UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

FORM 10-K

|FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|---------------------------------------------------------------------------------------------------------
|(Mark one)                                                                                               
|ý                                                                                                        
|For the Year Ended December 31, 2003                                                                     
|OR                                                                                                       
|o                                                                                                        
|For the transition period
from                             to                                            

Commission File Number 0-28252

---

BROADVISION, INC.(Exact Name of Registrant as Specified in its Charter)

|Delaware(State or Other Jurisdiction of
Incorporation or Organization)                                     |  | 94-3184303(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|585 Broadway, Redwood City, California(Address of principal executive offices)                             |  | 94063(Zip Code)                               
|(650) 542-5100(Registrant's telephone number, including area code)                                        
|Securities registered pursuant to Section 12(b) of the Act: 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 ý    No o

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. ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes ý    No o

As of June 30, 2003, based on the closing sales price as quoted by the Nasdaq, 32,845,905 shares of Common Stock, having an aggregate market value of
approximately $182.0 million were held by non-affiliates. For purposes of the above statement only, all directors and executive officers of the registrants are assumed to be
affiliates.

As
of March 5, 2004, the registrant had 33,347,140 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Parts
of the Proxy Statement for Registrant's 2004 Annual Meeting of Stockholders to be held June 11, 2004 are incorporated by reference to Part III of this
Form 10-K Report.



---



BROADVISION, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2003

TABLE OF CONTENTS

|Part I     |  |                                                                                                |  |   
|---------- |  | ---------------------------------------------------------------------------------------------- |  | --
|Item 1.    |  | Business                                                                                       |  | 4 
|Item 2.    |  | Properties                                                                                     |  | 15
|Item 3.    |  | Legal Proceedings                                                                              |  | 15
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                            |  | 15
|Part II    |  |                                                                                                |  |   
|Item 5.    |  | Market for Registrant's Common Equity and Related Stockholder Matters                          |  | 16
|Item 6.    |  | Selected Consolidated Financial Data                                                           |  | 17
|Item 7.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations          |  | 18
|Item 7A.   |  | Quantitative and Qualitative Disclosure About Market Risk                                      |  | 49
|Item 8.    |  | Financial Statements and Supplementary Data                                                    |  | 51
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |  | 89
|Item 9A.   |  | Controls and Procedures                                                                        |  | 89
|Part III   |  |                                                                                                |  |   
|Item 10.   |  | Directors and Executive Officers of the Registrant                                             |  | 90
|Item 11.   |  | Executive Compensation                                                                         |  | 91
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 91
|Item 13.   |  | Certain Relationships and Related Transactions                                                 |  | 91
|Item 14.   |  | Principal Accountant Fees and Services                                                         |  | 91
|Part IV    |  |                                                                                                |  |   
|Item 15.   |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               |  | 91
|SIGNATURES |  | 92                                                                                            

BroadVision®,
Broad Vision One-to-One®, iGuide® and Interleaf® are trademarks and registered trademarks of BroadVision in the
United States of America and other countries and BroadVision Process, Click-to-Create, Commerce, Enterprise, Command
Center, Portal, One-to-One Content, Publishing Center, Deployment Center, Integration Services,
Multi-Touchpoint Services, QuickSilver and LiveCycle, are trademarks of BroadVision.

2

---

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

Certain statements set forth or incorporated by reference in this Form 10-K, as well as in our Annual Report to Stockholders for the year ended
December 31, 2003, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes", "anticipates", "expects",
"intends", "estimates" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, those risk factors set forth under "Risk Factors" and elsewhere in this
Form 10-K.

We
expressly disclaim any obligation to update or publicly release any revision to these forward-looking statements after the date of this Form 10-K.

|Overview and Industry Background                   |                                                                                                      | 4 
|-------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | --
|The BroadVision Solution                           |                                                                                                      | 4 
|BroadVision Business Strategies                    |                                                                                                      | 5 
|                                                   | Integrate Leading Core Applications                                                                  |   
|                                                   | Support Dynamic Development of Targeted Application Solutions                                        |   
|                                                   | Enhance our Service and Support Infrastructure to Help Customers Maximize Their Return on Investment |   
|                                                   | Leverage Alliances with Key Business Partners                                                        |   
|                                                   | Support Diverse Customer Business Models                                                             |   
|BroadVision Solutions                              |                                                                                                      | 6 
|                                                   | Self-Service Applications                                                                            |   
|                                                   | Self-Service Extensions                                                                              |   
|                                                   | BroadVision Portal Platform                                                                          |   
|                                                   | Key Capabilities of BroadVision's Solutions                                                          |   
|                                                   | Other Products                                                                                       |   
|                                                   | Product Development                                                                                  |   
|BroadVision Global Services                        |                                                                                                      | 9 
|                                                   | Consulting Services                                                                                  |   
|                                                   | Support and Maintenance Services                                                                     |   
|                                                   | Training                                                                                             |   
|                                                   | Delivery Methodology                                                                                 |   
|Strategic Alliances                                |                                                                                                      | 10
|                                                   | System Integrators and Solution Providers                                                            |   
|                                                   | Application Service Providers                                                                        |   
|                                                   | Technology Partners                                                                                  |   
|Customers and Markets                              |                                                                                                      | 11
|Sales and Marketing                                |                                                                                                      | 11
|Competition                                        |                                                                                                      | 12
|Intellectual Property and Other Proprietary Rights |                                                                                                      | 13
|Employees                                          |                                                                                                      | 13
|Executive Officers                                 |                                                                                                      | 14

3

---



PART I

ITEM 1. BUSINESS

Overview and Industry Background

We develop, market and support personalized self-service web applications that enable organizations to unify their e-business
infrastructure and conduct both interactions and transactions with employees, partners and customers. Our integrated suite of process, commerce, portal and content solutions unify an organizations
e-business infrastructure to increase revenues and reduce costs. We also provide a range of professional services to support our customers, including implementation, training, education and technical
support.

As
of December 31, 2003, more than 1,000 companies and government entities around the globe have used our applications to power and personalize their mission-critical web
initiatives.

BroadVision®
was founded in 1993 and has been a publicly-traded corporation since 1996. BroadVision was among the pioneers of e-business and among the first to
offer pre-integrated, packaged web applications to power personalized information and commerce-centric portals.

General
information about us can be found at our website, www.broadvision.com, under the "Company" link. Our annual report on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K, as well as any amendments
or exhibits to those reports, are available free of charge through our website as soon as reasonably practicable after we file them with, or furnish them to, the SEC.

The BroadVision Solution

BroadVision's self-service web applications allow organizations to unify and extend their key business applications, information, and business
processes by taking advantage of the power of the web accessed by a broad range of wired and wireless mobile devices. BroadVision's products allow customers, partners, and employees to do business on
their own terms, in a personalized and collaborative way. BroadVision solutions allow multiple constituents to serve themselves from anywhere, at any time, through any web device. BroadVision's
personalized self-service web applications enable organizations to create business value by transforming the way they do businessmoving business interactions and transactions
from a manual, human-assisted paradigm to an automated, personalized self-service model that enhances productivity, agility, efficiency and scalability.

Our
integrated suite of process, commerce, portal and content solutions and product extensions enable organizations to develop dynamic profiles of web and wireless users from volunteered
data and observed behavior, deliver personalized content and execute transactions securely. Business managers are able to modify business rules and content in real time, offering a personalized
experience to each online or mobile visitor. Because of our commitment to open standards and open architecture, BroadVision applications integrate with our customers' existing systems and expand as
our customers' needs and businesses grow.

BroadVision's
integrated suite of products provides organizations with rapid time-to-market, and the flexibility to adapt as business needs and conditions change.
With BroadVision Process, customers can Click-to-Create new web-enabled business processes and connect them with existing BroadVision or non-BroadVision
portal and e-commerce solutions.

Supporting
this application infrastructure, as of December 31, 2003, are numerous partner firms around the world who are working to ensure our joint customers' success through
complementary technology, applications, tools and services offerings that extend and enhance BroadVision customers' implementations. BroadVision maintains long-standing relationships with
its partners.

4

---

We
believe our products improve our customers' revenue opportunities by enabling them to establish more effective and efficient one-to-one relationships with
their customers and business partners. Web and wireless users are engaged by highly personalized real-time interactions, able to transact business securely and encouraged to remain online
and make return visits. Our applications also improve the cost-effectiveness of one-to-one relationship management both within and outside an organization by
enabling non-technical managers to modify business rules and content in real time and by helping to reduce the cost of customer acquisition and retention, business development, technical
support and employee workplace initiatives. Because we provide pre-integrated, packaged solutions, time to deployment is shorter and customers are able to manage and maintain their web and
wireless applications in a cost-effective manner.

BroadVision Business Strategies

Our objective is to be the leading provider of personalized self-service web applications. To achieve this objective, we have adopted the following
key strategies:

Integrate Leading Core Applications.To enable our customers to effectively manage all of their key commerce and information
access initiatives, we have focused our product development and marketing efforts in the following areas:



Support Dynamic Development of Targeted Application Solutions.We were among the first companies to introduce packaged
web-based applications for electronic commerce, financial services and knowledge management. With BroadVision Process, our partners and customers can now dynamically develop additional
process-specific web applications that are unique to their business and/or industry and link them to either BroadVision portal and commerce solutions, or to other commercially available portal and
commerce solutions.

Enhance our Service and Support Infrastructure to Help Customers Maximize Their Return on Investment.BroadVision Global
Services (BVGS) provides a broad range of consulting, training and technical support services for all of our products. This organization provides business application and technical expertise, along
with extensive product knowledge, to complement our products and provide solutions that meet customer business requirements. By using BVGS, customers and business partners are able to customize their
application solutions to maximize the benefits of our self-service model.

We
are committed to extending the service offerings and the resources available to our customers and have implemented programs such as an online BroadVision University, a
train-the-trainer program and third-party educational centers to extend the breadth and depth of our service offerings. We have also tiered our technical support offerings to
provide standard, enterprise-strength and personalized support programs for our customers. Global coverage and intelligent sourcing enables our customers to receive the services they need at a
competitive price.

Leverage Alliances with Key Business Partners.We partner with leading systems integrators, technology partners, value-added
resellers (VARs), application service providers (ASPs), software partners and hardware platform partners. These alliances provide additional sales and marketing channels for our products, enable us to
more rapidly incorporate additional functions and technologies into our products and facilitate the successful deployment of customer applications.

To
accelerate adoption of our products, we have developed the BroadVision Partner Program. This program is a comprehensive, structured partnership relationship designed to drive
effective alliances

5

---

and
ensure success by jointly identifying and pursuing specific business objectives. The BroadVision Partner Program operates within a framework of proactive business planning, revenue targeting,
structured sales support and enhanced BroadVision training as well as marketing and sales engineering support. The partner program is intended to help our partners successfully develop, promote, and
sell their services and solutions in close coordination with our sales engineering, channel and partner marketing and professional services teams.

Support Diverse Customer Business Models.We are committed to offering our customers maximum flexibility in the deployment of
our applications. Customers can choose to deploy our applications using their own in-house technical resources, engaging with BVGS, working with a BroadVision-trained and certified systems
integrator or distribution partner, or applying a combination of our resources and those of a partner to assist with implementation.

BroadVision Solutions

BroadVision provides an integrated, self-service web application suite for enabling large-scale e-business. All BroadVision products
reflect the principles of excellence that drive our company's culture: adherence to open standards, scalability and performance, data and transaction security, high-powered functionality
based on expert business logic and rigorous testing for quality assurance.

BroadVision Self-Service Applications

BroadVision self-service applications are a set of cross-industry applications, designed to web-enable specific business processes,
leveraging the unique capabilities of a pre-integrated portal framework.

BroadVision Process

Transforms costly, people-intensive processes and collaborations into web-based self-service processes. Allows business analysts and
technical staff to design and deploy solutions in days, not months, significantly reducing IT cost and accelerating time to implementation. BroadVision Process is scheduled to be released in March
2004.

BroadVision Commerce

Transacts the entire sales process from lead generation to sales execution to customer support and allows management of B2B and B2C channels through a single
application. Delivers advanced personalization capabilities and easy-to-use catalog management tools.

BroadVision Portal

Connects visitors to personalized views of information, resources and business processes stored in diverse internal and external legacy information systems. Easy
to use and manage, it supports collaborative business processes through self-serviced microsites.

BroadVision Content

Manages all types of content throughout its lifecycle: from creation and management through deployment and distribution. Support for intelligent content tagging
and management enables organizations to deliver highly personalized content to multiple constituents using web, wireless or print.

6

---

BroadVision Self-Service Extensions

The following extensions build on the core functionality of BroadVision's self-service applications:

BroadVision Business Intelligence

Complements BroadVision Commerce by enabling the conduct of multi-dimensional analysis of complex dataincluding sales trends, customer segments,
customer purchase behavior and site performance. Developed in partnership with Teradata, a global leader in enterprise data warehousing and enterprise analytic technologies and services.

BroadVision eMarketing

Complements BroadVision Commerce with closed-loop campaign management. Makes it easy to segment prospects and customers and deliver personalized,
relevant and timely offers via web, e-mail or both. Integrated reporting automatically gathers and presents the information organizations need to discover the marketing approach that works
best.

BroadVision QuickSilver®

Provides powerful features for creating and publishing lengthy, complex documents supporting multiple output formats (including HTML, PDF and Postscript) and
automatic publishing of personalized content to BroadVision Portal. Assemble publications from a variety of text, graphic and database sources, including Microsoft Word, AutoCad, Microsoft Excel, and
Oracle. Includes a complete XML authoring environment.

Self-Service Framework

BroadVision applications and extensions leverage a self-service framework that provides notable availability, performance, scalability and security.

BroadVision Deployment

Simplifies the process of moving content from multiple systems to the production environment. Reduces the cost of managing BroadVision application assets and
improves process standardization for enterprise staging initiatives.

BroadVision Multi-Touchpoint

Extends BroadVision applications beyond the desktop to mobile phones enabled with WAP, CHTML or XHTML; personal digital assistants (PDAs); voice channels that use
Voice XML technology; as well as HTML devices including PCs, kiosks, ATMs, and point-of-sale terminals.
Enables you to personalize content to the memory, screen, and navigational characteristics of different touch points.

BroadVision Search

Provides full-text and field searching of online content and any referenced external files and returns results with relevance-ranked scores. Supports
query searches using a broad spectrum of search operators. Connects people to the information they seek regardless of medium. Developed in partnership with FAST, a global leader in
real-time search and filter technology.

7

---

BroadVision Portal Platform

Open Standards-Based Architecture

BroadVision solutions are built on object-oriented application code written in J2EE programming environments, including Java and JavaScript, and where appropriate
C++, which allows developers and system integrators to use, integrate, modify, adapt or extend the applications with minimal impact on other areas to create a rapidly customized product that meets
specific business requirements.

Support
for the CORBA standard for object-oriented computing enables high-volume performance, flexible application deployment and easy integration with third-party or legacy
applications. Our applications fully support XML, which is the emerging standard for managing and exchanging data between e-business systems as well as for re-purposing and
sending information to wireless devices.

In
addition, we use other widely accepted standards in developing our products, including Web Services, Structured Query Language (SQL) for accessing relational database management
systems; Common Gateway Interface (CGI) and Hypertext Transfer Protocol (HTTP) for web access; Netscape Application Programming Interface (NAPI) for access to Netscape's web servers; Secure Socket
Layer
(SSL) for secure transmissions over networks; and the RC2 and MD5 encryption algorithms supplied by RSA Security.

Our
applications can be operated in conjunction with relational database management systems provided by IBM Corporation, Informix, Microsoft, Oracle and Sybase. Supported application
servers include WebLogic, WebSphere and SunOne.

Support for Open Source

BroadVision Process gives organizations the option of running on a commercially available technology stack described above or on an open source stack. While our
commitment to commercial platforms has not changed, we recognize that our customers are adopting open source as a platform because of its total cost of ownership and runtime benefits.

Key Capabilities of BroadVision's Solutions

We have designed all BroadVision self-service web applications for use in mission-critical, high-performance environments by companies
with complex architecture, and demanding deployment and maintenance requirements. Some of the key capabilities of BroadVision applications include:



8

---



Other Products

In addition to our products, we have entered into agreements that enable us to resell selected third-party software products from IONA Technologies, FAST,
MKS, Inc., Rogue Wave, and NCR. These are sublicensed to end users and either incorporated in or sold as options to our products.

Product Development

We believe that our future success will depend in large part on our ability to enhance and extend the BroadVision self-service web application suite:
self-service applications, extensions and framework, and associated platform technologies; maintain technological leadership; and satisfy an evolving range of customer requirements for
large-scale, interactive, online relationship management applications.

Our
product development organization is responsible for developing product architecture and core technology, product testing, quality assurance, writing product user documentation and
expanding the ability of BroadVision products to operate with the leading hardware platforms, operating systems, database management systems and key electronic commerce transaction processing
standards.

Since
inception, we have made substantial investments in product development and related activities. Certain technologies have been acquired and integrated into BroadVision products
through licensing arrangements.

As
of December 31, 2003, we had 95 employees in our product development organization. Our research and development expenses were $21.1 million in the year ended
December 31, 2003, $41.4 million in the year ended December 31, 2002 and $78.7 million in the year ended December 31, 2001.

To
date, we have not capitalized any software development costs as products are made available for general release relatively concurrently with the establishment of technological
feasibility. We expect to continue to devote substantial resources to our product development activities.

BroadVision Global Services

BroadVision provides a full spectrum of global services to contribute to the success for businesses, including strategic services, implementation services,
migration services and ongoing training and support.

9

---



Consulting Services

The BroadVision Global Services organization provides strategic services that help customers achieve maximum business value from their BroadVision applications
and implementation services that ensure rapid deployment. BVGS leverages a global supply chain of certified professionals to provide customers with high value at low cost. Our comprehensive migration
servicesincluding migration planning and optimizationprovide a cost effective approach to migration and protect our customers' investment in critical business applications.

Support and Maintenance Services

We have tiered our support and maintenance programs to better serve the needs of our worldwide customer base. Standard Support provides technical assistance
during regular business hours; Enterprise Support is designed for customers with mission-critical environments, providing customers with access to support experts 24 hours a day, 7 days
a week; and Personalized Support assigns a specific individual to a customer along with other customer specified support services, including on-site support engineers. We have technical
support centers in North America, Europe and Asia. Under our standard maintenance agreement, we provide telephone support and upgrade rights to new releases, including patch releases as necessary, as
well as product enhancements.

Training

Under the banner of BroadVision University, we deliver training solutions that ensure our customers and partners have access to timely and effective training for
successful implementation of BroadVision applications globally. Our advanced delivery infrastructure allows us to deliver courses throughout the world at our facilities or at customer locations. In
addition to instructor-led courses, BroadVision University has launched a global e-learning platform to facilitate the delivery of web-based on-demand
courses. BroadVision University also delivers an extensive training program to BroadVision employees to ensure high-quality and consistent training of our own personnel. This program
provides a series of foundation courses that are general in content for all audiences as well as product- and role-specific courses.

Delivery Methodology

BroadVision LifeCycle is a multi-disciplinary implementation process that integrates business, content management and creative and technical expertise to take
sites live efficiently. Each phase of the processDefine, Design, Develop, Deployhas a suggested set of best practice tasks and deliverables formulated to identify the key
issues required to launch a high-performance and profitable site.

Strategic Alliances

We recognize that today's organizations require an open, partner-based approach to e-business. Accordingly, we have assembled a team of
best-of-breed partners with the skills, services and value-added products necessary to design, deploy and manage a global e-business. Working together, our partners
and we can help organizations go live quickly with dynamic, interactive applications.

System Integrators and Solution Providers

Our system integrators and solutions providers help customers plan and implement their mission-critical web strategies, including integration with front- and
back-office systems. They have developed their own technologies, solutions and best practices that complement our applications and in some cases provide deep industry-specific applications
solutions. In addition, we have entered into reseller agreements with partners to permit value-added and industry-specific extensions to our applications by

10

---

these
partners, who target various vertical industry applications with their solutions. Our partners include NCR in automated teller machine banking and Siemens medical solutions.

Application Service Providers

Our application service provider partners develop, host and support value-added application solutions based on our technology. These applications typically extend
our technology into new areas or leverage our applications by adding industry-specific functionality, providing targeted solutions that address specific market needs.

