and cash equivalents ....................      (9,331)          13,297           3,503
Cash and cash equivalents, beginning of year ............................      17,608            4,311             808
                                                                            ---------       ----------       ---------
Cash and cash equivalents, end of year ..................................   $   8,277       $   17,608       $   4,311
                                                                            =========       ==========       =========
Supplemental cash flow disclosures:
 Cash paid for interest .................................................   $     108       $       86       $      32
                                                                            =========       ==========       =========
Noncash investing and financing activities:
 Acquisition of equipment under capital lease ...........................   $   1,165       $      380       $      --
                                                                            =========       ==========       =========
 Deferred compensation relating to stock options granted at less than
   fair market value ....................................................   $      --       $    1,510       $   1,136
                                                                            =========       ==========       =========

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

                                                            43

<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                        December 31, 1997, 1996 and 1995


NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Nature of Business

     BroadVision,   Inc.  (the   "Company")   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,  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 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,  organizing  the  enterprise's
content,  targeting  that  content to each visitor  based on easily  constructed
business rules, and executing transactions.

  Basis of Presentation

     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.

  Use of Estimates

     The  preparation of  consolidated  financial  statements in conformity with
generally accepted accounting  principles  requires the Company's  management to
make certain assumptions and estimates that affect the amounts reported.  Actual
results could differ from those estimates.  Such estimates  include  established
reserves  for  potentially  uncollectible  accounts  receivable  and a valuation
allowance for deferred tax assets.

  Revenue Recognition

     The Company's revenue recognition policies are in accordance with Statement
of Position (SOP) No. 91-1, Software Revenue Recognition, and are as follows:

     *   Software  license  revenues are  recognized  when the software has been
         delivered,  the customer  acknowledges an  unconditional  obligation to
         pay, and the Company has no significant obligations remaining.

     *   Professional  services  revenues are  recognized  as such  services are
         performed.

     *   Maintenance   revenues,   including   revenues  bundled  with  software
         agreements which entitle the customers to technical  support and future
         enhancements,  are deferred and  recognized  over the related  contract
         period, generally twelve months.

     In October 1997,  the American  Institute of Certified  Public  Accountants
issued SOP 97-2, Software Revenue  Recognition.  The statement provides specific
industry   guidance  and  stipulates  that  revenue   recognized  from  software
arrangements is to be allocated to each element of the arrangement  based on the
relative  fair  values of the  elements,  such as software  products,  upgrades,
enhancements,  post contract customer support,  installation, or training. Under
SOP 97-2, the  determination of fair value is based on objective  evidence which
is specific to the vendor.  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. Revenue allocated to software products, specified
upgrades and  enhancements is generally  recognized upon delivery of the related
products, upgrades and enhancements. Revenue allocated to post contract customer
support  is  generally  recognized  ratably  over the term of the  support,  and
revenue  allocated to service  elements is generally  recognized as the services
are performed. SOP 97-2 will be adopted by the Company effective January 1, 1998
and is not expected to have any material effect on revenue recognition.

                                       44

<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES

            Notes to Consolidated Financial Statements -- (Continued)
                        December 31, 1997, 1996 and 1995

  Research and Development and Software Development Costs

     Development  costs  incurred in 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 typically  made  available for general
release, concurrent with achievement of technological feasibility.  Accordingly,
no software development costs have been capitalized through December 31, 1997.

  Cash and Cash Equivalents

     The  Company  considers  all  debt  securities   purchased  with  remaining
maturities  of three months or less to be cash  equivalents  which  consisted of
approximately  $7,708,000  in money  market  funds as of  December  31, 1997 and
$16,729,000 in commercial paper as of December 31, 1996.

  Short-term Investments

     As of December 31, 1997, short-term  investments of $796,000 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.  As of December 31, 1996,  short-term  investments consisted
principally of commercial  paper.  All short-term  investments are classified as
available-for-sale,  have  maturities  of one  year or less and are  carried  at
amortized  cost which  approximates  fair value.  Realized  gains and losses are
computed using the specific identification method. Realized and unrealized gains
or losses have not been significant.