Technology Partners

We have developed key technology partnerships with leading software and hardware companies in areas complementary to our solutions, such as data analysis and
reporting, content management and payment processing. These technology partnerships enhance our ability to base our products on industry standards and take advantage of current and emerging
technologies. Our technology partners include Actuate, NCR Teradata and Ektron.

Customers and Markets

As of December 31, 2003, we had licensed our products to over 1,000 end-user customers and partners. During each of the years ended
December 31, 2003, 2002 and 2001, no customer accounted for more than 10% of our total revenues.

Our
primary target customers are Global 2000 organizations that are at the forefront of delivering innovative self-service e-business to increase revenues,
improve productivity and reduce operational costs.

BroadVision's
software is deployed in all major industry groups, including financial services, government, healthcare, manufacturing, retail and telecommunications. Customers include key
entities like Achmea, CIBC, Citibank, Fleet Boston, ING Bank, Lloyds TSB Bank, Tatra Bank, U.S. Air Force, U.S. General Services Administration, U.S. Postal Service, Highmark Blue Cross, Pfizer, Merck
Medco, Pitney Bowes, Xerox, AEON, Circuit City, Sears Roebuck, Wal*Mart, KPN, O2 and Vodafone.

Sales and Marketing

We market our products primarily through a direct sales organization with operations in North America, Europe and Asia/Pacific. On December 31, 2003, our
direct sales organization included 96 sales representatives, managers and sales support personnel.

We
have sales offices located throughout the world to support the sales and marketing of our products. In support of the Americas sales and marketing organizations, offices are located
in the United States in California, Colorado, Georgia, Illinois, Massachusetts, New York, Texas, Virginia and Washington; in Canada, offices are located in Toronto and Vancouver, British Columbia.

Sales
and marketing offices for our Europe region are located in Austria, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom.

Our
sales and marketing offices in the Asia Pacific/Japan/India/Middle East region are located in India, Japan and the Republic of China (Taiwan).

Initial
sales activities typically involve discussion and review of the potential business value associated with the implementation of a BroadVision solution, a demonstration of our
self-service web applications capabilities at the prospect's site, followed by one or more detailed technical reviews, often presented at our headquarters. The sales process usually
involves collaboration with the prospective customer in order to specify the scope of the application. Our global services organization helps customers design, and then develop and deploy, their
applications.

11

---

As
of December 31, 2003, nine 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 our website.

Our
marketing efforts are targeted at:



Competition

If we fail to compete successfully with current or future competitors, we may lose market share. The market for self-service web applications is
rapidly evolving and intensely competitive. Our customers' requirements and the technology available to satisfy those requirements will continually change. We expect competition in this market to
persist and increase in the future. Our primary competition currently includes:



The
principal competitive factors affecting the market for our products are:



12

---



Compared
to us, many of these competitors and other current and future competitors have longer operating histories and significantly greater financial, technical, marketing and other
resources. As a result, they may be able to respond more quickly to new or changing opportunities, technologies and customer requirements. Many of these companies can use their greater name
recognition and more extensive customer base to gain market share at our expense. Competitors may be able to undertake more extensive promotional activities, adopt more aggressive pricing policies and
offer more attractive terms to purchasers. Current and potential competitors may bundle their products to discourage users from purchasing our products. In addition, 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. Competitive pressures may make it difficult for us to acquire and retain customers and may require us to reduce the price of our products. We may be unable to
compete successfully with current or new competitors.

Intellectual Property and Other Proprietary Rights

Our success and ability to compete are dependent to a significant degree on our proprietary technology. We hold a U.S patent, issued in January 1998 and
expiring in August 2015, on elements of the BroadVision One-To-One Enterprise product, which covers electronic commerce operations common in today's web business. We
also hold a U.S. patent, issued in November 1996 and expiring in February 2014, acquired as part of the Interleaf acquisition on the elements of the extensible electronic document
processing system for creating new classes of active documents. The patent on active documents (associating procedures to elements of an electronic document) is fundamental and hard to avoid by modern
document processing systems. Although we hold these patents, they may not provide an adequate level of intellectual property protection. In addition, litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or
invalidity. We cannot guarantee that infringement or other claims will not be asserted or prosecuted against us in the future, whether resulting from our intellectual property or licenses from third
parties. Claims or litigation, whether successful or unsuccessful, could result in substantial costs and diversions of resources, either of which could harm our business.

We
also rely on copyright, trademark, service mark, trade secret laws and contractual restrictions to protect our proprietary rights in products and services. We have registered
"BroadVision", "BroadVision One-To-One", "iGuide" and "Interleaf" as trademarks in the United States and in other countries. It is possible that our competitors or other
companies will adopt product names similar to these trademarks, impeding our ability to build brand identity and possibly confusing customers.

As
a matter of company policy, we enter into confidentiality and assignment agreements with our employees, consultants and vendors. We also control access to and distribution of our
software, documents and other proprietary information. Notwithstanding these precautions, it may be possible for an unauthorized third party to copy or otherwise obtain and use our software or other
proprietary information or to develop similar software independently. Policing unauthorized use of our products will be difficult, particularly because the global nature of the Internet makes it
difficult to control the ultimate destination or security of software and other transmitted data. The laws of other countries may afford us little or no effective protection of our intellectual
property.

Employees

As of December 31, 2003, we employed a total of 367 full-time employees, of whom 233 are based in North America, 116 in Europe and 18 in Asia.
Of these full-time employees, 105 are in sales and marketing, 95 are in product development, 137 are in global services and client support, and 30 are in finance, administration and
operations.

13

---

We
believe that our future success depends on attracting and retaining highly skilled personnel. We may be unable to attract and retain high-caliber employees. Our employees
are not represented by any collective bargaining unit. We have never experienced a work stoppage and consider our employee relations to be good.

Executive Officers

The following table sets forth certain information regarding our current executive officers.

|Name             |  | Age |  | Position                                                    
|---------------- |  | --- |  | ------------------------------------------------------------
|Pehong Chen      |  | 46  |  | Chairman of the Board, Chief Executive Officer and President
|William E. Meyer |  | 42  |  | Executive Vice President and Chief Financial Officer        
|Alex Kormushoff  |  | 47  |  | Senior Vice President, Global Services                      
|Warren Utt       |  | 46  |  | Senior Vice President, Worldwide Field Operations           

Pehong Chenhas served as our Chairman of the Board, Chief Executive Officer and President since our 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, 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.

William E. Meyerhas served as our Executive Vice President and Chief Financial Officer since April 2003. Prior to joining
BroadVision, Mr. Meyer was Chief Financial Officer of Mainsoft Corporation, a leading global publisher of cross-platform development software. Before Mainsoft, he held several senior finance
positions with Phoenix Technologies, a multi-national system software company, including chief financial officer and executive vice president of inSilicon Corporation, a leading developer of
semiconductor intellectual property that was spun-off from Phoenix. Prior to his tenure at Phoenix, Meyer held senior finance positions at Spectrum HoloByte/Microprose, SBT Accounting
Systems and Arthur Andersen & Co.

Alex Kormushoffhas served as our Senior Vice President of Global Services since October 2002. Mr. Kormushoff has served the
information technology industry for nearly 25 years in various positions, including consulting, business development, practice development, and business operations. Prior to joining
BroadVision, Mr. Kormushoff was the Managing Director of Sapient Germany. He also held the position of Managing Director of Sapient's Manufacturing, Retail and Distribution Practice. Sapient is
a leading business consulting and technology services firm. Before Sapient, he held various senior consulting, management, and sales positions with CSC Consulting and Digital Equipment Corporation.

Warren Utthas served as our Senior Vice President of Worldwide Field Operations since July 2002. Mr. Utt has served the
technology industry for over 20 years. Prior to joining BroadVision, Mr. Utt was the Vice President of Sales for PerformaWorks, a leading developer of goal driven performance management
software. Before PerformaWorks, he was the Vice President of Business Development and Channel Sales at InterOPS Management Solutions, a leading provider of mission critical operational management
services to the financial services sector. He was responsible for the creation of all strategic relationships and initial client sales. Prior to InterOPS, Mr. Utt was the Chief Executive
Officer of Contentra, where he led them from their founding to their acquisition by North American Media Engines.

14

---

ITEM 2. PROPERTIES

We lease approximately 705,000 square feet of office space, of which approximately 90% is in the United States. We occupy or sublease 55% of the 705,000 square
feet of our leased office space.

At
our headquarters, located in Redwood City, California, we occupy approximately 49,000 square feet of office facilities used for research and development, technical support, sales,
marketing, consulting, training and administration. Additional leased domestic facilities include offices located in Atlanta, GA., Bellevue, WA., Burlington, MA., Dallas, TX., El Segundo, CA., Irving,
TX., Itasca, IL., Landover, MD., McLean, VA., New York, NY., Redwood City, CA., San Francisco, CA., Santa Clara, CA., and Waltham, MA, which are primarily used for sales, marketing and customer
service activities. Leased facilities of significant size located outside of the United States and used primarily for sales, marketing, customer support and administrative functions include facilities
located in Vienna, Paris, Hamburg, Munich, Milan, Houten, Netherlands, Madrid, Stockholm, Reading, UK, Renes, Switzerland, Megenwil, Switzerland, Toronto, Japan and Singapore.

We
believe our facilities are suitable for their respective uses and, in general, are adequate to support our current and anticipated volume of business. We believe that suitable
additional space will be available to accommodate any necessary or currently anticipated expansion of our operations.

ITEM 3. LEGAL PROCEEDINGS

We are subject to various claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal
counsel, we have adequate defenses for each of the claims and actions, and believes that their ultimate disposition is not expected to have a material effect on our business, financial condition or
results of operations. Although management currently believes that the outcome of other outstanding legal proceedings, claims and litigation involving us will not have a material adverse effect on our
business, results of operations or financial condition, litigation is inherently uncertain, and there can be no assurance that existing or future litigation will not have a material adverse effect on
our business, results of operations or financial condition.

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

Not applicable.

15

---

PART II

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

Our common stock is quoted on the Nasdaq National Market under the symbol "BVSN." The following table shows high and low sale prices per share of our common stock
as reported on the Nasdaq National Market:

High

LowFiscal Year 2003First Quarter

$
4.50

$
3.60Second Quarter


7.69


3.75Third Quarter


6.95


4.52Fourth Quarter


5.71


4.14Fiscal Year 2002First Quarter

$
30.06

$
15.30Second Quarter


15.75


2.70Third Quarter


4.59


1.23Fourth Quarter


6.15


1.10


As
of March 5, 2004, there were 2,063 holders of record of our common stock. On March 5, 2004, the last sale price reported on the Nasdaq National Market System for our
common stock was $8.12 per share.

We
have never declared or paid cash dividends on our common stock, and it is our present intention to retain earnings to finance the expansion of our business. In addition, our credit
facility with our commercial lender contains certain covenants that may limit our ability to pay cash dividends.

16

---



ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

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 BroadVision and Notes thereto, and other financial information included elsewhere in this Form 10-K. Historical
results are not necessarily indicative of results that may be expected for future periods.

|                                                             |                                              | Years Ended December 31,
|------------------------------------------------------------ | -------------------------------------------- | ------------------------
|
|
|Consolidated Statement of Operations Data:                   |                                              |                         
|Revenues:                                                    |                                              |                         
|                                                             | Software licenses                            |                         
|                                                             | Services                                     |                         
|                                                             |                                              |                         
|                                                             |                                              | Total revenues          
|Cost of revenues:                                            |                                              |                         
|                                                             | Cost of software licenses                    |                         
|                                                             | Cost of services                             |                         
|                                                             |                                              |                         
|                                                             |                                              | Total cost of revenues  
|                                                             |                                              |                         
|Gross profit                                                 |                                              |                         
|Operating expenses:                                          |                                              |                         
|                                                             | Research and development                     |                         
|                                                             | Sales and marketing                          |                         
|                                                             | General and administrative                   |                         
|                                                             | Litigation settlement costs                  |                         
|                                                             | Goodwill and intangible amortization         |                         
|                                                             | Charge for acquired in-process technology    |                         
|                                                             | Restructuring charge                         |                         
|                                                             | Impairment of assets                         |                         
|                                                             | Impairment of goodwill and other intangibles |                         
|                                                             |                                              |                         
|                                                             |                                              | Total operating expenses
|                                                             |                                              |                         
|                                                             | Operating (loss) income                      |                         
|                                                             | Other, net                                   |                         
|                                                             |                                              |                         
|                                                             | (Loss) income before income taxes            |                         
|                                                             | Income tax provision                         |                         
|                                                             |                                              |                         
|                                                             | Net (loss) income                            |                         
|                                                             |                                              |                         
|Net (loss) earnings per share:                               |                                              |                         
|Basic (loss) earnings per share                              |                                              | $                       
|                                                             |                                              |                         
|Shares used in computationbasic (loss) earnings per share   |                                              |                         
|                                                             |                                              |                         
|Diluted (loss) earnings per share                            |                                              | $                       
|                                                             |                                              |                         
|Shares used in computationdiluted (loss) earnings per share |                                              |                         
|                                                             |                                              |                         

---

|                                              |  | As of December 31, |           
|--------------------------------------------- |  | ------------------ | ----------
|
|
|Consolidated Balance Sheet Data:              |  |                    |           
|Cash and cash equivalents                     |  | $                  | 78,776    
|Working capital                               |  |                    | 748       
|Total assets                                  |  |                    | 195,082   
|Debt and capital leases, less current portion |  |                    | 969       
|Accumulated deficit                           |  |                    | (1,204,675
|Total stockholders' equity                    |  |                    | 7,950     

17

---



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

Overview

We develop, market and support a suite of personalized self-service web applications that enable organizations to unify their e-business
infrastructure and conduct both interactions and transactions with employees, partners and customers. Our integrated suite of process, commerce, portal and content solutions helps organizations
rapidly increase revenues and reduce costs.

As
of December 31, 2003, more than 1,000 companies and government entities around the globe have used our applications to power and personalize their mission-critical web
initiatives.

Worldwide
demand for enterprise software has declined significantly over the past several quarters. The decline in venture capital spending has resulted in fewer new companies with
funding to, among other things, build an on-line business. Established companies have scaled back, delayed or cancelled web-based initiatives. As a result, we have seen
significant declines in our revenue over the past three fiscal years.

We
have significantly rationalized our operations in recent quarters in response to the reduced demand for our products and services. We have decreased our headcount and worldwide cost
structure each by over 80%. As discussed in Note 9 of Notes to Consolidated Financial Statements, we've taken significant charges to restructure operations, and we've implemented more efficient
processes in targeted areas. We believe our efforts position us well to improve our financial performance and to generate profitable operations in future periods.

We
strive to anticipate changes in the demand for our services and aggressively manage our labor force appropriately. Through our thorough budgeting process, cross-functional management
participates in
the planning, reviewing and managing of our business plans. This process allows us to adjust our cost structures to changing market needs, competitive landscapes and economic factors. Our emphasis on
cost control helps us manage our margins even if revenues generated fall short of what we anticipate.

Following
are key financial highlights for fiscal 2003:



Recent Events

We renewed and amended our revolving credit facility in June 2003. Borrowings under the revolving line of credit are collateralized by all of our assets
and bear interest at the bank's prime rate (floating with a floor of 4.25%). The amended and restated loan and security agreement requires us to maintain certain levels in cash and cash equivalents
and short-term investments (excluding restricted cash, long-term investments and equity investments). Additionally, the amended and restated loan and security agreement
requires us to maintain certain levels on deposit with our commercial lender and certain quarterly operating levels and ratios. As of December 31, 2003, we were not in compliance with the
financial and deposits covenants of the commercial credit facilities. Subsequently, we received a waiver from the bank regarding non-compliance. At December 31, 2003 and
December 31, 2002, $27.0 million and $25.0 million, respectively, was outstanding under the line of credit. Interest is due

18

---

monthly
and principal was due at expiration in February 2004. Subsequently, the facility has been renewed with substantially the same terms and an expiration date of February 2005.

Critical Accounting Policies

BroadVision management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America. In preparing these financial statements, we are required to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including
those related to doubtful accounts, product returns, investments, goodwill and intangible assets, income taxes and restructuring, as well as contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates using different assumptions or conditions. We believe the following critical accounting policies reflect the
more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

OverviewOur revenues are derived from fees for licenses of our software products, maintenance,
consulting services and customer training. We generally charge fees for licenses of our software products either based on the number of persons registered to use the product or based on the number of
Central Processing Units ("CPUs") on which the product is installed. Our revenue recognition policies are in accordance with Statement of Position (SOP) No. 97-2, Software Revenue Recognition, as
amended; SOP No. 98-9,Software Revenue Recognition, With Respect to Certain
Transactionsand the Securities and Exchange Commission's Staff Accounting Bulletin No. 101,Revenue Recognition in Financial
Statements.

Software License RevenueWe license our products through our direct sales force and indirectly through resellers. In general,
software license revenues are recognized when a non-cancelable license agreement has been signed and the customer acknowledges an unconditional obligation to pay, the software product has
been delivered, there are no uncertainties surrounding product acceptance, the fees are fixed and determinable and collection is considered probable. Delivery is considered to have occurred when title
and risk of loss have been transferred to the customer, which generally occurs when media containing the licensed programs is provided to a common carrier. In case of electronic delivery, delivery
occurs when the customer is given access to the licensed programs. If collectibility is not considered probable, revenue is recognized when the fee is collected. Subscription-based license revenues
are recognized ratably over the subscription period. We enter into reseller arrangements that typically provide for sublicense fees payable to us based upon a percentage of list price. We do not grant
our resellers the right of return.

We
recognize revenue using the residual method pursuant to the requirements of SOP 97-2, as amended by SOP 98-9. Revenues recognized from multiple-element
software arrangements are allocated to each element of the arrangement based on the fair values of the elements, such as licenses for software products, maintenance, consulting services or customer
training. The determination of fair value is based on objective evidence, which is specific to us. We limit our assessment of objective evidence for each element to either the price charged when the
same element is sold separately or the price established by management having the relevant authority to do so, for an element not yet sold separately. If evidence of fair value of all undelivered
elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized under the residual method. Under the

19

---

residual
method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.

We
record deferred revenue for software arrangements when cash has been received from the customer and the arrangement does not qualify for revenue recognition under our revenue
recognition policy. We
record accounts receivable for software arrangements when the arrangement qualifies for revenue recognition but cash or other consideration has not been received from the customer.

Services RevenueConsulting services revenues and customer training revenues are recognized as such services are performed.
Maintenance revenues, which include revenues bundled with software license agreements that entitle the customers to technical support and future unspecified enhancements to our products, are deferred
and recognized ratably over the related agreement period, generally twelve months. Our professional services which consist of consulting, maintenance and training are delivered through BVGS. Services
that we provide are not essential to the functionality of our software. This group provides consulting services, manages projects and client relationships, manages the needs of our partner community,
provides training-related services to employees, customers and partners, and also provides software maintenance services, including technical support, to our customers and partners. We record
reimbursement by our customers for out-of-pocket expenses as a component of services revenue. Services that we provide are not essential to the functionality of the software.

Allowances and Reserves

Occasionally, our customers experience financial difficulty after we record the sale but before we are paid. We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make required payments. Our normal payment terms are generally 30 to 90 days from invoice date. If the financial condition of
our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. We record reductions to revenue for estimated future returns of
products by our customers. If market conditions were to decline, we may experience larger volumes of returns resulting in an incremental reduction of revenue at the time the return occurs.

Impairment Assessments

We adopted Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002. This standard
requires that goodwill no longer be amortized and instead, be tested for impairment on a periodic basis.

Pursuant
to SFAS 142, we are required to test goodwill for impairment upon adoption and annually or more often if events or changes in circumstances indicate that the asset might
be impaired. While there was no accounting charge to record upon adoption, at September 30, 2002, we concluded that, based on the existence of impairment indicators, including a decline in our
market value, we would be required to test goodwill for impairment. SFAS 142 provides for a two-stage approach to determining whether and by how much goodwill has been impaired.
Since we have only one reporting unit for purposes of applying SFAS 142, the first stage requires a comparison of the fair value of
BroadVision to its net book value. If the fair value is greater, then no impairment is deemed to have occurred. If the fair value is less, then the second stage must be completed to determine the
amount, if any, of actual impairment. We completed the first stage and determined that our fair value at September 30, 2002 exceeded our net book value on that date, and as a result, no
impairment of goodwill was recorded in the consolidated financial statements. We obtained an independent appraisal of fair value to support our conclusion. We also determined that our fair value
exceeded our net book value as of December 31, 2003 and therefore, no additional impairment was warranted.

The
process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment. In estimating our fair value, we made estimates and judgments about
future

20

---

revenues
and cash flows. Our forecasts were based on assumptions that are consistent with the plans and estimates we are using to manage our business. Changes in these estimates could change our
conclusion regarding impairment of goodwill and potentially result in a non-cash goodwill impairment charge, for all or a portion of the goodwill balance at December 31, 2003. For
long-lived assets, accounting standards dictate that assets become impaired when the undiscounted future cash flows expected to be generated by them are less than their carrying amounts.
When that occurs, the affected assets are written down to their estimated fair value.

Deferred Tax Assets

We analyze our deferred tax assets with regard to potential realization. We have established a valuation allowance on our deferred tax assets to the extent that
management has determined that it is more likely than not that some portion or all of the deferred tax asset will not be realized based upon the uncertainty of their realization. We have considered
estimated future taxable income and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance.

Accounting for Stock-Based Compensation

We apply Accounting Principles Board (APB) Opinion No. 25,Accounting for Stock Issued to Employees, and
related interpretations when accounting for our stock option and stock purchase plans. In accordance with APB Opinion 25, we apply the intrinsic value method in accounting for employee stock options.
Accordingly, we generally recognize no compensation expense with respect to stock-based awards to employees.

During
the year ended December 31, 2003, we recorded compensation expense of $342,000 as a result of granting a third-party consultant common stock in the Company and a vesting
modification to a grant for a terminated employee. These charges were calculated based upon the market value of the underlying stock on the date of grant or modification.

We
have determined pro forma information regarding net income and earnings per share as if we had accounted for employee stock options under the fair value method as required by SFAS
No. 123,Accounting for Stock Compensation. The fair value of these stock-based awards to employees was estimated using the Black-Scholes option
pricing model. Please see Note 10 of Notes to Consolidated Financial Statements for assumptions used in the Black-Scholes option pricing model. Had compensation cost for our stock option plan
and employee stock purchase plan been determined consistent with SFAS 123, our reported net income (loss) and net earnings (loss) per share would have been changed to the amounts indicated
below (in thousands except per share data):

|                                                                                                                                            |  | Years Ended December 31, |        
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | -------
|
|Net loss as reported                                                                                                                        |  | $                        | (35,471
|Add: Stock-based compensation expense included in reported net loss, net of related tax effects                                             |  |                          | 342    
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |  |                          | (9,275 
|                                                                                                                                            |  |                          |        
|Pro forma net loss                                                                                                                          |  | $                        | (44,404
|                                                                                                                                            |  |                          |        
|Loss per share:                                                                                                                             |  |                          |        
|Basicas reported                                                                                                                           |  | $                        | (1.08  
|Basicpro forma                                                                                                                             |  | $                        | (1.35  
|Dilutedas reported                                                                                                                         |  | $                        | (1.08  
|Dilutedpro forma                                                                                                                           |  | $                        | (1.35  

21

---

Restructuring

Through December 31, 2003, we have approved certain restructuring plans to, among other things, reduce our workforce and consolidate facilities.
Restructuring charges were taken to align our cost structure with changing market conditions and to create a more efficient organization. Our restructuring charges are comprised primarily of:
(i) severance and benefits termination costs related to the reduction of our workforce; (ii) lease termination costs and/or costs associated with permanently vacating our facilities;
(iii) other incremental costs incurred as a direct result of the restructuring plan; and (iv) impairment costs related to certain long-lived assets abandoned. We account for
each of these costs in accordance with Staff Accounting Bulletin No. 100,Restructuring and Impairment Charges.

We
account for severance and benefits termination costs in accordance with EITF Issue No. 94-3,Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)for exit or disposal activities initiated prior to
December 31, 2002. Accordingly, we record the liability related to these termination costs when the following conditions have been met: (i) management with the appropriate level of
authority approves a termination plan that commits us to such plan and establishes the benefits the employees will receive upon termination; (ii) the benefit arrangement is communicated to the
employees in sufficient detail to enable the employees to determine the termination benefits; (iii) the plan specifically identifies the number of employees to be terminated, their locations
and their job classifications; and (iv) the period of time to implement the plan does not indicate changes to the plan are likely. The termination costs we recorded are not associated with nor
do they benefit continuing activities. We account for severance and benefits termination costs for exit or disposal activities initiated after December 31, 2002 in accordance with SFAS
No. 146,Accounting for Costs Associated with Exit Activities. SFAS 146 requires that a liability for a cost associated with an exit or
disposal activity be recognized and measured initially at fair value only when the liability is incurred. This differs from EITF 94-3, which required that a liability for an exit cost be
recognized at the date of an entity's commitment to an exit plan.

Prior
to the adoption on January 1, 2003 of SFAS 146, we accounted for the costs associated with lease termination and/or abandonment in accordance with EITF
88-10,Costs Associated with
Lease Modification or Termination. Accordingly, we recorded the costs associated with lease termination and/or abandonment when the leased property had no substantive future
use or benefit to us.

Inherent
in the estimation of the costs related to our restructuring efforts are assessments related to the most likely expected outcome of the significant actions to accomplish the
restructuring. In determining the charge related to the restructuring, the majority of estimates made by management related to the charge for excess facilities. In determining the charge for excess
facilities, we were required to estimate future sublease income, future net operating expenses of the facilities, and brokerage commissions, among other expenses. The most significant of these
estimates related to the timing and extent of future sublease income in which to reduce our lease obligations. Specifically, in determining the restructuring obligations related to facilities as of
December 31, 2003, we reduced our lease obligations by estimated sublease income of $49.4 million. We based our estimates of sublease income, in part, on the opinions of independent real
estate experts, current market conditions and rental rates, an assessment of the time period over which reasonable estimates could be made, the status of negotiations with potential subtenants, and
the location of the respective facility, among other factors.

These
estimates, along with other estimates made by management in connection with the restructuring, may vary significantly depending, in part, on factors that may be beyond our control.
Specifically, these estimates will depend on our success in negotiating with lessors, the time periods required to locate and contract suitable subleases and the market rates at the time of such
subleases. Adjustments to the facilities reserve will be required if actual lease exit costs or sublease income differ from amounts currently expected. We will review the status of restructuring
activities on a quarterly

22

---

basis
and, if appropriate, record changes to our restructuring obligations in current operations based on management's most current estimates.

Legal Matters

Management's current estimated range of liability related to pending litigation is based on claims for which it is probable that a liability has been incurred and
our management can estimate the amount and range of loss. We have recorded the minimum estimated liability related to those claims, where there is a range of loss. Because of the uncertainties related
to both the determination of the probability of an unfavorable outcome and the amount and range of loss in the event of an unfavorable outcome, management is unable to make a reasonable estimate of
the liability that could result from the remaining pending litigation. As additional information becomes available, we will assess the probability and the potential liability related to our pending
litigation and revise our estimates, if necessary. Such revisions in our estimates of the potential liability could materially impact our results of operations and financial position.

Statement of Operations as a Percent of Total Revenues

The following table sets forth certain items reflected in our consolidated statements of operations expressed as a percent of total revenues for the periods
indicated.

|                    |                                              | Years Ended December 31,    |                                       
|------------------- | -------------------------------------------- | --------------------------- | --------------------------------------
|
|Revenues:           |                                              |                             |                                       
|                    | Software licenses                            |                             | 34                                    
|                    | Services                                     |                             | 66                                    
|                    |                                              |                             |                                       
|                    |                                              | Total revenues              |                                       
|Cost of revenues:   |                                              |                             |                                       
|                    | Cost of software licenses                    |                             | 3                                     
|                    | Cost of services                             |                             | 29                                    
|                    |                                              |                             |                                       
|                    |                                              | Total cost of revenues      |                                       
|                    |                                              |                             |                                       
|                    |                                              |                             | Gross profit                          
|Operating expenses: |                                              |                             |                                       
|                    | Research and development                     |                             | 24                                    
|                    | Sales and marketing                          |                             | 30                                    
|                    | General and administrative                   |                             | 11                                    
|                    | Litigation settlement costs                  |                             | 5                                     
|                    | Goodwill and intangible amortization         |                             | 1                                     
|                    | Charge for acquired in-process technology    |                             |                                      
|                    | Restructuring charge                         |                             | 40                                    
|                    | Impairment of assets                         |                             |                                      
|                    | Impairment of goodwill and other intangibles |                             |                                      
|                    |                                              |                             |                                       
|                    |                                              | Total operating expenses    |                                       
|                    |                                              |                             |                                       
|                    |                                              |                             | Operating loss                        
|                    |                                              |                             |                                       
|                    |                                              | Other (expense) income, net |                                       
|                    |                                              |                             |                                       
|                    |                                              |                             | Loss before provision for income taxes
|                    |                                              |                             |                                       
|                    |                                              | Provision for income taxes  |                                       
|                    |                                              |                             |                                       
|                    |                                              |                             | Net loss                              
|                    |                                              |                             |                                       

23

---

Results of Operations

|                              |              | Software |         | %      |     | Services |   | %       |        | Total |    | % |        
|----------------------------- | ------------ | -------- | ------- | ------ | --- | -------- | - | ------- | ------ | ----- | -- | - | -------
|
|Year Ended December 31, 2003: |              |          |         |        |     |          |   |         |        |       |    |   |        
|                              | Americas     |          | $       | 14,435 |     | 48       | % | $       | 30,700 |       | 53 | % | $      
|                              | Europe       |          |         | 11,725 |     | 39       |   |         | 23,733 |       | 41 |   |        
|                              | Asia/Pacific |          |         | 4,070  |     | 13       |   |         | 3,418  |       | 6  |   |        
|                              |              |          |         |        |     |          |   |         |        |       |    |   |        
|Total                         |              | $        | 30,230  |        | 100 | %        | $ | 57,851  |        | 100   | %  | $ | 88,081 
|                              |              |          |         |        |     |          |   |         |        |       |    |   |        
|Year Ended December 31, 2002: |              |          |         |        |     |          |   |         |        |       |    |   |        
|                              | Americas     |          | $       | 23,988 |     | 59       | % | $       | 46,137 |       | 61 | % | $      
|                              | Europe       |          |         | 14,658 |     | 36       |   |         | 24,853 |       | 33 |   |        
|                              | Asia/Pacific |          |         | 1,837  |     | 5        |   |         | 4,425  |       | 6  |   |        
|                              |              |          |         |        |     |          |   |         |        |       |    |   |        
|Total                         |              | $        | 40,483  |        | 100 | %        | $ | 75,415  |        | 100   | %  | $ | 115,898
|                              |              |          |         |        |     |          |   |         |        |       |    |   |        
|Year Ended December 31, 2001: |              |          |         |        |     |          |   |         |        |       |    |   |        
|                              | Americas     |          | $       | 51,863 |     | 51       | % | $       | 98,385 |       | 67 | % | $      
|                              | Europe       |          |         | 37,606 |     | 37       |   |         | 37,524 |       | 26 |   |        
|                              | Asia/Pacific |          |         | 12,011 |     | 12       |   |         | 11,034 |       | 7  |   |        
|                              |              |          |         |        |     |          |   |         |        |       |    |   |        
|Total                         |              | $        | 101,480 |        | 100 | %        | $ | 146,943 |        | 100   | %  | $ | 248,423
|                              |              |          |         |        |     |          |   |         |        |       |    |   |        

Revenues

Total revenues for the year ended December 31, 2003 were $88.1 million, down $27.8 million, or 24%, from the prior year. This decline
consisted of a decrease in software license revenue of $10.3 million, or 25%, and a decrease in services revenue of $17.6 million, or 23%.

The
decrease in software license revenues is primarily attributable to continued weakness in the information technology market due to economic uncertainties throughout 2003. The decrease
in services revenue consisted of decreases in both maintenance and support ($2.9 million) and consulting services revenue ($14.7 million). The decreases in maintenance and consulting
services revenue were a result of a corresponding decline in software license revenues and of weak economic conditions over the past fiscal year.

Total
revenues for the year ended December 31, 2002 were $115.9 million, down $132.5 million or 53% on a year-over-year basis. This decline
consisted of a decrease in software license revenue of $61.0 million or 60% and a decrease in services revenue of $71.5 million or 49%.

The
decrease in software license revenues is primarily attributable to an overall decline in the economy throughout the 2002 fiscal year in comparison to the 2001 fiscal year. The
decrease in services revenue consisted of decreases in both maintenance and support ($21.3 million) and consulting services revenue ($50.2 million). Continued economic uncertainty
affected the spending on information technology, which significantly effected our license revenue during 2002. The decrease in services revenue is a result of decreased business volume associated with
decreased software license revenues over the past year and an overall decline in the economy.

Cost of Revenues

Cost of software licenses includes the costs of product media, duplication, packaging and other manufacturing costs as well as royalties payable to third parties
for software that is either embedded in, or bundled and sold with, our products.

24

---

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

|                              |  | Years Ended December 31, |       
|----------------------------- |  | ------------------------ | ------
|
|
|Cost of software licenses (1) |  | $                        | 2,561 
|Cost of services (2)          |  |                          | 25,708
|                              |  |                          |       
|Total cost of revenues (3)    |  | $                        | 28,269
|                              |  |                          |       

---

Cost
of software licenses for the year ended December 31, 2003 decreased $5.6 million, or 69%, on a year over year basis. Cost of software licenses as a percent of license
revenues was 8% in 2003 as compared to 20% in 2002. The decrease in absolute dollars is a result of decreased license revenues, including revenue generated from our products that embed or include
third-party products. During the fourth quarter of fiscal year 2002, we recorded a provision of $3.2 million related to prepaid royalties for software we no longer intended to utilize.

Cost
of services for the year ended December 31, 2003 decreased $13.2 million, or 34%, on a year over year basis. Cost of services as a percent of services revenues was 44%
in 2003 as compared to 52% in 2002. The decreases in absolute dollar terms and as a percentage of revenue during 2003 as compared to 2002 were the result of reductions in consulting headcount and
third-party consultant costs that occurred during the 2002 fiscal year.

For
the year ended December 31, 2002, cost of software licenses decreased $1.8 million or 18% on a year-over-year basis. Cost of software licenses
as a percent of license revenues was 20% in 2002 as compared to 10% in 2001. The decrease in absolute dollars year over year is a result of decreased license revenues and resulting decrease in
revenues with associated third party royalties. The increases in the 2002 fiscal year from the 2001 fiscal year as a percentage of license revenue is due primarily to a $3.2 million
write-off of pre-paid royalties recorded in the fourth quarter of fiscal 2002 related to software we no longer intend to utilize.

Cost
of services during 2002 decreased $58.7 million or 60% on a year-over-year basis. Cost of services as a percent of services revenues was 52% in 2002
as compared to 66% in 2001. The decreases in cost of services in absolute dollar terms and as a percentage of revenue during 2002 as compared to 2001 were the result of reductions in consulting
headcount and third-party consultant costs that occurred during the 2002 fiscal year.

Total
employees in BVGS were 98 as of December 31, 2003, 170 as of December 31, 2002 and 394 as of December 31, 2001.

Operating Expenses

Operating expenses consists of the following:



25

---



A
summary of operating expenses is set forth in the following table. The percentage of expenses is calculated based on total revenues.

|                                             |  | Years Ended December 31, |       
|-------------------------------------------- |  | ------------------------ | ------
|
|
|Research and development                     |  | $                        | 21,067
|Sales and marketing                          |  |                          | 26,394
|General and administrative                   |  |                          | 9,790 
|Litigation settlement costs                  |  |                          | 4,250 
|Goodwill and intangible amortization         |  |                          | 886   
|Charge for acquired in-process technology    |  |                          |      
|Restructuring charge                         |  |                          | 35,356
|Impairment of assets                         |  |                          |      
|Impairment of goodwill and other intangibles |  |                          |      
|                                             |  |                          |       
|Total operating expenses                     |  | $                        | 97,743
|                                             |  |                          |       
|Interest income                              |  | $                        | 803   
|                                             |  |                          |       
|Other income (expense), net                  |  | $                        | 2,096 
|                                             |  |                          |       

26

---

Research and development.Research and development expenses decreased $20.4 million, or 49%, in 2003 compared to 2002,
and $37.2 million, or 47%, in 2002 compared to 2001. The decreases in both years
were primarily attributable to reductions in staffing levels resulting in decreased salary and salary related costs, as well as other cost-cutting efforts taken as part of our
restructuring plan, such as consolidation of facilities.

Sales and marketing.Sales and marketing expenses decreased $22.5 million, or 46%, in 2003 compared to 2002, and
$90.9 million, or 65%, in 2002 compared to 2001. Sales and marketing expenses in both years decreased primarily due to decreased salary expense as a result of reductions in force, decreased
variable compensation due to lower revenues, and decreased facility, travel and marketing program costs as a result of various cost-cutting actions.

General and administrative.General and administrative expenses decreased $6.5 million, or 40%, in 2003 compared to
2002, and $26.0 million, or 62%, in 2002 compared to 2001. The decreases in both years were primarily attributable to decreases in salary expenses as a result of reductions in force,
professional services expenses as a result of cost cutting measures, reserves of accounts receivable due to better than expected collection efforts and declining accounts receivable balances, and
continued facilities consolidations.

Litigation settlement costs.During the third quarter of 2003, we settled outstanding litigation which resulted in a charge
of $4.3 million. The settlement involved payments for past royalties and certain legal expenses and license fee that are due and payable in future periods. These payments are not expected to
have a material effect on our business, financial condition or results of operations.

Goodwill and intangible amortization.On June 29, 2001, we completed our acquisition of Keyeon LLC ("Keyeon"), a
joint venture in which we previously held an interest of approximately 36%. As consideration for the acquisition, we issued 301,475 shares of our common stock valued at $13.6 million to the
other participants in the joint venture, which resulted in our owning 100% of the outstanding shares of Keyeon. The acquisition was accounted for as a purchase. As a result of the Keyeon acquisition,
we recorded goodwill of $880,000. Amortization of goodwill related to the Keyeon acquisition was approximately $246,000 in 2001. We acquired Interleaf on April 14, 2000. We accounted for the
acquisition as a purchase business combination. As a result of this transaction, we recorded goodwill and other intangible assets of $794.7 million. Amortization of recognizable intangible
assets related to the Interleaf transaction was $35 million in 2002. Amortization of goodwill and other intangibles assets related to the Interleaf acquisition was $210.8 million in
2001. On November 24, 1999, we acquired all of the registered shares of Fidutec Information Technology SA. We have accounted for this acquisition as a purchase business combination.
Amortization of goodwill related to Fidutec was approximately $214,000 in 2001.

Charge for acquired in-process technology.In connection with the acquisition of Keyeon, LLC, and based upon our
estimates prepared in conjunction with a third-party valuation consultant, $6.4 million was allocated to acquired in-process technology and $880,000 was allocated to goodwill and
intangible assets. The acquired in-process technology included a project to develop an employee portal product. We estimated that $6.4 million of the purchase price for Keyeon
represented acquired in-process technology that had not yet reached technological feasibility and had no alternative future use. Accordingly, this amount was immediately charged to expense
in the consolidated statements of operations. The income approach methodology was used to value the acquired in-process technology. Under the income approach, fair value reflects the
present value of the projected free cash flows that will be generated by the products, incorporating the acquired technologies under development, assuming they will be successfully completed. These
cash flows are discounted at a rate appropriate for the risk of the asset. The rate of return depends upon the stage of completion, which was estimated at fifty percent. An overall after tax discount
rate of thirty percent was applied to the cash flows expected to be generated by the products incorporating technology currently under development. The efforts

27

---

required
to complete the acquired in-process technology included the completion of all planning, designing and testing activities that were necessary to establish that the product can be
produced to meet its design requirements, including functions, features and technical performance requirements. The costs to complete this project were included in the year ending December 31,
2001 and there are no expected remaining costs.

Restructuring charge.The Company approved restructuring plans to, among other things, reduce its workforce and consolidate
facilities. These restructuring and asset impairment charges were taken to align our cost structure with changing market conditions and to create a more efficient organization. A pre-tax
charge of $35.4 million was recorded during fiscal 2003 and a pre-tax charge of $110.4 million was recorded during fiscal 2002 to provide for these actions and other related
items. The Company recorded the low-end of a range of assumptions modeled for the restructuring charges, in accordance with SFAS No. 5,Accounting for
Contingencies. Adjustments to the restructuring reserves will be made in future periods, if necessary, based upon the then current actual events and circumstances.