  Concentrations of Credit Risk

     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 the 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  approximated  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.

  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.

     In  accordance  with the  provisions  of Statement of Financial  Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, 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.  Under SFAS No. 121, an impairment  loss would be  recognized  when
estimated future cash flows expected to result from the

                                       45

<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES

            Notes to Consolidated Financial Statements -- (Continued)
                        December 31, 1997, 1996 and 1995

use  of the asset and its eventual disposition is less than the carrying amount.
The  Company  adopted  SFAS No. 121 on January 1, 1996. The adoption of SFAS No.
121 had no effect on the Company's consolidated results of operations.

  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 would be recorded on the date of grant only if the current  market price
of the underlying stock exceeded the exercise price.  Effective January 1, 1996,
the Company adopted the disclosure  requirements of SFAS No. 123, Accounting for
Stock-Based  Compensation.  Under SFAS No. 123,  the Company  must  disclose pro
forma net loss and pro forma loss per share for employee stock option grants and
employee  stock  purchases  occurring  subsequent to December 31, 1994 as if the
SFAS No. 123 fair value-based method had been applied.

  Net Loss Per Share

     The Financial  Accounting  Standards  Board (FASB) recently issued SFAS No.
128,  Earnings Per Share.  SFAS No. 128 requires the  presentation  of basic net
income per share, and for companies with complex capital structures, diluted net
income per share.  In conjunction  with the Company's  adoption of SFAS No. 128,
the Company also adopted the provisions of Staff  Accounting  Bulletin (SAB) No.
98, issued in February 1998. Accordingly, shares previously included pursuant to
SAB No. 83 have been  omitted  from both pro forma  basic and diluted net income
per share amounts.  Prior periods have been restated to conform to SFAS No. 128,
however,  as the Company had a net loss in the prior periods,  basic and diluted
loss per share are the same as the previously  presented primary loss per share.

     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.

  Foreign Currency Translations

     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.

  Recently Issued Accounting Standards

     In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income;
and SFAS No.  131,  Disclosures  about  Segments  of an  Enterprise  and Related
Information,  which are effective for the Company  beginning with its year ended
December 31, 1998.

     SFAS No. 130  establishes  standards for the  reporting  and  disclosure of
comprehensive  income and its components  which will be presented in association
with a company's financial  statements.  Comprehensive  income is defined as the
change  in  a  business   enterprise's  equity  during  a  period  arising  from
transactions,  events or  circumstances  relating to nonowner  sources,  such as
foreign  currency  translation  adjustments  and  unrealized  gains or losses on
available-for-sale securities. It includes all changes in equity during a period
except those resulting from investments by or distributions to owners.

                                       46

<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES

            Notes to Consolidated Financial Statements -- (Continued)
                        December 31, 1997, 1996 and 1995

     SFAS No. 131 establishes annual and interim reporting standards relating to
the  disclosure  of  an  enterprise's  business  segments,  products,  services,
geographic areas, and major customers.

     Adoption of these  standards is not  expected to have a material  effect on
the Company's consolidated financial position or results of operations.


NOTE 2--PROPERTY AND EQUIPMENT (in thousands):


                                                          December 31,
                                                         ---------------
                                                          1997     1996
                                                         ------   ------
        Furniture and fixtures .......................   $  636   $  539
        Computer and software ........................    5,458    3,210
        Leasehold improvements .......................    2,780      138
                                                         ------   ------
                                                          8,874    3,887
        Less accumulated depreciation and amortization    2,407      863
                                                         ------   ------
                                                         $6,467   $3,024
                                                         ======   ======


     Leased equipment totaled approximately $2,256 and $1,105 as of December 31,
1997 and 1996,  respectively.  Accumulated  depreciation  for  leased  equipment
totaled  approximately  $927  and  $355  as  of  December  31,  1997  and  1996,
respectively.


NOTE 3--ACCRUED EXPENSES (in thousands):


                                                       December 31,
                                                      ---------------
                                                      1997       1996
                                                      ------   ------
          Employee benefits .......................   $  420   $  254
          Commissions and bonuses .................      833      696
          Directors and officers insurance premiums       57      283
          Taxes payable ...........................      366      129
          Contractor fees .........................      162      489
          Other ...................................      330      675
                                                      ------   ------
                                                      $2,168   $2,526
                                                      ======   ======


NOTE 4--UNEARNED REVENUE (in thousands):


                                                December 31,
                                               ---------------
                                                1997     1996
                                               ------   ------
                           Software licenses   $  803   $2,217
                           Services ........      532      408
                                               ------   ------
                                               $1,335   $2,625
                                               ======   ======

NOTE 5--DEBT

     As of December 31, 1997,  the Company had  $2,651,000  outstanding  under a
commercial  credit  facility.  Borrowings bear interest at the bank's prime rate
(8.5% as of December 31,  1997).  Principal  and interest is due in  consecutive
monthly payments  through maturity based on the term of the facility.  Principal
payments  of  $449,000  annually  are due from 1998  through  2000 and  $326,000
annually from 2001 through 2004. The credit

                                       47

<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES

            Notes to Consolidated Financial Statements -- (Continued)
                        December 31, 1997, 1996 and 1995

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, 1997.


NOTE 6--INCOME TAXES

     The  individual  components  of the  Company's  deferred  tax  assets as of
December 31, 1997 and 1996 were as follows (in thousands):


                                                             December 31,
                                                          -------------------
                                                            1997       1996
                                                          --------   --------
         Depreciation and amortization ................    $  401     $  175
         Accrued liabilities ..........................       887        403
         Capitalized research and development .........     1,024        531
         Net operating losses .........................     6,408      5,093
         Tax credits ..................................     1,258        431
                                                           ------     ------
            Total deferred tax assets .................     9,978      6,633
         Less valuation allowance .....................     9,978      6,633
                                                           ------     ------
                                                           $   --     $   --
                                                           ======     ======


     The Company has provided a valuation  allowance for all of its deferred tax
assets as it is  presently  unable to  conclude  that it is more likely than not
that the  deferred  tax assets will be  realized.  Some of the factors that were
taken into consideration  include the Company's stage of development and related
history of operating losses,  the competitive  market in which it operates,  the
nature of the deferred tax assets, and the lack of carryback capacity to realize
these assets. Although management's operating plans indicate the Company will be
profitable in future periods,  management's evaluation of all available evidence
in assessing the  realizability  of the deferred tax assets  indicates that such
plans are not considered  sufficient to overcome the weight of existing negative
factors.

     As of December  31, 1997,  the Company had federal and state net  operating
loss  carryforwards of approximately  $17,100,000 and $6,400,000,  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 $585,000 and $451,000, respectively, available to
offset future tax  liabilities.  The Company's net operating loss and tax credit
carryforwards expire in the years 1999 through 2013, if not utilized.

     The Tax Reform Act of 1986 and the  California  Tax  Conformity Act of 1987
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

     During  1997,  the  Company  entered  into a lease  for a new  headquarters
facility.  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. As of December 31, 1997, the Company is committed to
spend approximately $523,000 for tenant

                                       48

<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES

            Notes to Consolidated Financial Statements -- (Continued)
                        December 31, 1997, 1996 and 1995

improvements  for its new headquarters facility. The Company also leases certain
equipment  under  capital  leases  expiring  through the year 2000. A summary of
future minimum lease payments is as follows (in thousands):