Activity
related to the restructuring plans prior to January 1, 2003 is accounted for in accordance with EITF 94-3. Activity initiated during 2003 is accounted for in
accordance with FAS 146, with the exception of amounts that were the result of changes in assumptions to restructuring plans that were initiated prior to January 1, 2003. The charges for
lease cancellations and commitments under FAS 146 were $21.7 million. FAS 146 requires a present value calculation be applied to these charges. In fiscal 2003, there were charges
of $11.6 million for lease cancellations and commitments that were accounted for in accordance with EITF 94-3.

As
of December 31, 2003, the total restructuring accrual was $105.4 million under EITF 94-3 and FAS 146. Of the total accrual $18.6 million is
current and $86.8 million is noncurrent. (See Note 5 and Note 6)

The
following table summarizes the activity related to the restructuring plans initiated in 2003, and accounted for in accordance with FAS 146, for the twelve months ended
December 31, 2003 (in thousands):

|                             |                                                     | Accrued restructuring costs at
Dec. 31, 2002 |   | Amounts charged to restructuring costs and other |   | Amounts paid or written off |        | Accrued restructuring costs at Dec. 31, 2003
|---------------------------- | --------------------------------------------------- | -------------------------------------------- | - | ------------------------------------------------ | - | --------------------------- | ------ | --------------------------------------------
|Year Ended December 31, 2003 |                                                     |                                              |   |                                                  |   |                             |        |                                             
|                             | Lease cancellations and commitments                 |                                              | $ |                                                 |   | $                           | 21,683 |                                             
|                             | Termination payments to employees and related costs |                                              |   |                                                 |   |                             | 1,535  |                                             
|                             | Write-off on disposal of assets and related costs   |                                              |   |                                                 |   |                             | 515    |                                             
|                             |                                                     |                                              |   |                                                  |   |                             |        |                                             
|                             |                                                     | $                                            |  |                                                  | $ | 23,733                      |        | $                                           
|                             |                                                     |                                              |   |                                                  |   |                             |        |                                             

28

---

The
following table summarizes the activity related to the restructuring plans intiated prior to January 1, 2003, and accounted for in accordance with EITF 94-3
(in thousands):

|                                                    |  | Accrued restructuring costs, beginning |        | Amounts charged to restructuring costs and other |   | Amounts reversed to restructuring costs and other |   | Amounts paid or written off |     | Accrued restructuring costs, ending
|--------------------------------------------------- |  | -------------------------------------- | ------ | ------------------------------------------------ | - | ------------------------------------------------- | - | --------------------------- | --- | -----------------------------------
|Year Ended December 31, 2001                        |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Lease cancellations and commitments                 |  | $                                      |       |                                                  | $ | 106,962                                           |   | $                           |    |                                    
|Termination payments to employees and related costs |  |                                        |       |                                                  |   | 9,121                                             |   |                             |    |                                    
|Write-off on disposal of assets and related costs   |  |                                        |       |                                                  |   | 37,201                                            |   |                             |    |                                    
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|                                                    |  | $                                      |       |                                                  | $ | 153,284                                           |   | $                           |    |                                    
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Year Ended December 31, 2002                        |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Lease cancellations and commitments                 |  | $                                      | 89,859 |                                                  | $ | 82,851                                            |   | $                           |    |                                    
|Termination payments to employees and related costs |  |                                        | 817    |                                                  |   | 7,644                                             |   |                             |    |                                    
|Write-off on disposal of assets and related costs   |  |                                        | 113    |                                                  |   | 19,954                                            |   |                             |    |                                    
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|                                                    |  | $                                      | 90,789 |                                                  | $ | 110,449                                           |   | $                           |    |                                    
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Year Ended December 31, 2003                        |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Lease cancellations and commitments                 |  | $                                      | 94,691 |                                                  | $ | 11,649                                            |   | $                           |    |                                    
|Termination payments to employees and related costs |  |                                        | 1,425  |                                                  |   | 41                                                |   |                             |    |                                    
|Write-off on disposal of assets and related costs   |  |                                        | 79     |                                                  |   | (41                                               | ) |                             | (26 | )                                  
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|                                                    |  | $                                      | 96,195 |                                                  | $ | 11,649                                            |   | $                           | (26 | )                                  
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    

The
following table summarizes the restructuring accrual activity recorded during the twelve months ended December 31, 2003 (in thousands):

|                                    |  | Severance
and Benefits |        | Facilities |   | Total   |  
|----------------------------------- |  | ---------------------- | ------ | ---------- | - | ------- | -
|Accrual balances, December 31, 2002 |  | $                      | 1,504  |            | $ | 94,691  |  
|Restructuring charges               |  |                        | 1,509  |            |   | 33,847  |  
|Cash payments                       |  |                        | (2,342 | )          |   | (23,829 | )
|                                    |  |                        |        |            |   |         |  
|Accrual balances, December 31, 2003 |  | $                      | 671    |            | $ | 104,709 |  
|                                    |  |                        |        |            |   |         |  

29

---

The nature of the charges summarized above is as follows:



Sublease income to be received under non-cancelable sublease agreements signed prior to December 31, 2003

$
18,183Estimated sublease income for sublease agreements yet to be negotiated


31,175Total estimated sublease income

$
49,358


We
expect to pay the following future minimum lease payment amounts related to restructured or abandoned leased space through October 2013 (in thousands):

Years Ending December 31,2004

$
18,0152005


16,4642006


14,8512007


13,7962008


7,6592009 and thereafter


40,074Total minimum lease payments

$
110,859


Of
these amounts, $18.0 million is due within the twelve months ending December 31, 2004, and has been classified as a current liability in the accompanying condensed
Consolidated Balance Sheet. Actual future cash requirements may differ materially from the accrual at December 31, 2003, particularly if actual sublease income is significantly different from
prospective estimates.

During
the twelve months ended December 31, 2003, we recorded a facilities-related restructuring charge of $33.8 million. This charge related to our revisions of estimates
with respect to our planned future occupancy and anticipated future subleases. These revisions were necessary due to a reduction in planned future BroadVision space needs and a further decline in the
market for commercial real estate. We estimated future sublease timing and rates based upon current market indicators and information obtained from a third party real estate expert.

Actual
future cash requirements may differ materially from the restructuring accruals at December 31, 2003, particularly if actual sublease income is significantly different from
current estimates. Adjustments to the restructuring accruals will be made in future periods, if necessary, based upon the then current actual events and circumstances.

During
fiscal 2001 and fiscal 2002, we approved restructuring plans to, among other things, reduce our workforce and consolidate facilities. These restructuring and asset impairment
charges were taken to align our cost structure with changing market conditions and to create a more efficient organization.

30

---

A
pre-tax charge of $110.4 million was recorded during fiscal 2002 and a pre-tax charge of $153.3 million was recorded during fiscal 2001 to provide for these
actions and other related items. We recorded the low-end of a range of assumptions modeled for the restructuring charges, in accordance with SFAS No. 5, Accounting for Contingencies. The high-end
of the range was estimated at $117.8 million for the charge related to fiscal 2002.
Adjustments to the restructuring reserves will be made in future periods, if necessary, based upon the then current actual events and circumstances.

The
following table summarizes charges recorded during fiscal 2002 for exit activities and asset write-downs (in thousands):

|                                    |  | Severance and Benefits |        | Facilities/Excess Assets |   | Total   |  
|----------------------------------- |  | ---------------------- | ------ | ------------------------ | - | ------- | -
|Reserve balances, December 31, 2001 |  | $                      | 930    |                          | $ | 89,859  |  
|Restructuring charges               |  |                        | 8,707  |                          |   | 101,742 |  
|Cash payments                       |  |                        | (8,026 | )                        |   | (78,019 | )
|Non-cash portion                    |  |                        | (107   | )                        |   | (18,891 | )
|                                    |  |                        |        |                          |   |         |  
|Reserve balances, December 31, 2002 |  | $                      | 1,504  |                          | $ | 94,691  |  
|                                    |  |                        |        |                          |   |         |  

The
nature of the charges summarized above is as follows:

Severance
and benefits and otherWe recorded a charge of approximately $8.7 million during fiscal year ended December 31, 2002 related to severance benefits to
terminated employees in the United States and various international locations. Costs incurred include severance, payroll taxes and COBRA benefits. Included in the $8.7 million is $107,000 of
non-cash charges. These non-cash charges represent a one-time compensation charge taken as a result of granting certain terminated employees extended vesting of
stock options beyond the standard vesting schedule for terminated employees. The compensation charge was calculated using the Black-Schools option pricing model. Approximately $817,000 of severance
and benefits related costs remained accrued as of December 31, 2001 as a result of our 2001 restructuring plan. Approximately $8.0 million of severance and benefits and other costs had
been paid out during fiscal 2002 and the remaining $1.5 million of severance, payroll taxes and COBRA benefits is expected to be paid in full by December 31, 2003. Our restructuring plan
included plans to terminate the employment of approximately 430 employees in North and South America and approximately 95 employees throughout Europe and Asia/Pacific during the first three quarters
of fiscal 2002, impacting all departments. The employment of approximately 525 employees was terminated during fiscal year 2002. As a result of these reductions, we expect annual salary savings of
approximately $44.6 million.

Facilities/Excess
AssetsDuring fiscal year 2002, we revised our estimates and expectations with respect to our facilities disposition efforts due to further consolidation
and abandonment of additional facilities and to account for changes in estimates used in our 2001 restructuring plan based upon actual events and circumstances. Total lease termination costs include
the impairment of related assets, remaining lease liabilities and brokerage fees offset by estimated sublease income. The estimated costs of abandoning these leased facilities, including estimated
sublease income, were based on market information analyses provided by a commercial real estate brokerage firm we retained. Based on the factors above, a facilities/excess assets charge of
$101.7 million was recorded during fiscal year 2002 and includes non-cash asset impairment charges of approximately $18.9 million.

Approximately
$89.9 million of facilities related costs remained accrued as of December 31, 2001 as a result of our 2001 restructuring plan. Net cash payments during fiscal
year 2002 related to abandoned facilities amounted to $78.0 million. As of December 31, 2002, $94.7 million of lease termination costs, net of anticipated sublease income, is
expected to be paid by the end of the second quarter of fiscal 2013. The Company expects to pay approximately $26.9 million over the next twelve months and the remaining $67.8 million
from January 1, 2004 through June of fiscal 2013. The

31

---

$94.7 million
is net of approximately $44.8 million of estimated sublease income of which approximately $28.8 million represents sublease agreements yet to be negotiated.

Impairment of assets.During the first quarter of 2002, we engaged a third party firm to conduct a physical inventory of our
computer hardware assets located in North America. We conducted an internal physical inventory on computer hardware assets located outside of North America. The objective of the physical inventory was
to verify the amount and location of our computer hardware. As a result of the findings of the physical inventory and related reconciliation with our asset records, we recorded an asset impairment
charge of approximately $2.3 million net book value related to computer hardware during the first quarter of fiscal 2002. During the third quarter of 2002, we conducted an additional review of
remaining computer and communication related assets not reviewed during the first quarter inventory and recorded an asset impairment charge of $853,000 as a result of the findings of our inventory and
related reconciliation with our asset records. During fiscal 2003, we recorded asset impairments of approximately $515,000 in connection with our restructuring plan, which is included in our
restructuring charge recorded in our Statement of Operations.

Impairment of goodwill and other intangible assets.Pursuant to SFAS 142, we are required to test goodwill for
impairment upon adoption and annually or more often if events or changes in circumstances indicate that the asset might be impaired. SFAS 142 provides for a two-step approach to
determining whether and by how much goodwill has been impaired. Since we have only one reporting unit for purposes of applying SFAS No.142, the first step requires a comparison of our fair value to
our net book value. If the fair value is greater, then no impairment is deemed to have occurred. If the fair value is less, then the second step must be completed to determine the amount, if any, of
actual impairment. We determined, as of December 31, 2003, that the fair value exceeded our net book value and no impairment of goodwill and other intangible assets was required.

The
process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment. In estimating the fair value of the Company, we made estimates and
judgments about future revenues and cash flows. Our forecasts were based on assumptions that are consistent with the plans and estimates we are using to manage the Company. Changes in these estimates
could change our conclusion regarding impairment of goodwill and potentially result in a non-cash goodwill impairment charge, for all or a portion of the goodwill balance at
December 31, 2003. For long-lived assets, accounting standards dictate that assets become impaired when the undiscounted future cash flows expected to be generated by them are less
than their carrying amounts. When that occurs, the affected assets are written down to their estimated fair value. As described in "Recent Accounting Pronouncements" in this document, our accounting
for goodwill changed in 2002 upon adoption of SFAS 142.

As
reported in Note 4 in Notes to Consolidated Financial Statements, we recorded a $336.4 million impairment charge during 2001 to reduce goodwill by $330.2 million
and other intangible assets by $6.2 million associated with our acquisitions, primarily the Interleaf acquisition, to their estimated fair value.

Other Income (Expense), net

Other income (expense), net, consists of the following (in thousands):

|                            |  | Years Ended December 31, |      
|--------------------------- |  | ------------------------ | -----
|
|
|Interest income             |  | $                        | 803  
|                            |  |                          |      
|Other income (expense), net |  | $                        | 2,096
|                            |  |                          |      

32

---

Interest
income decreased $3.3 million, or 81%, in 2003 compared to 2002, and $7.3 million, or 64%, in 2002 compared to 2001. The decrease in 2003 was attributable to
decreased cash balances from 2002 to 2003 and lower market interest rates earned on invested cash. The decrease in 2002 was attributable to decreased cash balances from 2001. Other income, net, for
the 2003 fiscal year was $2.1 million as compared to net expense of $12.1 million in 2002 and net expense of $18.3 million in 2001. The main reason for the 2003 change was due to
realized losses on cost method investments in 2002 that did not recur in 2003 in other expense. The main reasons for the 2002 change was due to a decrease in losses
on asset sales/disposals of $2.2 million, a decrease in losses on foreign currency of $1.6 million and a decrease in equity in net loss from unconsolidated subsidiaries of
$2.4 million.

Income Taxes

We recorded income tax provisions of $439,000, $7.6 million and $2.1 million for the years ended December 31, 2003, 2002 and 2001. For the
year ended December 31, 2003, the tax expense mainly relates to foreign withholding taxes and state income taxes. For the year ended December 31, 2002, $6.3 million of the
$7.6 million relates to a valuation provision for our deferred tax asset recorded in the second quarter of fiscal 2002. The tax expense, excluding the deferred tax asset valuation provision,
mainly relates to foreign withholding taxes and state income taxes.

Liquidity and Capital Resources

December 31,2003

2002

2001(dollars in thousands)Cash, cash equivalents and short-term investments

$
78,776

$
101,870

$
141,463Long-term investments




$
587

$
22,135Restricted cash and investments

$
19,827

$
16,704

$
29,949Working capital

$
747

$
5,616

$
67,165Working capital ratio


1.0


1.0


1.5


As
of December 31, 2003, cash, cash equivalents, short-term investments, long-term investments and restricted cash totaled $98.6 million, which
represents a decrease of $20.6 million as compared to a balance of $119.2 million at December 31, 2002. This decrease was primarily attributable to net cash used for operations,
partially offset by a $2 million increase in bank borrowings.

We
have a credit facility with Silicon Valley Bank that includes term loans in the form of promissory notes and a revolving line of credit (the "SVB Facilities") for up to
$28.9 million as of December 31, 2003. We renewed and amended our revolving credit facility in June 2003. Borrowings under the revolving line of credit are collateralized by all
of our assets and bear interest at the bank's prime rate (floating with a floor of 4.25%). The amended and restated loan and security agreement requires us to maintain certain levels in cash and cash
equivalents and short-term investments (excluding restricted cash, long-term investments and equity investments). Additionally, the amended and restated loan and security
agreement requires us to maintain certain levels on deposit with our commercial lender and certain quarterly operating levels and ratios. As of December 31, 2003, we were not in compliance with
the financial and deposits covenants of the commercial credit facilities. Subsequently, we received a waiver from the bank regarding non-compliance. At December 31, 2003 and
December 31, 2002, $27.0 million and $25.0 million, respectively, was outstanding under the line of credit. Interest is due monthly and principal is due at expiration in
February 2004. Subsequently, the facility has been renewed with substantially the same terms and an expiration date of February 2005.

Under
the term loan portion of the SVB Facilities, we have two outstanding loans and the total outstanding amounts of these loans were $1.9 million as of December 31, 2003
and $2.9 million as of December 31, 2002. Interest on these term loans are at the bank's prime rate (4.00% as of

33

---

December 31,
2003 and December 31, 2002) plus 1.25% (5.25% as of December 31, 2003 and December 31, 2002). Principal and interest are due in consecutive monthly payments
through maturity of these term loans in March 31, 2005 and September 30, 2006, respectively. Principal payments of $977,000 are due annually from 2000 through 2004, $611,000 is due in
2005, and a final payment of $357,000 is due in 2006.

As
of December 31, 2003 and 2002, commitments totaling $19.8 million and $16.7 million, respectively, in the form of standby letters of credit were issued and
outstanding from financial institutions in favor of our various landlords to secure obligations under our facility leases and to secure a litigation settlement. These letters of credit are
collateralized by a security agreement, under which we are required to maintain an equal amount of cash in a restricted specified interest bearing account. Accordingly, $19.8 million and
$16.7 million have been presented as restricted cash in the accompanying condensed Consolidated Balance Sheets at December 31, 2003 and December 31, 2002, respectively.

Cash Used For Operating Activities

Cash used for operating activities was $23.1 million, $99.2 million and $77.9 million for fiscal 2003, 2002 and 2001, respectively. The
primary reason for the net cash used for operating activities for fiscal 2003 is due to the net loss of $35.5 million adjusted for certain non-cash items such as depreciation
expense, amortization of prepaid royalties and amortization of intangibles. Decreases in accounts receivable reserves of $2.5 million, accounts payable and accrued expenses of
$8.1 million and in unearned revenues and deferred maintenance of $11.7 million contributed to the use of cash, offset by decreases in other noncurrent assets of $1.9 million, in
accounts receivable of $10.0 million and in prepaids and other of $1.6 million and an increase in the restructuring reserves of $7.5 million. Net cash used for operating
activities for the year ended December 31, 2002 was primarily attributed to the net loss of $170.5 million adjusted for certain non-cash items such as depreciation expense,
amortization of prepaid royalties, amortization of intangibles, impairment of assets, non-cash restructuring charge, accounts receivable reserves and provision for deferred tax asset
valuation as well as a decrease in accounts payable and accrued expenses, a decrease in unearned revenues and deferred maintenance, a decrease in other noncurrent assets, partially offset by decreases
in accounts receivable and in prepaids and other, and an increase in the restructuring reserves. Net cash used for operating activities for the year ended December 31, 2001 was primarily
attributed to the net loss for the year, less non-cash charges such as goodwill and intangible amortization, fixed asset depreciation and amortization, impairment of goodwill and other
intangibles, charge for acquired in-process technology and the non-cash portion of the restructuring charge. Other key contributors included decreases in accounts payable and
accrued expenses, unearned revenue and deferred maintenance and increases in other noncurrent assets, all partially offset by decreases in accounts receivable and prepaid expenses.

Cash Provided By (Used For) Investing Activities

Cash provided by investing activities of $22.0 million for fiscal 2003 and $73.9 million for fiscal 2002 primarily consisted of net sales/maturities
of investments. Cash used for investing activities of $15.0 million for the year ended December 31, 2001 consisted of net maturities of investments, purchases of property and equipment,
and net cash acquired in a purchase transaction.

Capital
expenditures were $131,000 for fiscal 2003, $1.1 million for fiscal 2002 and $55.7 million for fiscal 2001. Our capital expenditures have consisted of purchases of
operating resources to manage our operations and included computer hardware and software, office furniture and fixtures and leasehold improvements.

34

---

Cash Provided By Financing Activities

Cash provided by financing activities of $2.5 million for fiscal 2003 and $26.9 million for fiscal 2002 consisted mostly of proceeds from borrowings
under our line of credit facility. Cash provided in fiscal 2001 of $15.4 million consisted primarily of proceeds from the issuance of common stock.

Leases and Other Contractual Obligations

In connection with our restructuring plan initiated during 2001, we consolidated various operating facilities during 2002 and 2001. Lease termination costs
include the abandonment of certain excess lease facilities for the remaining lease terms. These costs totaled $33.8 million, including $515,000 in leasehold improvements impairments, during
2003 and $101.7 million, including $18.9 million in leasehold improvements impairments in 2002. Total lease termination costs include the abandonment of leasehold improvements and the
remaining lease liabilities and brokerage fees, offset by estimated sublease income. The estimated costs of abandoning these facilities, estimated costs to sublease as well as estimated sublease
income, were based upon market information analyses provided by a commercial real estate brokerage firm retained by us.

In
January 2000, the Company entered into a limited partnership agreement with a venture capital firm under which it is obligated to contribute capital based upon the periodic funding
requirements. The total capital commitment is $2.0 million, of which $1.1 million has been contributed through December 31, 2003. The remaining $.9 million will be contributed in
future periods based upon the capital requirements of the fund.

As
of December 31, 2003, $90.3 million of future minimum lease payments, net of anticipated sublease income, is accrued in our restructuring accruals. The restructuring
accruals are net of approximately $49.4 million of sublease income of which approximately $31.2 million represents estimated sublease income for sublease agreements yet to be negotiated
and the remaining $18.2 million represents sublease income to be received under non-cancelable sublease agreements signed by
December 31, 2003. See Note 9 of Notes to Consolidated Financial Statements for additional information.

The
following table summarizes our contractual obligations and the effect such obligations are expected to have on our liquidity and cash flows in future years. Restricted cash and
investments represent the collateral for our letters of credit. The operating leases include facilities included in restructuring and excluded $49.4 million of sublease income of which
approximately $31.2 million represents estimated sublease income for sublease agreements yet to be negotiated.

Total

Less than
1 year

1-3 years

4-5 years

Over
5 years(in thousands)Letters of credit

$
19,827

$
3,580

$
347

$
1,496

$
14,404Long-term debt


1,945


977


968





SVB Facility


27,000


27,000








Non-cancelable operating leases


179,998


25,228


65,109


29,610


60,051$
228,770

$
56,785

$
66,424

$
31,106

$
74,455


We
anticipate that such operating expenses, as well as capital expenditures, will constitute a material use of our cash resources. As a result, our net cash flows will depend heavily on
the level of future sales, our ability to restructure operations successfully and our ability to manage infrastructure costs.

We
currently expect to fund our short-term working capital and operating resource expenditure requirements, for at least the next twelve months, from our existing cash and
cash equivalents and

35

---

short-term
investment resources, our anticipated cash flows from operations and anticipated cash flows from subleases. However, we could experience unforeseen circumstances such as a
worsening economic downturn, legal or lease settlements and less than anticipated cash inflows from operations, invested assets, and subleases that may increase our use of available cash or need to
obtain additional financing. Also, we may find it necessary to obtain additional equity or debt financing 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. We 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 our
stockholders 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 our 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, we may be unable to
develop our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, which could have a material adverse effect on our business, financial
condition and future operating results.

Quarterly Results of Operations

The following tables set forth certain unaudited condensed consolidated statement of operations data for the eight quarters ended December 31, 2003, as
well as that data expressed as a percentage of our total revenues for the periods indicated.

This
data has been derived from unaudited condensed 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 and Notes thereto included elsewhere herein on this
Form 10-K. We believe that

36

---

period-to-period
comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of future performance.

|                                                             |                                      | Three Months Ended       |        
|------------------------------------------------------------ | ------------------------------------ | ------------------------ | -------
|
|
|(UNAUDITED)                                                  |                                      |                          |        
|Statement of Operations Data:                                |                                      |                          |        
|Revenues:                                                    |                                      |                          |        
|                                                             | Software licenses                    |                          | $      
|                                                             | Services                             |                          |        
|                                                             |                                      |                          |        
|                                                             |                                      | Total revenues           |        
|Cost of revenues:                                            |                                      |                          |        
|                                                             | Cost of software licenses            |                          |        
|                                                             | Cost of services                     |                          |        
|                                                             |                                      |                          |        
|                                                             |                                      | Total cost of revenues   |        
|                                                             |                                      |                          |        
|Gross profit                                                 |                                      |                          | 16,182 
|Operating expenses:                                          |                                      |                          |        
|                                                             | Research and development             |                          |        
|                                                             | Sales and marketing                  |                          |        
|                                                             | General and administrative           |                          |        
|                                                             | Litigation settlement costs          |                          |        
|                                                             | Goodwill and intangible amortization |                          |        
|Restructuring charge                                         |                                      |                          | 21,995 
|Impairment of assets                                         |                                      |                          |       
|                                                             |                                      |                          |        
|                                                             |                                      | Total operating expenses |        
|                                                             |                                      |                          |        
|Operating income (loss)                                      |                                      |                          | (19,211
|                                                             |                                      |                          |        
|Other, net                                                   |                                      |                          | 263    
|                                                             |                                      |                          |        
|Net income (loss)                                            |                                      | $                        | (18,949
|                                                             |                                      |                          |        
|Basic net income (loss) per share                            |                                      | $                        | (0.57  
|Dilute net income (loss) per share                           |                                      | $                        | (0.57  
|Shares used in computing basic net income (loss) per share   |                                      |                          | 33,080 
|Shares used in computing diluted net income (loss) per share |                                      |                          | 33,080 

37

---

|                                             |                                           | Dec. 31,
2003            |    | Sep. 30,
2003 |    | June 30,
2003 |    | Mar. 31,
2003 |    | Dec. 31,
2002 |    | Sep. 30,
2002 |    | June 30,
2002 |    | Mar. 31,
2002 |   
|-------------------------------------------- | ----------------------------------------- | ------------------------ | -- | ------------- | -- | ------------- | -- | ------------- | -- | ------------- | -- | ------------- | -- | ------------- | -- | ------------- | --
|As a Percentage of Revenues:                 |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|Revenues:                                    |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|                                             | Software licenses                         |                          | 45 | %             | 27 | %             | 31 | %             | 33 | %             | 39 | %             | 39 | %             | 35 | %             | 27
|                                             | Services                                  |                          | 55 |               | 73 |               | 69 |               | 67 |               | 61 |               | 61 |               | 65 |               | 73
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|                                             |                                           | Total revenues           |    | 100           |    | 100           |    | 100           |    | 100           |    | 100           |    | 100           |    | 100           |   
|Cost of revenues:                            |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|                                             | Cost of software licenses                 |                          | 4  |               | 2  |               | 2  |               | 4  |               | 16 |               | 5  |               | 3  |               | 4 
|                                             | Cost of services                          |                          | 26 |               | 27 |               | 33 |               | 32 |               | 26 |               | 32 |               | 35 |               | 40
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|                                             |                                           | Total cost of revenues   |    | 30            |    | 29            |    | 35            |    | 36            |    | 42            |    | 37            |    | 38            |   
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|Gross profit                                 |                                           | 70                       |    | 71            |    | 65            |    | 64            |    | 58            |    | 63            |    | 62            |    | 56            |   
|Operating expenses:                          |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|                                             | Research and development                  |                          | 19 |               | 24 |               | 28 |               | 25 |               | 23 |               | 29 |               | 44 |               | 46
|                                             | Sales and marketing                       |                          | 29 |               | 36 |               | 28 |               | 28 |               | 26 |               | 34 |               | 54 |               | 53
|                                             | General and administrative                |                          | 9  |               | 16 |               | 11 |               | 9  |               | 9  |               | 9  |               | 17 |               | 20
|                                             | Litigation settlement costs               |                          |   |               | 23 |               |   |               |   |               |   |               |   |               |   |               |  
|                                             | Goodwill and intangible amortization      |                          |   |               |   |               |   |               | 4  |               | 3  |               | 3  |               | 3  |               | 3 
|                                             | Charge for acquired in-process technology |                          |   |               |   |               |   |               |   |               |   |               |   |               |   |               |  
|Restructuring charge                         |                                           | 95                       |    | 24            |    | 36            |    | 4             |    | 26            |    | 233           |    | 118           |    | 18            |   
|Impairment of assets                         |                                           |                         |    |              |    |              |    |              |    |              |    | 3             |    |              |    | 8             |   
|Impairment of goodwill and other intangibles |                                           |                         |    |              |    |              |    |              |    |              |    |              |    |              |    |              |   
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|                                             |                                           | Total operating expenses |    | 152           |    | 123           |    | 102           |    | 70            |    | 87            |    | 311           |    | 236           |   
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|Operating loss                               |                                           | (83                      | )  | (58           | )  | (38           | )  | 1             |    | (29           | )  | (248          | )  | (174          | )  | (92           | ) 
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|Other, net                                   |                                           | 1                        |    | 3             |    | 3             |    | 4             |    | (6            | )  | (1            | )  | (19           | )  | (27           | ) 
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   
|Net loss                                     |                                           | (82                      | )% | (55           | )% | (35           | )% | 5             | %  | (35           | )% | (249          | )% | (193          | )% | (119          | )%
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |    |               |    |               |   

Our quarterly operating results have fluctuated in the past and may fluctuate significantly in the future as a result of a variety of factors,
many of which are outside of our control. It is likely that our operating results in one or more future quarters may be below the expectations of securities analysts and investors. In that event, the
trading price of our common stock almost certainly would decline.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest
Entities." FIN 46 expands upon and strengthens existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and
activities of another entity. A variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (i) does not have equity
investors with voting rights or (ii) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires a variable interest entity
to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's
residual returns or both. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements
apply to older entities in the first fiscal year or interim period beginning after December 15, 2003. Disclosure requirements apply to any financial statements issued after January 31,
2003. We do not expect the adoption of SFAS 146 to have a material impact on our consolidated financial position, results of operations or cash flows.

In
May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity." SFAS 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities.

38

---

The
financial instruments affected include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or
other assets and certain obligations that can be settled with shares of stock. SFAS 150 is effective for all financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We do not expect the adoption of SFAS 150 to have a material impact on our consolidated
financial position, results of operations or cash flows.

RISK FACTORS

The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business could be harmed. In that event, the trading price of our common
stock could decline.

Risks related to our business

We have experienced prolonged negative cash flows and difficulty returning to profitability.

We have experienced a decline in revenues sequentially for the first three quarters of fiscal 2002 and the first three quarters of fiscal 2003 and the outlook on
future periods is unclear given the general economic conditions. Furthermore, we incurred net losses for the past three quarters and have not achieved positive cash flow from operations. We may not be
profitable from operations for the near
term and may continue to incur negative cash flow. If the negative cash flow continues, our liquidity and ability to operate our business would be severely and adversely impacted. Additionally, our
ability to raise financial capital may be hindered due to our operational losses and negative cash flows, reducing our operating flexibility.

We
are continuing efforts to reduce and control our expense structure. We believe strict cost containment and expense reductions are essential to achieving positive cash flow and
profitability. A number of factors could preclude us from successfully bringing costs and expenses in line with our revenues, including unplanned uses of cash, the inability to accurately forecast
business activities and further deterioration of our revenues. If we are not able to effectively reduce our costs and achieve an expense structure commensurate with our business activities and
revenues, we may have inadequate levels of cash for operations or for capital requirements, which could significantly harm our ability to operate our business.

General economic conditions are and may continue to affect our ability to return to profitability.

There has been a general downturn in the United States of America and global economy. If the economic environment continues to decline or if the current global
slowdown worsens or becomes prolonged, our future results may be significantly impacted. We believe that the current economic decline has increased the average length of our sales cycle and our
operating results could suffer and our stock price could decline if we do not achieve the level of revenues we expect.

Like
other U.S. companies, our business and operating results are subject to uncertainties arising out of the terrorist attacks on the United States, including the economic consequences
of military actions or additional terrorist activities and associated political instability, and the impact of heightened security concerns on domestic and international travel and commerce. Such
uncertainties could also lead to delays or cancellations of customer orders, a general decrease in corporate spending or our inability to effectively market and sell our products. Any of these results
could substantially harm our business and results of operations, causing a decrease in our revenues.

39

---



Our future financial performance is largely dependent on the successful upgrading of our current products and introduction of new products.

Our future financial performance will depend, in significant part, on the successful development and sale of new and enhanced versions of our products and other
new products. We may be unable to upgrade and continue to market products. We may be unable to successfully develop new products and new products may not achieve market acceptance.

If we are unable to meet the rapid technological changes in online commerce and communication, our products and services may fail to be competitive.

Our products and services may fail to be competitive if we do not maintain or exceed the pace of technological developments in Internet commerce and
communication. 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 evolving industry standards and practices. 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. Our future success will depend, in part, on our ability to:



Internet
commerce technology is complex and new products and enhancements can require long development periods. If we are unable to develop and introduce new products and services or
enhancements in a timely manner in response to changing market conditions or customer requirements, or if new products and services do not achieve market acceptance, our business may fail to be
competitive.

Our lengthy sales and product implementation cycles could cause delays in revenue recognition and make it difficult to predict our quarterly results.

Our sales and product implementation cycles are subject to delays over which we have little or no control. These delays can affect the timing of revenue
recognition and make it difficult to predict our quarterly results. Licensing our products is often an enterprise-wide decision by prospective customers. The importance of this decision
requires that we engage in a lengthy sales cycle with prospective customers. During the sales process, we provide a significant level of education regarding the uses and benefits of our products. Once
the decision has been made to implement our products, our customers or our BroadVision Global Services consultants then must commit significant resources over an extended period of time. Slowdowns in
general economic conditions may result in decisions by customers to defer decisions to purchase our products. Delays in license transactions due to unusually lengthy sales cycles could cause our
operating results to vary significantly from quarter to quarter.

The market for our products and services is in a rapidly evolving environment and may fail to remain a viable market.

Our products and services facilitate online commerce and communication over public and private networks. The market for these products and services is rapidly
evolving. A viable market may fail to be sustainable. We cannot predict the level of demand for and market acceptance of our products and

40

---

services,
especially because acquisition of our products and services requires a large capital or other significant resource commitment. If the market for our products and services does not continue
to mature, we will be unable to execute successfully our business plan. Adoption of electronic commerce and knowledge management, particularly by those individuals and companies that have historically
relied upon traditional means of commerce and communication, will require a broad acceptance of new and different methods of conducting business and exchanging information. If Internet commerce does
not continue to grow or grows more slowly than expected, our future revenues and profits may not meet our expectations or those of analysts. In the marketplace of Internet commerce, our products and
services involve a new approach to the conduct of online business. As a result, intensive marketing and sales efforts may be necessary to educate prospective customers regarding the uses and benefits
of our products and services, thereby generating demand. Companies that have already invested substantial resources in other methods of conducting business may be reluctant to adopt a new approach
that may replace, limit or compete with their existing systems. Similarly, purchasers with established patterns of commerce may be reluctant to alter those patterns or may otherwise resist providing
the personal data necessary to support our consumer profiling capability. In addition, the security and privacy concerns of existing and potential online purchasers may inhibit the growth of online
business generally and the market's acceptance of our products and services in particular. Accordingly, a viable market for our products and services may not be sustainable.

Fluctuations in our quarterly operating results may cause our stock price to decline and make it difficult for us to forecast quarterly revenue and
operating results.

Our quarterly operating results have fluctuated in the past and may fluctuate significantly in the future as a result of a variety of factors, many of which are
outside of our control. It is likely that our operating results in one or more future quarters may be below the expectations of securities analysts and investors. In that event, the trading price of
our common stock almost certainly would decline.

Factors
that may affect our quarterly operating results include the following:



41

---



Due
to these and other factors, it is difficult to accurately forecast our quarterly revenues and operating results. We believe that period-to-period comparisons
of our operating results may not be meaningful and you should not rely upon them as any indication of our future performance.

Changes in accounting standards and in the way we charge for licenses could result in a reduction of the revenue we are able to recognize.

In October 1997, the American Institute of Certified Public Accountants issued SOP 97-2, and later amended its position by its SOP
98-4 and SOP 98-9. Based on our interpretation of the AICPA's position, we believe our current revenue recognition policies and practices are consistent with SOP
97-2, SOP 98-4 and SOP 98-9. However, interpretations of these standards continue to be issued. Future interpretations could lead to unanticipated changes in our
current revenue
recognition practices, which could materially adversely affect our business, financial condition and operating results.

The
Securities and Exchange Commission and the Financial Accounting Standards Board are also currently reviewing the accounting standards related to other areas. Any changes to these
accounting standards, or the way these standards are interpreted or applied, could require us to change the way we account for any other aspects of our business in a manner that could adversely affect
our reported financial results.

We have substantially modified our business and operations and will need to manage and support these changes effectively in order for our business plan
to succeed.

We substantially expanded then contracted our business and operations since our inception in 1993. We grew from 652 employees at the end of 1999 to 2,412
employees at the end of 2000 and have reduced our numbers to 1,102 at the end of 2001 and 449 at the end of 2002 and 367 at the end of 2003. If we are unable to support these changes effectively, we
may have to divert additional resources away from executing our business plan and toward internal administration. If our expenses do not track our revenues, we may have to make additional changes to
our management systems and our business plan may not succeed.

We are dependent on direct sales personnel and third-party distribution channels to achieve revenue growth.

To date, we have sold our products primarily through our direct sales force. Our ability to achieve significant revenue growth in the future largely will depend
on our success in recruiting, training and retaining sufficient direct sales personnel and establishing and maintaining relationships with distributors, resellers and systems integrators. Our products
and services require a sophisticated sales effort targeted at the senior management of our prospective customers. New hires as well as employees of our distributors, resellers and systems integrators
require training and take time to achieve full productivity. Our recent hires may not become as productive as necessary, and we may be unable to hire and retain sufficient numbers of qualified
individuals in the future. We have entered into strategic alliance agreements with partners, under which partners have agreed to resell and support our current BroadVision
One-to-One product suite. These contracts are generally terminable by either party upon 30 days' notice of an uncured material breach or for convenience upon
90 days' notice prior to the end of any annual term. Termination of any of these alliances could harm our expected revenues. We may be unable to expand our other distribution channels, and any
expansion may not result in revenue increases. If we fail to maintain and expand our direct sales force or other distribution channels, our revenues may not grow or they may decline.

42

---

Our customers may rely on third-party systems integrators for the success of online marketplaces.

Our current and prospective customers may rely on third-party systems integrators to develop, deploy and manage online marketplaces. If we are unable to
adequately train these systems integrators who, as a result, ineffectively assist customers with their online marketplaces, our reputation may be harmed and we may lose customers. In addition, if for
any reason a large number of these integrators adopt a different product or technology instead of the BroadVision products, sales of these products may not grow or they may decline.

We are susceptible to numerous risks associated with international operations.

Our international activities expose us to numerous additional risks. In the year ended December 31, 2003, approximately 49% of our revenues were derived
from sales outside of North America.

As
we continue to expand internationally, we will be increasingly subject to risks of doing business internationally, including:



Our
international sales growth will be limited if we are unable to establish additional foreign operations, expand international sales channel management and support, hire additional
personnel, customize products for local markets and develop relationships with international service providers, distributors and system integrators. Even if we are able to successfully expand our
international operations, we may not succeed in maintaining or expanding international market demand for our products.

Our products are especially susceptible to product defects because they are complex.

Sophisticated software products, like those sold by us, may contain undetected errors that will not become apparent until after the products are introduced or
when the volume of provided services increases. It is possible that, despite testing by us and our prospective customers, errors will be found in our products. Product defects could result in all or
any of the following consequences to our business:



43

---



Because a significant portion of our sales activity occurs at the end of each fiscal quarter, delays in a relatively small number of license
transactions could adversely affect our operating results for the quarter.

Like most software companies, a significant proportion of our sales are concentrated near the end of each fiscal quarter. Gross margins are high for our license
transactions. Customers and prospective customers are aware of these facts and use these conditions in an attempt to obtain concessions. While we have tried to avoid making concessions that could
result in lower margins, the tactic often results in delays in the closing of license transactions. Small delays in a relatively small number of license deals could have a significant impact on our
reported operating results for that quarter.

Current and potential competitors could make it difficult for us to acquire and retain customers now and in the future.