                                                           Capital    Operating
Year Ended December 31,                                     leases      leases
-----------------------                                    -------     -------
 1998 ..................................................   $   903     $ 1,938
 1999 ..................................................       684       1,621
 2000 ..................................................       224       1,362
 2001 ..................................................      --         1,269
 2002 ..................................................      --         1,346
 Thereafter ............................................      --         7,445
                                                           -------     -------
Total minimum lease payments ...........................     1,811     $14,981
                                                                       =======
Less amount representing imputed interest ..............       235
                                                           -------
Present value of net minimum capital lease payments ....     1,576
Less current portion ...................................       773
                                                           -------
Capital leases, excluding current portion ..............   $   803
                                                           =======


     Rental expense relating to operating leases was  approximately  $1,161,000,
$571,000,  and  $264,000 for the years ended  December 31, 1997,  1996 and 1995,
respectively.

     Total  minimum  sublease  payments  to be  received  in  the  future  under
noncancelable subleases total $2,298,000 through May, 2000.

  Standby Letter of Credit Commitments

     As of December 31, 1997,  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  expiring November 12, 1998;
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 which expired February 14, 1998. The standby letter of credit
commitments  are secured by  compensating  cash balances of equal value with the
issuing  bank.  These  compensating  balances  are  shown as  restricted  in the
accompanying consolidated balance sheet.


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, 1997, there were warrants  outstanding to acquire 33,750
and  60,000  shares of common  stock at $2.00 and $8.50 per share and  relate to
equipment lease financing and a facilities lease,  respectively.  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 $1,510,000 and

                                       49

<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES

            Notes to Consolidated Financial Statements -- (Continued)
                        December 31, 1997, 1996 and 1995

$1,136,000  in  1996  and  1995,  respectively,  for  the difference between the
exercise  price and the deemed fair value of the common stock underlying options
granted  in  1996.  This  amount  is being amortized to expense over the vesting
period of the individual options, generally five years.

     The Company has  reserved  5,000,000  shares of common  stock for  issuance
under its Equity  Incentive  Plan.  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  grant  date.  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 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 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.  As of
December  31,  1997,   426,293   shares  were   subject  to   repurchase   at  a
weighted-average price of $0.18.

     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, 1997,  275,000 shares were
vested.

     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 1997 and 1996: no dividend yield;  expected volatility
of 67% in 1997 and 60% in  1996;  risk-free  interest  rate of 5.91% in 1997 and
6.5% in 1996; and expected life of 2.8 years in 1997 and 5 years in 1996.

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


<CAPTION>
                                                 1997                            1996                          1995
                                     ----------------------------   ------------------------------   -------------------------
                                                     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       2,393         $   2.75           1,924         $   0.13         1,004       $  0.06
Granted ............................   1,346             6.69           1,849             3.98         1,916           .14
Exercised ..........................    (255)            0.31          (1,092)            0.18          (334)          .09
Forfeited ..........................    (577)            4.19            (288)            2.83          (662)          .06
                                       -----                           ------                          -----
Outstanding at end of year .........   2,907             4.50           2,393             2.75         1,924           .13
                                       =====                           ======                          =====
Options vested at year-end .........     641             2.64             309             0.22           200           .06
                                       =====                           ======                          =====       =======
Weighted-average fair value of
 options granted during the year                     $   6.70                         $   2.29                         .08
                                                     ========                         ========                     =======
</TABLE>

                                                               50

<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES

            Notes to Consolidated Financial Statements -- (Continued)
                        December 31, 1997, 1996 and 1995

<TABLE>
     The following table summarizes stock options outstanding as of December 31,
1997:


<CAPTION>
                                     Options Outstanding                            Options Vested
                    -----------------------------------------------------   -------------------------------
                        Number         Weighted-Avg.                            Number
                     Outstanding         Remaining                           Exercisable
     Range of        at 12/31/97     Contractual Life      Weighted-Avg.     at 12/31/97     Weighted-Avg.
 Exercise Prices       (000's)           In Years         Exercise Price       (000's)       Exercise Price
-----------------   -------------   ------------------   ----------------   -------------   ---------------
<S>                       <C>               <C>              <C>                 <C>           <C>     
$0.06 - $0.20             695               7.47             $   0.16            281           $   0.16
 0.40 -  5.31             406               8.42                 2.51            141               1.54
 5.50 -  5.75             644               8.19                 5.52             80               5.53
 6.00 -  7.00             620               8.94                 6.82            108               6.92
 7.13 -  8.50             542               9.14                 7.72             31               7.58
                        -----                                                    ---
$0.06 - $8.50           2,907               8.39             $   4.50            641           $   2.64
                        =====                                                    ===
</TABLE>


<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>
                                                 1997                           1996                         1995
                                     ----------------------------   ----------------------------   -------------------------
                                                     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        711          $   3.52           20          $   0.20          --            --
Granted ............................    154              5.50          727              3.46          20           .20
Exercised ..........................     --                --          (20)             0.20          --            --
Forfeited ..........................    (70)             0.80          (16)             0.80          --            --
                                        ---                            ---                            --
Outstanding at end of year .........    795              4.07          711              3.52          20           .20
                                        ===                            ===                            ==
Options vested at year-end .........    395              3.60          197              4.35          --            --
                                        ===                            ===
Weighted-average fair value of
 options granted during the year                     $   5.50                       $   2.03                       .12
                                                     ========                       ========                       ===
</TABLE>


     The 795,000  options  outstanding  have exercise  prices  between $0.80 and
$7.00 and a weighted-average  contractual life of 7.25 years. As of December 31,
1997, 12,000 shares were subject to repurchase at $0.20.

  Employee Stock Purchase Plan

     The Board of Directors has reserved  600,000  shares for issuance under the
Company's  Employee Stock Purchase Plan (the "Purchase Plan"). 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 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 1997 and 1996: an expected life of seven
months;  expected  volatility of 67% and 60%,  respectively;  risk-free interest
rate  of  5.05%  and   6.5%,   respectively;   and  no   dividend   yield.   The
weighted-average  fair value of the purchase rights granted in 1997 and 1996 was
$2.16 and $2.61, respectively.

                                       51

<PAGE>


                       BROADVISION, INC. and SUBSIDIARIES

            Notes to Consolidated Financial Statements -- (Continued)
                        December 31, 1997, 1996 and 1995

  Pro Forma Disclosure

     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 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.


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  $9,500  in  1997.  Employees  vest
immediately in their  contributions and earnings  thereon.  The plan allows for,
but does not require,  Company matching contributions.  As of December 31, 1997,
the Company has not made any such matching contributions.


NOTE 10--GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION

     The Company's export sales to Europe  represented  40.0% and 30.1% of total
revenues  in 1997 and  1996,  respectively,  and  export  sales to Asia  Pacific
represented  12.4% and 29.4% of total  revenues in 1997 and 1996,  respectively.
During 1995,  the Company was in its  development  stage and had no  significant
export revenues.

     In 1997,  approximately 11% of the Company's  revenues were attributable to
one  customer.  In 1996 and  1995,  approximately  10% and 93% of the  Company's
revenues were  attributable  to two  different  customers,  respectively.  As of
December 31, 1997,  two  customers  accounted for 19.4% and 11.8% of total trade
accounts receivable, respectively.


NOTE 11--SUBSEQUENT EVENTS

     On March 1, 1998, the Company  finalized an  arrangement  dated February 5,
1998 with its  commercial  bank to approve an increase in its existing term debt
credit  facility  to provide for up to  $4,250,000  in total  borrowings  (total
outstanding  as of  December  31, 1997 of  $2,651,000).  In  addition,  the bank
approved a $2,250,000  accounts  receivable line of credit to facilitate working
capital financing.

     On March 4, 1998, the Company filed a registration statement on Form S-3 in
connection with a proposed public  offering of the Company's  Common Stock.  The
registration  statement  covers  3,795,000  shares  of  Common  Stock  of  which
3,000,000 shares are being sold by the Company, 300,000 shares are being sold by
certain  stockholders  of the  Company  and  495,000  shares are  issuable  upon
exercise of the underwriters' over-allotment option.