If we fail to compete successfully with current or future competitors, we may lose market share. The market for self-service web applications is
rapidly evolving and intensely competitive. Our customers' requirements and the technology available to satisfy those requirements will continually change. We expect competition in this market to
persist and increase in the future. Our primary competition currently includes:



The
principal competitive factors affecting the market for our products are:



Compared
to us, many of these and other current and future competitors have longer operating histories and significantly greater financial, technical, marketing and other resources. As a
result, they may be able to respond more quickly to new or changing opportunities, technologies and customer

44

---

requirements.
Many of these companies also can use their greater name recognition and more extensive customer base to gain market share at our expense. Competitors may be able to undertake more
extensive promotional activities, adopt more aggressive pricing policies and offer more attractive terms to purchasers. Current and potential competitors may bundle their products to discourage users
from purchasing our products. In addition, 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. Competitive pressures may make it difficult for us to acquire and retain customers
and may require us to reduce the price of our products. We may be unable to compete successfully with current or new competitors.

Our success and competitive position will depend on our ability to protect our proprietary technology.

Our success and ability to compete are dependent to a significant degree on our proprietary technology. We hold a U.S patent, issued in January 1998, on
elements of the BroadVision One-To-One Enterprise product, which covers electronic commerce operations common in today's web business. We also hold a U.S. patent, issued in
November 1996, acquired as part of the Interleaf acquisition on the elements of the extensible electronic document processing system for creating new classes of active documents. The patent on
active documents (associating procedures to elements of an electronic document) is fundamental and hard to avoid by modern document processing systems. Although we hold these patents, they may not
provide an adequate level of intellectual property protection. In addition, litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to
determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. We cannot guarantee that infringement or other claims will not be
asserted or prosecuted against us in the future, whether resulting from our intellectual property or licenses from third parties. Claims or litigation, whether successful or unsuccessful, could result
in substantial costs and diversions of resources, either of which could harm our business.

We
also rely on copyright, trademark, service mark, trade secret laws and contractual restrictions to protect our proprietary rights in products and services. We have registered
"BroadVision", "BroadVision One-To-One", "iGuide" and Interleaf as trademarks in the United States and in other countries. It is possible that our competitors or other
companies will adopt product names similar to these trademarks, impeding our ability to build brand identity and possibly confusing customers.

As
a matter of company policy, we enter into confidentiality and assignment agreements with our employees, consultants and vendors. We also control access to and distribution of our
software, documents and other proprietary information. Notwithstanding these precautions, it may be possible for an unauthorized third party to copy or otherwise obtain and use our software or other
proprietary information or to develop similar software independently. Policing unauthorized use of our products will be difficult, particularly because the global nature of the Internet makes it
difficult to control the ultimate destination or security of software and other transmitted data. The laws of other countries may afford us little or no effective protection of our intellectual
property.

A breach of the encryption technology that we use could expose the company to liability and harm our reputation, causing a loss of customers.

If any breach of the security technology embedded in our products were to occur, we would be exposed to liability and our reputation could be harmed, which could
cause us to lose customers. A significant barrier to online commerce and communication is the secure exchange of valuable and confidential information over public networks. We rely on encryption and
authentication technology, including OpenSSL, public key cryptography technology including the major encryption algorithms RC2 and MDS to provide the security and authentication necessary to affect
the secure exchange of confidential information. Advances in computer capabilities, new discoveries in the field of

45

---

cryptography
or other events or developments could cause a breach of the RSA or other algorithms that we use to protect customer transaction data.

We could be subject to claims of intellectual property infringement, which could divert management resources, cause product delays or require that we
enter into licensing or royalty agreements.

Third parties may claim that we have infringed their patent, trademark, copyright or other proprietary rights. It is also possible that claims will be made for
indemnification resulting from allegations of infringement. In addition, intellectual property infringement claims may be asserted against us as a result of the use by us, our customers or other third
parties of our products for the transmission, dissemination or display of information on the Internet. Any claims, with or without merit, could be time consuming, costly, cause product shipment delays
or require that we enter into royalty or licensing agreements. These licenses might not be available on reasonable terms, or at all.

The loss or malfunction of technology licensed from third parties could delay the introduction of our products and services.

We rely in part on technology that we license from third parties, including relational database management systems from Oracle, Sybase, and Informix object
request broker software from IONA Technologies PLC, database access technology from Rogue Wave Software and other software. We integrate or sublicense this technology with internally developed
software to perform key functions. For example, our products and services incorporate data encryption and authentication technology licensed from Open SSL. Third-party technology licenses might not
continue to be available to us on commercially reasonable terms, or at all. Moreover, the licensed technology may contain defects that we cannot control. The loss of any of these technology licenses
could cause delays in introducing our
products or services until equivalent technology, if available, is identified, licensed and integrated. Delays in introducing our products and services could harm our business.

Our executive officers, key employees and highly skilled technical and managerial personnel are critical to our business, and they may not remain with
us in the future.

Our performance substantially depends on the performance of our executive officers and key employees. We also rely on our ability to retain and motivate qualified
personnel, especially our management and highly skilled development teams. The loss of the services of any of our executive officers or key employees, particularly our founder and Chief Executive
Officer, Dr. Pehong Chen, could cause us to incur increased operating expenses and divert senior management resources in searching for replacements. The loss of their services also could harm
our reputation if our customers were to become concerned about our future operations. We do not carry "key person" life insurance policies on any of our employees. Our future success also depends on
our continuing ability to identify, hire, train and retain other highly qualified technical and managerial personnel. Competition for these personnel is intense, especially in the Internet industry.
We have in the past experienced, and may continue to experience, difficulty in hiring and retaining sufficient numbers of highly skilled employees. The significant downturn in our business environment
has had a negative impact on our operations. We are currently restructuring our operations and have taken actions to reduce our workforce and implement other cost containment activities. These actions
could lead to disruptions in our business, reduced employee morale and productivity, increased attrition and problems with retaining existing employees and recruiting future employees and increased
financial costs.

Limitations on the online collection of profile information could impair the effectiveness of our products.

Online users' resistance to providing personal data and laws and regulations prohibiting use of personal data gathered online without express consent or requiring
businesses to notify their web site

46

---

visitors
of the possible dissemination of their personal data could limit the effectiveness of our products.

One
of the principal features of the BroadVision products is the ability to develop and maintain profiles of online users to assist business managers in determining the nature of the
content to be provided to these online users. Typically, profile information is captured when consumers, business customers and employees visit a web site and volunteer information in response to
survey questions concerning their backgrounds, interests and preferences. Profiles can be augmented over time through the subsequent collection of usage data.

Although
BroadVision 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 resist providing the personal data necessary to support this profiling capability. The mere perception by prospective customers
that substantial security and privacy concerns exist among online users, whether or not valid, may indirectly inhibit market acceptance of our products. In addition, new laws and regulations could
heighten privacy concerns by requiring businesses to notify web site users that the data captured from them while online may be used by marketing entities to direct product messages to them.

We
are subject to increasing regulation at the federal and state levels relating to online privacy and the use of personal user information. Several states have proposed legislation that
would limit the uses of personal user information gathered online or require online services to establish privacy policies.

In
addition, the U.S. Federal Trade Commission, or FTC, has urged Congress to adopt legislation regarding the collection and use of personal identifying information obtained from
individuals when accessing Web sites. In the past, the emphasis has been on information obtained from minors. Focus has now shifted to include online privacy protections for adults. These regulations
may include requirements that companies establish procedures to, among other things: give adequate notice to users regarding information collection and disclosure practices; provide users with the
ability to have personal information deleted from a company's database; provide users with access to their collected personal information and the ability to correct inaccuracies; clearly identify
affiliations with third parties that may collect information or sponsor activities on another company's Web site; and obtain express parental consent prior to collecting and using personal information
from children under 13 years of age.

The
FTC has settled several proceedings resulting in consent decrees in which Internet companies have been required to establish programs regarding the manner in which personal
information is collected from users and provided to third parties. We could become a party to a similar enforcement proceeding. These regulatory and enforcement efforts could also harm our customers'
ability to collect demographic and personal information from users, which could impair the effectiveness of our products.

New and existing laws could either directly restrict our business or indirectly affect our business by limiting the growth of Internet commerce.

The adoption of any laws or regulations that restrict our methods of doing business or limit the growth of the Internet could decrease demand for our products and
services and increase our cost of doing business. Today, there are relatively few laws specifically directed towards online services.

However,
due to the increasing popularity of the Internet generally and Internet commerce specifically, we expect that federal, state or foreign agencies will enact laws and regulations
with respect to the Internet. These new laws and regulations would be likely to address issues like online user privacy, pricing, content and quality of products and services. If enacted, these laws
and regulations could limit the market for our products and services.

47

---

For
example, because our products involve the solicitation of personal data regarding individual consumers, our business could be limited by laws regulating the solicitation, collection
or processing of this data. The Telecommunications Act of 1996 prohibits the transmission of some types of information and content over the Internet. The prohibition's scope and the liability
associated with a Telecommunications Act violation are currently unsettled. Legislation imposing potential liability upon us for information carried on or disseminated through our products would
likely cause us to implement costly measures to reduce our exposure to this liability or to discontinue some of our services.

Our
business could be harmed by the expense involved in reacting to actual or potential liability associated with the Telecommunications Act or other Internet-related laws and
regulations. In addition, the increased attention focused upon liability issues as a result of the Telecommunications Act could limit the growth of Internet commerce, which could decrease demand for
our products.

The
United States government regulates the export of technology, including encryption technology, which our products incorporate. Export regulations, either in their current form or as
may be subsequently enacted, may limit our ability to distribute our software outside the United States. Any revocation or modification of our export authority or adoption of new laws or regulations
relating to the export of software and encryption technology could limit our international operations. The unlawful export of our software could also harm our reputation. Although we take precautions
against unlawful export of their software, the global nature of the Internet makes it difficult to effectively control the distribution of software.

The imposition of sales and other taxes on products sold by our customers over the Internet could have a negative effect on online commerce and, as a
result, on demand for our products.

The imposition of new sales or other taxes could limit the growth of Internet commerce generally and, as a result, the demand for our products. We believe that,
in accordance with current industry practice, most companies that sell products over the Internet do not currently collect sales or other taxes on shipments of their products into states or foreign
countries where they are not physically present. It is possible that one or more states or foreign countries may seek to impose sales or other tax collection obligation on
out-of-jurisdiction companies that engage in electronic commerce.

A
successful assertion by one or more states or foreign countries that companies engaged in electronic commerce should collect sales or other taxes on the sale of their products over the
Internet, even though not physically present in the state or foreign country, could indirectly reduce demand for our products.

We may not have adequate back-up systems, and natural or manmade disasters could damage our operations, reduce our revenues and lead to a
loss of customers.

We do not have fully redundant systems for service at an alternate site. A disaster could severely harm our business because our service could be interrupted for
an indeterminate length of time. Our operations depend upon our ability to maintain and protect our computer systems at our facility in Santa Clara, California, which reside on or near known
earthquake fault zones. Although these systems are designed to be fault tolerant, they are vulnerable to damage from fire, floods, earthquakes, power loss, acts of terrorism, telecommunications
failures and similar events. In addition, our facilities in California could be subject to electrical blackouts if California faces another power shortage similar to that of 2001. Although we do have
a backup generator, which would maintain critical operations, this generator could fail. We also have significantly reduced our workforce in a short period of time, which has placed different
requirements on our systems and has caused us to lose personnel knowledgeable about our systems and which may make it more difficult to quickly resolve potential system disruptions. Disruptions in our
internal business operations could harm our business by resulting in delays, disruption of our customers' business, loss of data, and loss of customer confidence.

48

---

Our stock price has been and is likely to continue to be highly volatile.

The trading price of our common stock has been and is likely to continue to be highly volatile. Our stock price is subject to wide fluctuations in response to a
variety of factors, including:



In
addition, the stock market has experienced significant price and volume fluctuations that have particularly affected the trading prices of equity securities of many high technology
companies. These fluctuations have often been unrelated or disproportionate to the operating performance of these companies.

Any
negative change in the public's perception of the prospects of Internet or electronic commerce companies could further depress our stock price regardless of our results. Other broad
market fluctuations may decrease the trading price of our common stock. In the past, following declines in the market price of a company's securities, securities class action litigation, such as the
class action lawsuits filed against us and certain of our officers and directors in early 2001, has often been instituted against that company. Litigation could result in substantial costs and a
diversion of management's attention and resources.

Failure to meet our SVB Facility financial covenants would allow SVB to terminate the SVB Facility and accelerate our repayment obligations, which would
negatively affect our cash liquidity.

We renewed and amended the SVB Facility during the second quarter of fiscal 2003. The SVB Facility is secured by substantially all of our owned assets. The
primary financial covenant under the SVB Facility obligates us to maintain certain levels of available cash, cash equivalents, short-term investments and long-term investments
(excluding equity investments). Falling below such levels would be an event of default for which Silicon Valley Bank may, among other things, accelerate the payment of the facility. As of
December 31, 2003, we were not in compliance with the financial and deposits covenants of the commercial credit facilities. Subsequently, we received a waiver from the bank regarding
non-compliance. While we plan to adhere to the financial covenants of the SVB Facility and avoid an event of default in future periods, in the
event that we are unable to avoid another event of default, it may be necessary or advisable to retire and terminate the SVB Facility and pay off all remaining balances borrowed. Such a payoff would
further limit our available cash and cash equivalents.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We had no derivative financial instruments as of
December 31, 2003 and 2002. We place our investments in instruments that meet high credit quality standards and the amount of credit exposure to any one issue, issuer and type of instrument is
limited.

Cash and Cash Equivalents, Short-Term Investments, Long-Term Investments

We consider all debt and equity securities with remaining maturities of three months or less at the date of purchase to be cash equivalents. Our
short-term investments consist of debt and equity

49

---

securities
that are classified as available-for-sale. Our debt securities are carried at fair value with related unrealized gains or losses reported as other comprehensive
income (loss), net of tax. Our long-term investments include debt securities that are classified as available-for-sale. These securities have remaining maturities
greater than one year from December 31, 2003. These investments are carried at fair value with related unrealized gains or losses reported as other comprehensive income, net of tax.

All
short term investments have a remaining maturity of twelve months or less. Total short-term and long-term investment unrealized gains (losses) were $(400,000)
and $(1.7) million for the years ended December 31, 2003 and 2002, respectively. Total realized gains during fiscal 2003 and 2002 were $1.1 million and $719,000, respectively, and are
included in other income in the accompanying Consolidated Statements of Operations. [emailed to Patricia]

Our
cash and cash equivalents, short-term investments and long-term investments consisted of the following as of December 31, 2003 (in thousands):

|                                      |  | Amortized costs |        | Unrealized gains |    | Unrealized losses |    | Fair value
|------------------------------------- |  | --------------- | ------ | ---------------- | -- | ----------------- | -- | ----------
|Cash                                  |  | $               | 65,592 |                  | $ |                   | $ |           
|Money market                          |  |                 | 32,602 |                  |   |                   |   |           
|Corporate notes/bonds                 |  |                 | 408    |                  |   |                   |   |           
|Government notes/bonds                |  |                 |       |                  |   |                   |   |           
|                                      |  |                 |        |                  |    |                   |    |           
|                                      |  | $               | 98,602 |                  | $ |                   | $ |           
|Included in cash and cash equivalents |  | $               | 98,602 |                  | $ |                   | $ |           
|Included in short-term investments    |  |                 |       |                  |   |                   |   |           
|Included in long-term investments     |  |                 |       |                  |   |                   |   |           
|                                      |  |                 |        |                  |    |                   |    |           
|                                      |  | $               | 98,602 |                  | $ |                   | $ |           
|                                      |  |                 |        |                  |    |                   |    |           

Included
in the table above in cash and cash equivalents is $19.8 million of restricted cash and investments.

Our
cash and cash equivalents, short-term investments and long-term investments consisted of the following as of December 31, 2002 (in thousands):

|                                      |  | Amortized costs |         | Unrealized gains
losses |   | Unrealized |  | Fair value
|------------------------------------- |  | --------------- | ------- | ----------------------- | - | ---------- |  | ----------
|Cash                                  |  | $               | 36,070  |                         | $ |           |  | $         
|Money market                          |  |                 | 36,232  |                         |   |           |  |           
|Corporate notes/bonds                 |  |                 | 23,369  |                         |   | 50         |  |           
|Government notes/bonds                |  |                 | 23,430  |                         |   | 11         |  |           
|                                      |  |                 |         |                         |   |            |  |           
|                                      |  | $               | 119,101 |                         | $ | 61         |  | $         
|Included in cash and cash equivalents |  | $               | 94,090  |                         | $ |           |  | $         
|Included in short-term investments    |  |                 | 24,428  |                         |   | 57         |  |           
|Included in long-term investments     |  |                 | 583     |                         |   | 4          |  |           
|                                      |  |                 |         |                         |   |            |  |           
|                                      |  | $               | 119,101 |                         | $ | 61         |  | $         
|                                      |  |                 |         |                         |   |            |  |           

Included
in the table above in cash and cash equivalents are $16.7 million of non-current restricted cash and investments.

50

---

Concentrations of Credit Risk

Financial assets that potentially subject us to significant concentrations of credit risk consist principally of cash, cash equivalents, short-term
investments, and trade accounts receivable. We maintain our cash and cash equivalents and short-term investments with four separate financial institutions. We market and sell our products
throughout the world and perform ongoing credit evaluations of our customers. We maintain reserves for potential credit losses. For the years ended December 31, 2003, 2002 and 2001 no one
customer accounted for more than 10% of total revenue. As of December 31, 2003 and 2002, one customer individually accounted for more than 10% of accounts receivable. As of December 31,
2001, no one customer individually accounted for more than 10% of the accounts receivable.

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, short-term investments, restricted cash and investments, long-term
investments, equity investments, accounts receivable, accounts payable and debt. We do not have any derivative financial instruments. We believe the reported carrying amounts of its financial
instruments approximates fair value, based upon the short maturity of cash equivalents, short-term investments, accounts receivable and payable, and based on the current rates available to
it on similar debt issues.

Equity Investments

Our equity investments consist of equity investments in public and non-public companies that are accounted for under either the cost method of
accounting or the equity method of accounting. Equity investments are accounted for under the cost method of accounting when we have a minority interest and do not have the ability to exercise
significant influence. These investments are classified as available for sale and are carried at fair value when readily determinable market values exist or at cost when such market values do not
exist. Adjustments to fair value are recorded as a component of other comprehensive income unless the investments are considered permanently impaired in which case the adjustment is recorded as a
component of other income (expense), net in the consolidated statement of operations. Equity investments are accounted for under the equity method of accounting when we have a minority interest and
have the ability to exercise significant influence. These investments are classified as available for sale and are carried at cost with periodic adjustments to carrying value for equity in net income
(loss) of the equity investee. Such adjustments are recorded as a component of other income, net. Any decline in value of our investments, which is other than a temporary decline, is charged to
earnings during the period in which the impairment occurs.

The
total fair value of our cost method long-term equity investments in public and non-public companies as of December 31, 2003 was $1.6 million.
This includes $500,000 of net write-downs during 2003 of investments due to an other-than-temporary decline in fair value. There were no unrealized gains or losses recorded to
date and for the year ended December 31, 2003 related to long-term equity investments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial statements and the related notes thereto of BroadVision, Inc. and the Report of Independent Certified Public
Accountants are filed as a part of this Form 10K.

51

---



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To
The Board of Directors and Stockholders of BroadVision, Inc. and Subsidiaries:

We
have audited the accompanying consolidated balance sheets of BroadVision, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2003 and 2002, and the
related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements of
BroadVision, Inc. as of December 31, 2001, and for the year then ended, prior to the revisions discussed in Notes 1 and 4, were audited by other independent accountants who have ceased
operations. Those independent accountants expressed an unqualified opinion on those financial statements in their report dated March 29, 2002.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 2003 and 2002 consolidated financial statements referred to above present fairly, in all material respects, the financial position of BroadVision, Inc. and
subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years then ended in conformity with accounting principles generally
accepted in the United States of America.

As
disclosed in Notes 1 and 4 to the consolidated financial statements, upon adoption of new accounting pronouncements effective during 2002, the Company changed its method of
accounting for goodwill and other intangible assets, and its method of accounting for reimbursable out-of-pocket expenses.

As
discussed above, the consolidated financial statements of BroadVision, Inc. as of December 31, 2001, and for the year then ended, were audited by other independent
accountants who have ceased operations. As described in Note 1, these financial statements have been restated to include the transitional disclosures required by Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," which was adopted by the Company on January 1, 2002, and to reclassify reimbursable
out-of-pocket expenses in accordance with Emerging Issues Task Force Issue 01-14 "Income Statement Characterization of Reimbursements Received for Out of Pocket
Expenses Incurred," also adopted by the Company on January 1, 2002. We audited the transitional disclosures for 2001 described in Note 1. We also audited the adjustments described in
Note 4 that were applied to restate the 2001 consolidated financial statements. In our opinion, all such adjustments and transitional disclosures are appropriate and have been properly applied.
However, we were not engaged to audit, review, or apply any procedures to the 2001 consolidated financial statements of the company other than with respect to such adjustments and transitional
disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 consolidated financial statements taken as a whole.

/s/
BDO Seidman, LLP

San
Jose, California
January 22, 2004

52

---

THE
FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSSUED. BROADVISION, INC. HAS RESTATED ITS FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 2001, TO INCLUDE THE TRANSITIONAL DISCLOSURES REQUIRED BY STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS," AND TO RECLASSIFY
REIMBURSABLE OUT-OF-POCKET EXPENSES IN ACCORDANCE WITH EMERGING ISSUES TASK FORCE ISSUE 01-14 "INCOME STATEMENT CHARACTERIZATION OF REIMBURSEMENTS RECEIVED FOR OUT
OF POCKET EXPENSES INCURRED," ALSO ADOPTED BY THE COMPANY ON JANUARY 1, 2002. THE REVISION TO THE 2001 FINANCIAL STATEMENTS RELATED TO THIS TRANSITIONAL DISCLOSURE WERE REPORTED ON BY BDO SEIDMAN,
LLP, AS STATED IN THEIR REPORT APPEARING HEREIN.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To
the Board of Directors and Stockholders of BroadVision, Inc. and Subsidiaries:

We
have audited the accompanying consolidated balance sheets of BroadVision, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 financial statements referred to above present fairly, in all material respects, the financial position of BroadVision, Inc. and subsidiaries as of
December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.

| |  | /s/ARTHUR ANDERSEN LLP
| |  | ----------------------

San
Jose, California
March 29, 2002

53

---



BROADVISION, INC. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS  (in thousands, except per share amounts)

|                                       |                                                                                                                                                              | December 31,                               |       
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------
|
|ASSETS                                 |                                                                                                                                                              |                                            |       
|Current assets:                        |                                                                                                                                                              |                                            |       
|                                       | Cash and cash equivalents                                                                                                                                    |                                            | $     
|                                       | Short-term investments                                                                                                                                       |                                            |       
|                                       | Accounts receivable, less receivable reserves of $3,022 and $5,502 as of December 31, 2003 and 2002, respectively                                            |                                            |       
|                                       | Prepaids and other                                                                                                                                           |                                            |       
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | Total current assets                       |       
|Property and equipment, net            |                                                                                                                                                              |                                            | 15,400
|Long-term investments                  |                                                                                                                                                              |                                            |      
|Restricted cash and investments        |                                                                                                                                                              |                                            | 19,827
|Equity investments                     |                                                                                                                                                              |                                            | 1,565 
|Goodwill                               |                                                                                                                                                              |                                            | 53,421
|Other intangibles, net                 |                                                                                                                                                              |                                            | 3,013 
|Other assets                           |                                                                                                                                                              |                                            | 2,354 
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | Total assets                               |       
|                                       |                                                                                                                                                              |                                            |       
|LIABILITIES AND STOCKHOLDERS' EQUITY   |                                                                                                                                                              |                                            |       
|Current liabilities:                   |                                                                                                                                                              |                                            |       
|                                       | Bank borrowings and current portion of long-term debt                                                                                                        |                                            | $     
|                                       | Accounts payable                                                                                                                                             |                                            |       
|                                       | Accrued expenses                                                                                                                                             |                                            |       
|                                       | Unearned revenue                                                                                                                                             |                                            |       
|                                       | Deferred maintenance                                                                                                                                         |                                            |       
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | Total current liabilities                  |       
|Long-term debt, net of current portion |                                                                                                                                                              |                                            | 969   
|Other noncurrent liabilities           |                                                                                                                                                              |                                            | 87,409
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | Total liabilities                          |       
|                                       |                                                                                                                                                              |                                            |       
|Commitments and contingencies (Note 8) |                                                                                                                                                              |                                            |       
|Stockholders' equity:                  |                                                                                                                                                              |                                            |       
|                                       | Convertible preferred stock, $0.0001 par value; 10,000 shares authorized; none issued and outstanding                                                        |                                            |       
|                                       | Common stock, $0.0001 par value; 2,000,000 shares authorized; 33,198 and 32,439 shares issued and outstanding as of December 31, 2003 and 2002, respectively |                                            |       
|                                       | Additional paid-in capital                                                                                                                                   |                                            |       
|                                       | Accumulated other comprehensive (loss) income                                                                                                                |                                            |       
|                                       | Accumulated deficit                                                                                                                                          |                                            |       
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | Total stockholders' equity                 |       
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | Total liabilities and stockholders' equity |       
|                                       |                                                                                                                                                              |                                            |       

The
accompanying notes are an integral part of these consolidated financial statements

54

---



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

|                                                    |                                              | Years Ended December 31, |                                       
|--------------------------------------------------- | -------------------------------------------- | ------------------------ | --------------------------------------
|
|Revenues:                                           |                                              |                          |                                       
|                                                    | Software licenses                            |                          | $                                     
|                                                    | Services                                     |                          |                                       
|                                                    |                                              |                          |                                       
|                                                    |                                              | Total revenues           |                                       
|Cost of revenues:                                   |                                              |                          |                                       
|                                                    | Cost of software licenses                    |                          |                                       
|                                                    | Cost of services                             |                          |                                       
|                                                    |                                              |                          |                                       
|                                                    |                                              | Total cost of revenues   |                                       
|                                                    |                                              |                          | Gross profit                          
|Operating expenses:                                 |                                              |                          |                                       
|                                                    | Research and development                     |                          |                                       
|                                                    | Sales and marketing                          |                          |                                       
|                                                    | General and administrative                   |                          |                                       
|                                                    | Litigation settlement costs                  |                          |                                       
|                                                    | Goodwill and intangible amortization         |                          |                                       
|                                                    | Charge for acquired in-process technology    |                          |                                       
|                                                    | Restructuring charge                         |                          |                                       
|                                                    | Impairment of assets                         |                          |                                       
|                                                    | Impairment of goodwill and other intangibles |                          |                                       
|                                                    |                                              |                          |                                       
|                                                    |                                              | Total operating expenses |                                       
|                                                    |                                              |                          |                                       
|                                                    |                                              |                          | Operating loss                        
|Interest income                                     |                                              |                          | 803                                   
|Other (expense) income, net                         |                                              |                          | 2,096                                 
|                                                    |                                              |                          |                                       
|                                                    |                                              |                          | Loss before provision for income taxes
|Provision for income taxes                          |                                              |                          | 439                                   
|                                                    |                                              |                          |                                       
|                                                    |                                              |                          | Net loss                              
|                                                    |                                              |                          |                                       
|Basic net loss per share                            |                                              | $                        | (1.08                                 
|                                                    |                                              |                          |                                       
|Diluted net loss per share                          |                                              | $                        | (1.08                                 
|                                                    |                                              |                          |                                       
|Shares used in computing basic net loss per share   |                                              |                          | 32,800                                
|                                                    |                                              |                          |                                       
|Shares used in computing diluted net loss per share |                                              |                          | 32,800                                
|                                                    |                                              |                          |                                       

The
accompanying notes are an integral part of these consolidated financial statements

55

---



BROADVISION, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  (in thousands)

|                                                                                                                        |                          | Common Stock |  |   |   | Accumulated
Other
Comprehensive
Income (loss) |   |           |  |   |        |   |  
|----------------------------------------------------------------------------------------------------------------------- | ------------------------ | ------------ |  | - | - | --------------------------------------------- | - | --------- |  | - | ------ | - | -
|
|
|Balances as of December 31, 2000                                                                                        |                          | 30,007       |  | $ | 3 |                                               | $ | 1,176,066 |  | $ | (4,348 | ) | $
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Comprehensive loss:                                                                                                     |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Net loss                                                                                                                |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Unrealized investment loss less reclassification adjustment for gains (losses) included in net loss, net of $701 of tax |                          |              |  |   |   |                                               |   |           |  |   | (897   | ) |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|                                                                                                                        | Total comprehensive loss |              |  |   |   |                                               |   |           |  |   |        |   |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Issuance of common stock under employee stock purchase plan                                                             |                          | 266          |  |   |  |                                               |   | 6,975     |  |   |       |   |  
|Issuance of common stock from exercise of options                                                                       |                          | 1,069        |  |   |  |                                               |   | 9,450     |  |   |       |   |  
|Issuance of common stock in connection with Keyeon acquisition                                                          |                          | 301          |  |   |  |                                               |   | 13,566    |  |   |       |   |  
|Stock-based compensation charge                                                                                         |                          |             |  |   |  |                                               |   | 1,014     |  |   |       |   |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Balances as of December 31, 2001                                                                                        |                          | 31,643       |  |   | 3 |                                               |   | 1,207,071 |  |   | (5,245 | ) |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Comprehensive loss:                                                                                                     |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Net loss                                                                                                                |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Unrealized investment gain less reclassification adjustment for gains (losses) included in net loss, net of $2,606 tax  |                          |              |  |   |   |                                               |   |           |  |   | 5,282  |   |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Total comprehensive loss                                                                                                |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Issuance of common stock under employee stock purchase plan                                                             |                          | 558          |  |   |  |                                               |   | 1,793     |  |   |       |   |  
|Issuance of common stock from exercise of options                                                                       |                          | 238          |  |   |  |                                               |   | 1,087     |  |   |       |   |  
|Stock-based compensation charge                                                                                         |                          |             |  |   |  |                                               |   | 846       |  |   |       |   |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Balances as of December 31, 2002                                                                                        |                          | 32,439       |  |   | 3 |                                               |   | 1,210,797 |  |   | 37     |   |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Comprehensive loss:                                                                                                     |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Net loss                                                                                                                |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Unrealized investment gain less reclassification adjustment for gains (losses) included in net loss                     |                          |              |  |   |   |                                               |   |           |  |   | (86    | ) |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Total comprehensive loss                                                                                                |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Issuance of common stock under employee stock purchase plan                                                             |                          | 365          |  |   |   |                                               |   | 863       |  |   |        |   |  
|Issuance of common stock from exercise of options                                                                       |                          | 369          |  |   |   |                                               |   | 669       |  |   |        |   |  
|Stock-based compensation charge                                                                                         |                          | 25           |  |   |   |                                               |   | 342       |  |   |        |   |  
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  
|Balances as of December 31, 2003                                                                                        |                          | 33,198       |  | $ | 3 |                                               | $ | 1,212,671 |  | $ | (49    | ) | $
|                                                                                                                        |                          |              |  |   |   |                                               |   |           |  |   |        |   |  

The accompanying notes are an integral part of these consolidated financial statements.

56

---



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

|                                                     |                                                                                            | Years Ended December 31,                                                            |                                                     
|---------------------------------------------------- | ------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------- | ----------------------------------------------------
|
|Cash flows from operating activities:                |                                                                                            |                                                                                     |                                                     
|                                                     | Net loss                                                                                   |                                                                                     | $                                                   
|                                                     | Adjustments to reconcile net loss to net cash used for operating activities:               |                                                                                     |                                                     
|                                                     |                                                                                            | Depreciation and amortization                                                       |                                                     
|                                                     |                                                                                            | Stock-based compensation charge                                                     |                                                     
|                                                     |                                                                                            | Provision for (release of) doubtful accounts and reserves                           |                                                     
|                                                     |                                                                                            | Amortization of prepaid royalties                                                   |                                                     
|                                                     |                                                                                            | Amortization of prepaid compensation                                                |                                                     
|                                                     |                                                                                            | Realized loss on cost method long-term investments                                  |                                                     
|                                                     |                                                                                            | Equity in net loss from unconsolidated subsidiary                                   |                                                     
|                                                     |                                                                                            | Loss on sale of equipment                                                           |                                                     
|                                                     |                                                                                            | Impairment of assets                                                                |                                                     
|                                                     |                                                                                            | Amortization of goodwill and other intangibles                                      |                                                     
|                                                     |                                                                                            | Impairment of intangibles                                                           |                                                     
|                                                     |                                                                                            | Charge for acquired in-process technology                                           |                                                     
|                                                     |                                                                                            | Non-cash restructuring charge (reversal)                                            |                                                     
|                                                     |                                                                                            | Provision for deferred tax asset valuation allowance                                |                                                     
|                                                     |                                                                                            | Changes in operating assets and liabilities, net of effects from acquired business: |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     | Net cash used for operating activities              
|                                                     |                                                                                            |                                                                                     |                                                     
|Cash flows from investing activities:                |                                                                                            |                                                                                     |                                                     
|                                                     | Sales/maturity of short-term investments                                                   |                                                                                     |                                                     
|                                                     | Purchase of short-term investments                                                         |                                                                                     |                                                     
|                                                     | Sales/maturity of long-term investments                                                    |                                                                                     |                                                     
|                                                     | Transfer from restricted cash/investments                                                  |                                                                                     |                                                     
|                                                     | Purchase of long-term investments                                                          |                                                                                     |                                                     
|                                                     | Purchase of property and equipment                                                         |                                                                                     |                                                     
|                                                     | Proceeds from sale of assets                                                               |                                                                                     |                                                     
|                                                     | Cash acquired in purchase transaction                                                      |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     | Net cash provided by (used for) investing activities
|                                                     |                                                                                            |                                                                                     |                                                     
|Cash flows from financing activities:                |                                                                                            |                                                                                     |                                                     
|                                                     | Proceeds from borrowings                                                                   |                                                                                     |                                                     
|                                                     | Repayments of borrowings                                                                   |                                                                                     |                                                     
|                                                     | Proceeds from issuance of common stock, net                                                |                                                                                     |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     |                                                                                            | Net cash provided by financing activities                                           |                                                     
|                                                     |                                                                                            |                                                                                     |                                                     
|Net increase (decrease) in cash and cash equivalents |                                                                                            |                                                                                     | 1,390                                               
|Cash and cash equivalents, beginning of year         |                                                                                            |                                                                                     | 77,386                                              
|                                                     |                                                                                            |                                                                                     |                                                     
|Cash and cash equivalents, end of year               |                                                                                            | $                                                                                   | 78,776                                              
|                                                     |                                                                                            |                                                                                     |                                                     
|Supplemental cash flow disclosures:                  |                                                                                            |                                                                                     |                                                     
|                                                     | Cash paid for interest                                                                     |                                                                                     | $                                                   
|                                                     |                                                                                            |                                                                                     |                                                     
|                                                     | Cash paid for income taxes                                                                 |                                                                                     | $                                                   
|                                                     |                                                                                            |                                                                                     |                                                     
|Non-cash investing and financing activities:         |                                                                                            |                                                                                     |                                                     
|                                                     | In connection with the acquisition of Keyeon, the following non-cash transaction occurred: |                                                                                     |                                                     
|                                                     |                                                                                            | Fair value of assets acquired, including cash                                       |                                                     
|                                                     |                                                                                            | Liabilities assumed                                                                 |                                                     
|                                                     |                                                                                            | Issuance of common stock                                                            |                                                     

The accompanying notes are an integral part of these consolidated financial statements

57

---



BROADVISION, INC. AND SUBSIDIARIES        Notes to Consolidated Financial Statements        December 31, 2003

Note 1Organization and Summary of Significant Accounting Policies

Nature of Business

BroadVision, Inc. (collectively with its subsidiaries, the "Company") was incorporated in the state of Delaware on May 13, 1993 and has been a
publicly traded corporation since 1996. BroadVision develops, markets, and supports enterprise portal applications that enable companies to unify their e-business infrastructure and
conduct both interactions and transactions with employees, partners, and customers through a personalized self-service model that increases revenues, reduces costs, and improves
productivity.

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. In the Company's opinion, the consolidated financial statements presented herein include all necessary adjustments, consisting of normal
recurring adjustments, to fairly state the
Company's financial position, results of operations, and cash flows for the periods indicated. The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make certain assumptions and estimates that affect reported amounts of assets and liabilities as of the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates.

Revenue Recognition

Overview

The Company's revenue consists of fees for licenses of the Company's software products, maintenance, consulting services and customer training. The Company
generally charges fees for licenses of its software products either based on the number of persons registered to use the product or based on the number of Central Processing Units ("CPUs") on which
the product is installed. Licenses for software whereby fees charged are based upon the number of persons registered to use the product are differentiated between licenses for development use and
licenses for use in deployment of the customer's website. Licenses for software whereby fees charged are on a per-CPU basis do not differentiate between development and deployment usage.
The Company's revenue recognition policies are in accordance with SOP 97-2, as amended; SOP 98-9, and the Securities and Exchange Commission's Staff Accounting Bulletin
No. 104,Revenue Recognition in Financial Statements.

Software License Revenue

The Company licenses its products through its direct sales force and indirectly through resellers. In general, software license revenues are recognized when a
non-cancelable license agreement has been signed and the customer acknowledges an unconditional obligation to pay, the software product has been delivered, there are no uncertainties
surrounding product acceptance, the fees are fixed and determinable and collection is considered probable. Delivery is considered to have occurred when title and risk of loss have been transferred to
the customer, which generally occurs when media containing the licensed programs is provided to a common carrier. In case of electronic delivery, delivery occurs

58

---

when
the customer is given access to the licensed programs. If collectibility is not considered probable, revenue is recognized when the fee is collected. Subscription-based license revenues are
recognized ratably over the subscription period. The Company enters into reseller arrangements that typically provide for sublicense fees payable to the Company based upon a percentage of list price.
The Company does not grant its resellers the right of return.

The
Company recognizes revenue using the residual method pursuant to the requirements of SOP 97-2, as amended by SOP 98-9. Revenues recognized from multiple-
element software arrangements are allocated to each element of the arrangement based on the fair values of the elements, such as licenses for software products, maintenance, consulting services or
customer training. The determination of fair value is based on objective evidence, which is specific to the Company. The Company limits its assessment of objective evidence for each element to either
the price charged when the same element is sold separately or the price established by management having the relevant authority to do so, for an element not yet sold separately. If evidence of fair
value of all undelivered elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value
of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.

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

Services Revenue

Consulting services revenues and customer training revenues are recognized as such services are performed. Maintenance revenues, which include revenues bundled
with software license agreements that entitle the customers to technical support and future unspecified enhancements to the Company's products, are deferred and recognized ratably over the related
agreement period, generally twelve months.

The
Company's consulting services, which consist of consulting, maintenance and training, are delivered through BVGS. Services that the Company provides are not essential to the
functionality of the software. In accordance with EITF 01-14, which the Company adopted as of January 1, 2002, the Company records reimbursement by its customers for
out-of-pocket expenses as an increase to services revenues. Prior to January 1, 2002, the Company recorded reimbursement by its customers for
out-of-pocket expenses as a decrease to cost of services. The Company's results of operations for the year ended 2001 have been reclassified for comparable purposes in
accordance with EITF 01-14. The effect of this reclassification was to increase services revenues and increase cost of services for the year ended 2001 by $3.9 million.

Research and Development and Software Development Costs

Under the criteria set forth in Statement of Financial Accounting Standards ("SFAS") No. 86,Accounting for the Cost of Computer
Software to be Sold, Leased or Otherwise Marketed, development

59

---

costs
incurred in the research and development of new software products are expensed as incurred until technological feasibility in the form of a working model has been established at which time such
costs are capitalized and recorded at the lower of unamortized cost or net realizable value. The costs incurred subsequent to the establishment of a working model but prior to general release of the
product have not been significant. To date, the Company has not capitalized any costs related to the development of software for external use.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense, which is included in sales and marketing expense, amounted to $122,000, $571,000 and
$1.8 million in 2003, 2002 and 2001, respectively.

Prepaid Royalties

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

Allowances and Reserves

Occasionally, the Company's customers experience financial difficulty after the Company records the sale but before payment has been received. The Company
maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company's normal payment terms are generally 30 to
90 days from invoice date. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be
required.