                                       52

<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 1997 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 for the Company's  directors and on 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, 1997 and 1996
               Consolidated  Statements of Operations for the three years in the
               period ended December 31, 1997
               Consolidated  Statements  of  Stockholders' Equity  for the three
               years in the period ended December 31, 1997
               Consolidated  Statements of Cash Flows for the three years in the
               period ended December 31, 1997
               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, 1997.

                                       53

<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 6th day of March 1998.

                                            BroadVision, Inc.


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

                                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.


          Signature                          Title                    Date
-----------------------------   ------------------------------   --------------

      /s/ Pehong Chen             Chairman of the Board and      March 6, 1998
---------------------------        Chief Executive Officer
         Pehong Chen            (Principal Executive Officer)


   /s/ Randall C. Bolten         Vice President, Operations,     March 6, 1998
---------------------------        Chief Financial Officer
     Randall C. Bolten              (Principal Financial
                                   and Accounting Officer)


   /s/ David L. Anderson                Director                 March 6, 1998
---------------------------
     David L. Anderson


    /s/ Yogen K. Dalal                  Director                 March 6, 1998
---------------------------
      Yogen K. Dalal


    /s/ Koh Boon Hwee                   Director                 March 6, 1998
---------------------------
       Koh Boon Hwee


   /s/ Carl Pascarella                  Director                 March 6, 1998
---------------------------
       Carl Pascarella

                                       54

<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 28, 1998, except as to note
11,  which  is  as  of  March  4, 1998, included the related financial statement
schedule  as  of  December  31,  1997 and 1996, and for each of the years in the
three-year  period ended December 31, 1997, are included in the Annual Report on
Form  10-K  for  the  year  ended  December  31,  1997.  The financial statement
schedule  is  the responsibility of the Company's management. Our responsibility
is  to  express  an  opinion  on  the  financial statement schedule based on our
audits.  In  our  opinion,  the 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.
333-3844)  on  Form  S-8  and (No. 333-47339) on Form S-3 of BroadVision Inc. of
our  reports  dated January 28, 1998, except as to note 11, which is as of March
4,  1998,  relating  to the consolidated balance sheets of BroadVision, Inc. and
subsidiaries  as  of  December  31,  1997 and 1996, 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,  1997,  and the related
schedule,  which  report appears in the December 31, 1997, Annual Report on Form
10-K of BroadVision, Inc.


                                             KPMG PEAT MARWICK LLP


Mountain View, California
March 5, 1998

                                       55

<PAGE>


<TABLE>
                                                 BROADVISION, INC. AND SUBSIDIARIES

                                          SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                                                           (in thousands)

<CAPTION>
                                                                 Balance at                                             Charged to
                                                                 Beginning           Costs and                          Balance at
Description                                                      of Period            Expenses     Deductions(1)       End of Period
-----------                                                      ---------            --------     -------------       -------------
<S>                                                                <C>                <C>                <C>                <C>
Allowance for doubtful accounts
 Year Ended December 31, 1995 .............................        $   --             $   --             $  --             $ --
                                                                   ======             ======             =====             ====
 Year Ended December 31, 1996 .............................        $   --             $  196             $   5             $191
                                                                   ======             ======             =====             ====
 Year Ended December 31, 1997 .............................        $  191             $  515             $  35             $671
                                                                   ======             ======             =====             ====

<FN>
(1)  Represents net charge-offs of specific receivables.
</FN>
</TABLE>

                                                                 56

<PAGE>


                               BROADVISION, INC.
                          ANNUAL REPORT ON FORM 10-K
                               DECEMBER 31, 1997


                               INDEX TO EXHIBITS


      Exhibit      Description
------------------ -------------------------------------------------------------
         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 Peat Marwick 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.


------------
*        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.