Restructuring

The Company has approved certain restructuring plans to, among other things, reduce its workforce and consolidate facilities. These restructuring charges were
taken to align the Company's cost structure with changing market conditions and to create a more efficient organization. The Company's restructuring charges are comprised primarily of:
(i) severance and benefits termination costs related to the reduction of the Company's workforce; (ii) lease termination costs and/or costs associated with permanently vacating its
facilities; (iii) other incremental costs incurred as a direct result of the restructuring plan; and (iv) impairment costs related to certain long-lived assets abandoned.

The
Company accounts for severance and benefits termination costs in accordance with EITF 94-3 for exit or disposal activities initiated prior to December 31, 2002.
Accordingly, the Company records the liability related to these termination costs when the following conditions have been met: (i) management with the appropriate level of authority approves a
termination plan that commits the Company to such plan and establishes the benefits the employees will receive upon termination; (ii) the benefit arrangement is communicated to the employees in
sufficient detail to enable the employees to

60

---

determine
the termination benefits; (iii) the plan specifically identifies the number of employees to be terminated, their locations and their job classifications; and (iv) the period of
time to implement the plan does not indicate changes to the plan are likely. The termination costs recorded by the Company are not associated with nor do they benefit continuing activities. The
Company accounts for severance and benefits termination costs for exit or disposal activities initiated after December 31, 2002 in accordance with SFAS 146. SFAS 146 requires that
a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. This differs from EITF 94-3,
which required that a liability for an exit cost be recognized at the date of an entity's commitment to an exit plan.

Prior
to the adoption on January 1, 2003 of SFAS 146, the Company accounted for the costs associated with lease termination and/or abandonment in accordance with EITF
88-10. Accordingly, the Company recorded the costs associated with lease termination and/or abandonment when the leased property has no substantive future use or benefit to the Company.

The
Company accounts for the costs associated with lease termination and/or abandonment in accordance with EITF 88-10. Accordingly, the Company records the costs associated
with lease termination and/or abandonment when the leased property has no substantive future use or benefit to the Company. Under EITF 88-10, the Company records the liability associated
with lease termination and/or abandonment as the sum of the total remaining lease costs and related exit costs, less probable sublease income. The Company accounts for costs related to
long-lived assets abandoned in accordance with SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived
Assetsand, accordingly, charges to expense the net carrying value of the long-lived assets when the Company ceases to use the assets.

Inherent
in the estimation of the costs related to the Company's restructuring efforts are assessments related to the most likely expected outcome of the significant actions to
accomplish the restructuring. In determining the charge related to the restructuring, the majority of estimates made by management related to the charge for excess facilities. In determining the
charge for excess facilities, the Company was required to estimate future sublease income, future net operating expenses of the facilities, and brokerage commissions, among other expenses. The most
significant of these estimates related to the timing and extent of future sublease income in which to reduce the Company's lease obligations. Specifically, in determining the restructuring obligations
related to facilities as of December 31, 2003, the Company reduced its lease obligations by estimated sublease income of $49.4 million. The Company based its estimates of sublease
income, in part, on the opinions of independent real estate experts, current market conditions and rental rates, an assessment of the time period over which reasonable
estimates could be made, the status of negotiations with potential subtenants, and the location of the respective facility, among other factors.

These
estimates, along with other estimates made by management in connection with the restructuring, may vary significantly depending, in part, on factors that may be beyond the
Company's control. Specifically, these estimates will depend on the Company's success in negotiating with lessors, the time periods required to locate and contract suitable subleases and the market
rates at the time of such subleases. Adjustments to the facilities reserve will be required if actual lease exit costs or sublease income differ from amounts currently expected. The Company will
review the status of

61

---

restructuring
activities on a quarterly basis and, if appropriate, record changes to its restructuring obligations in current operations based on management's most current estimates.

Legal Matters

The Company's current estimated range of liability related to pending litigation is based on claims for which it is probable that a liability has been incurred
and the Company can estimate the amount and range of loss. The Company has recorded the minimum estimated liability related to those claims, where there is a range of loss. Because of the
uncertainties related to both the determination of the probability of an unfavorable outcome and the amount and range of loss in the event of an unfavorable outcome, the Company is unable to make a
reasonable estimate of the liability that could result from the remaining pending litigation. As additional information becomes available, the Company will assess the potential liability related to
its pending litigation and revise its estimates, if necessary. Such revisions in the Company's estimates of the potential liability could materially impact the Company's results of operations and
financial position.

Cash and Cash Equivalents, Short-Term Investments, Long-Term Investments

The Company considers all debt and equity securities with original maturities of three months or less at the date of purchase to be cash equivalents. The
Company's short-term investments consist of debt and equity securities that are classified as available-for-sale. The Company's debt securities are carried at fair
value with related unrealized gains or losses reported as other comprehensive income (loss), net of tax. The Company's long-term investments include debt securities that are classified as
available-for-sale. These securities have remaining maturities greater than one year. For the year ended December 31, 2003, there were no long-term
investment. These investments are carried at fair value with related unrealized gains or losses reported as other comprehensive income, net of tax.

All
short-term investments have a remaining maturity of twelve months or less. Total short-term and long-term investment unrealized gains (losses)
were $400,000 and $(1.7) million for the years ended December 31, 2003 and 2002, respectively. Total realized gains during fiscal 2003 and 2002 were $1.1 million and $719,000,
respectively, and are included in other income in the accompanying Consolidated Statements of Operations.

62

---

The
Company's cash and cash equivalents, restricted cash and investments, short-term investments and long-term investments consisted of the following as of
December 31, 2003 (in thousands):

|                                      |  | Amortized costs |        | Unrealized gains
losses |   | Unrealized |  | Fair value
|------------------------------------- |  | --------------- | ------ | ----------------------- | - | ---------- |  | ----------
|Cash                                  |  | $               | 65,592 |                         | $ |           |  | $         
|Money market                          |  |                 | 32,602 |                         |   |           |  |           
|Corporate notes/bonds                 |  |                 | 408    |                         |   |           |  |           
|Government notes/bonds                |  |                 |       |                         |   |           |  |           
|                                      |  |                 |        |                         |   |            |  |           
|                                      |  | $               | 98,602 |                         | $ |           |  | $         
|Included in cash and cash equivalents |  | $               | 98,602 |                         | $ |           |  | $         
|Included in short-term investments    |  |                 |       |                         |   |           |  |           
|Included in long-term investments     |  |                 |       |                         |   |           |  |           
|                                      |  |                 |        |                         |   |            |  |           
|                                      |  | $               | 98,602 |                         | $ |           |  | $         
|                                      |  |                 |        |                         |   |            |  |           

Included
in the table above in cash and cash equivalents is $19.8 million of restricted cash and investments.

The
Company's cash and cash equivalents, short-term investments and long-term investments consisted of the following as of December 31, 2002 (in
thousands):

|                                      |  | Amortized cost |         | Unrealized gains |   | Unrealized losses |  | Fair value
|------------------------------------- |  | -------------- | ------- | ---------------- | - | ----------------- |  | ----------
|Cash                                  |  | $              | 36,070  |                  | $ |                  |  | $         
|Money market                          |  |                | 36,232  |                  |   |                  |  |           
|Corporate notes/bonds                 |  |                | 23,369  |                  |   | 50                |  |           
|Government notes/bonds                |  |                | 23,430  |                  |   | 11                |  |           
|                                      |  |                |         |                  |   |                   |  |           
|                                      |  | $              | 119,101 |                  | $ | 61                |  | $         
|Included in cash and cash equivalents |  | $              | 94,090  |                  | $ |                  |  | $         
|Included in short-term investments    |  |                | 24,428  |                  |   | 57                |  |           
|Included in long-term investments     |  |                | 583     |                  |   | 4                 |  |           
|                                      |  |                |         |                  |   |                   |  |           
|                                      |  | $              | 119,101 |                  | $ | 61                |  | $         
|                                      |  |                |         |                  |   |                   |  |           

Included
in the table above in cash and cash equivalents are $16.7 million of non-current restricted cash and investments.

Concentrations of Credit Risk

Financial assets that potentially subject us to significant concentrations of credit risk consist principally of cash, cash equivalents, short-term
investments, and trade accounts receivable. The Company maintains its cash and cash equivalents and short-term investments with four separate financial institutions. The Company markets
and sells its products throughout the world and performs

63

---

ongoing
credit evaluations of its customers. The Company maintains reserves for potential credit losses. For the years ended December 31, 2003, 2002 and 2001, no one customer accounted for more
than 10% of fiscal year total revenue. As of December 31, 2003 and 2002, one customer individually accounted for more than 10% of the Company's accounts receivable. As of December 31,
2001, no one customer individually accounted for more than 10% of the Company's accounts receivable.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, short-term investments, restricted cash and investments,
long-term investments, equity investments, accounts receivable, accounts payable and debt. The Company does not have any derivative financial instruments. The Company believes the reported
carrying amounts of its financial instruments approximates fair value, based upon the maturities and nature of its cash and cash equivalents, short-term investments, long-term
investments, restricted cash and investments, accounts receivable and payable, and based on the current rates available to it on similar debt issues. Additionally, the Company periodically evaluates
the carrying value of all of its investments for other-than-temporary impairment when events and circumstances indicate that the book value of an asset may not be recoverable.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amounts by which the carrying amount exceeds its fair market value. The Company's equity investments
are comprised of investments in public and non-public technology related companies. The Company may record future impairment charges due to continued economic decline and the potential
decline resulting in a negative impact on the companies.

Equity Investments

The Company's equity investments consist of equity investments in public and non-public companies that are accounted for under the cost method of
accounting, because the Company has a minority interest and does not have the ability to exercise significant
influence. These investments are classified as available for sale and are carried at fair value when readily determinable market values exist or at cost when such market values do not exist.
Adjustments to fair value are recorded as a component of other comprehensive income unless the investments are considered permanently impaired in which case the adjustment is recorded as a component
of other income (expense), net in the Consolidated Statement of Operations. The Company does not have any investments accounted for under the equity method of accounting.

The
total fair value of the Company's cost method long-term equity investments in public and non-public companies as of December 31, 2003 was
$1.6 million. This includes $518,000 in net write-downs during 2003 of investments due to an other-than-temporary decline in fair value, which are included in other
expense in the consolidated statement of operations. There were no unrealized gains or losses recorded for the year ended December 31, 2003 related to long-term equity investments.

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful lives (two to eight years). Leasehold
improvements are amortized over the lesser of the remaining life of the lease term or their estimated useful lives. Depreciation and amortization

64

---

expense
for the years ended December 31, 2003, 2002 and 2001 was $11.3 million, $18.2 million and $25.4 million, respectively. The Company recorded asset impairments of
approximately $515,000 during fiscal 2003 in connection with the Company's restructuring plan, which are included in the Company's restructuring charge recorded in the Company's Statement of
Operations. In 2002, the Company recorded a $3.1 million asset impairment as a result of the physical inventories of the Company's assets.

Valuation of Long-Lived Assets

The Company periodically assesses the impairment of long-lived assets in accordance with the provisions of SFAS 144. The Company assesses the
impairment of goodwill and identifiable intangible assets in accordance with SFAS No. 141,Business Combinationsand SFAS 142, Goodwill and Other Intangible
Assets. The Company adopted the provisions of SFAS 142 as of January 1, 2002. Please see Note 4 of
Notes to Consolidated Financial Statements for additional information.

Employee Stock Option and Purchase Plans

The Company accounts for employee stock-based awards in accordance with the provisions of APB Opinion 25, Financial Accounting Standards Board Interpretation
No. 44 (FIN 44), Accounting for Certain Transactions Involving Stock Compensationan Interpretation of APB Opinion 25, and related interpretations. As such, compensation expense is
recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Pursuant to SFAS 123, the Company discloses the pro forma effects of using
the fair value method of accounting for stock-based compensation arrangements. The Company accounts for equity instruments issued to non-employees in accordance with the provisions of
SFAS 123 and Emerging Issues Task Force (EITF) 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees For Acquiring or in
Conjunction with Selling Goods or Services.

The
Company applies APB Opinion 25 and related interpretations when accounting for its stock option and stock purchase plans. In accordance with APB Opinion 25, we apply the intrinsic
value method in accounting for employee stock options. Accordingly, the Company generally recognizes no compensation expense with respect to stock-based awards to employees.

During
the year ended December 31, 2003 the Company recorded compensation expense of $342,000. This charge was recorded as a result of granting a third-party consultant shares of
our common stock and a vesting modification to a grant for a terminated employee. The compensation charge was calculated using the Black-Scholes model. $131,000 of the charge is recorded in general
and administrative expense, $67,000 is recorded in sales and marketing and the remaining $144,000 is included in restructuring charge as it related to employees terminated under the Company's
restructuring plan.

On
February 7, 2002, the Board of Directors approved an increase by an amount not to exceed 5% of the number of shares outstanding 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 the Purchase Plan, the Company issued approximately 365,049, 555,278 and
293,112

65

---

shares
to employees in the years ended December 31, 2003, 2002 and 2001, respectively. Under SFAS 123, compensation cost is recognized for the fair value of the employees' purchase
rights, which was estimated using the Black-Scholes option pricing model with no expected dividends, an expected life of approximately 2 months, and the following weighted-average assumptions:

Years ended December 31,2003

2002

2001Risk-free interest rate

.93
%
1.06
%
1.67
%Volatility

118
%
122
%
143
%


The
weighted-average fair value of the purchase rights granted in the years ended December 31, 2003, 2002, and 2001, was $1.22, $2.94 and $18.00, respectively.

The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with no expected dividends and the following weighted-average
assumptions:

Years ended December 31,2003

2002

2001Expected life

3.5 years

3.5 years

4.0 yearsRisk-free interest rate

2.9
%
1.93
%
3.82
%Volatility

118
%
122
%
143
%


We
have determined pro forma information regarding net income and earnings per share as if we had accounted for employee stock options under the fair value method as required by
SFAS 123. The fair value of these stock-based awards to employees was estimated using the Black-Scholes option pricing model. Please see Note 10 of Notes to Consolidated Financial
Statements for assumptions used in the Black-Scholes option pricing model. Had compensation cost for the Company's stock option plan and employee stock purchase plan been determined consistent with
SFAS 123, the Company's reported

66

---

net
income (loss) and net earnings (loss) per share would have been changed to the amounts indicated below (in thousands except per share data):

|                                                                                                                                            |  | Years Ended December 31, |        
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | -------
|
|Net loss as reported                                                                                                                        |  | $                        | (35,471
|Add: Stock-based compensation expense included in reported net loss, net of related tax effects                                             |  |                          | 342    
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |  |                          | (9,275 
|Pro forma net loss                                                                                                                          |  | $                        | (44,404
|Earnings per share:                                                                                                                         |  |                          |        
|Basicas reported                                                                                                                           |  | $                        | (1.08  
|Basicpro forma                                                                                                                             |  | $                        | (1.35  
|Dilutedas reported                                                                                                                         |  | $                        | (1.08  
|Dilutedpro forma                                                                                                                           |  | $                        | (1.35  

Reverse Stock Splits

On July 24, 2002, the Company announced that its Board of Directors had approved a one-for-nine reverse split of its common stock.
The reverse split was effective as of 8:00 p.m. Eastern Daylight Time on July 29, 2002. Each nine shares of outstanding common stock of the Company automatically converted into one share
of common stock. The Company's common stock began trading on a post-split basis at the opening of trading on the Nasdaq National Market on July 30, 2002.

The
accompanying consolidated financial statements and related financial information contained herein have been retroactively restated to give effect for the July, 2002 reverse stock
split and the February 2000 and September 1999 stock splits.

Earnings Per Share Information

Basic loss per share is computed using the weighted-average number of shares of common stock outstanding less shares subject to repurchase. Diluted loss per share
is computed using the weighted-average number of shares of common stock outstanding and, when dilutive, common equivalent shares from outstanding stock options and warrants using the treasury stock
method and shares subject to repurchase. The following table sets forth the basic and diluted loss per share computational data for the periods presented. Excluded from the computation of diluted
earnings per share for the years

67

---

ended
December 31, 2003, 2002 and 2001, are options and warrants to acquire 1,231,000, 552,000, and 1,229,000 shares of common stock, respectively, because their effects would be
anti-dilutive.

|                                                                           |                               | Years Ended December 31,                                                                                 |        
|-------------------------------------------------------------------------- | ----------------------------- | -------------------------------------------------------------------------------------------------------- | -------
|
|
|Net loss                                                                   |                               | $                                                                                                        | (35,471
|                                                                           |                               |                                                                                                          |        
|Weighted-average common shares outstanding to compute basic loss per share |                               |                                                                                                          | 32,800 
|Weighted-average common equivalent shares outstanding:                     |                               |                                                                                                          |        
|                                                                           | Employee common stock options |                                                                                                          |        
|                                                                           | Common stock warrant          |                                                                                                          |        
|                                                                           |                               | Total weighted-average common and common equivalent shares outstanding to compute diluted loss per share |        
|                                                                           |                               |                                                                                                          |        
|Basic loss per share                                                       |                               | $                                                                                                        | (1.08  
|                                                                           |                               |                                                                                                          |        
|Diluted loss per share                                                     |                               | $                                                                                                        | (1.08  
|                                                                           |                               |                                                                                                          |        

Foreign Currency Transactions

The functional currency of the Company's foreign subsidiaries is the U.S. dollar. Foreign exchange gains and losses resulting from the remeasurement of foreign
currency assets and liabilities are included in other income (expense), net in the Consolidated Statements of Operations.

Comprehensive Loss

Comprehensive loss includes the Company's net loss and all changes in equity during a period except those resulting from investments by or distributions to
owners.

For
the years ended December 31, 2003, 2002 and 2001, comprehensive loss was $35.6 million, $165.2 million and $837.2 million, respectively. The components of
other comprehensive loss for these periods relate solely to unrealized gains and losses on available-for-sale investments.

Income Taxes and Deferred Tax Assets

Income taxes are computed using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred
tax assets and liabilities for the future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns. The measurement of current and
deferred tax assets and liabilities is based on provisions
of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that,
based on available evidence, are not expected to be realized.

68

---



The Company analyzes its deferred tax assets with regard to potential realization. The Company has established a valuation allowance on its deferred tax assets to
the extent that management has determined that it is more likely than not that some portion or all of the deferred tax asset will not be realized based upon the uncertainty of their realization. The
Company has considered estimated future taxable income and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance.

Segment and Geographic Information

The
Company operates in one segment, electronic commerce business solutions. The Company's chief operating decision maker is considered to be the Company's CEO. The CEO reviews financial
information presented on a consolidated basis accompanied by disaggregated information about revenues by geographic region and by product for purposes of making operating decisions and assessing
financial performance.

Reclassifications

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

New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." FIN 46 expands upon and
strengthens existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. A variable interest entity
is a corporation, partnership, trust, or any other legal structure used for business purposes that either (i) does not have equity investors with voting rights or (ii) has equity
investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires a variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's residual returns or both. The consolidation requirements
of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period
beginning after December 15, 2003. Disclosure requirements apply to any financial statements issued after January 31, 2003. We do not expect the adoption of SFAS 146 to have a
material impact on our consolidated financial position, results of operations or cash flows.

In
May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS 150 requires that
certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected include mandatorily redeemable
stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets and certain obligations that can be settled with shares
of stock. SFAS 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. We do not expect the adoption of

69

---

SFAS 150
to have a material impact on our consolidated financial position, results of operations or cash flows.

Note 2Acquired and Disposed Businesses

Keyeon

On June 29, 2001, the Company completed its acquisition of Keyeon, LLC ("Keyeon"), formerly a joint venture in which the Company held an interest of
approximately 36%. The acquisition was completed primarily to obtain technology to extend functionality of the Company's existing products. As consideration for the remaining interest in Keyeon, the
Company issued 301,475 shares of its common stock valued at $13.6 million to the other former participants in the joint venture which resulted in the Company owning 100% of the outstanding
shares of Keyeon, LLC. The acquisition was accounted for as a purchase. The acquired assets and assumed liabilities, and the related results of operations, are included in the consolidated financial
statements of the Company from the date of acquisition. The purchase price allocation is as follows (in thousands):

Purchase price, net of cash acquired

$
6,395Add: fair value of liabilities assumed


4,007Total purchase consideration


10,402Less: fair value allocated to acquired assets


3,104Excess of purchase consideration over acquired assets and assumed liabilities


7,298Excess allocated to:Acquired in-process technology


6,418Goodwill


880


At
December 31, 2002, accumulated amortization related to goodwill acquired in the Keyeon acquisition totaled $246,000. Amortization of goodwill ceased as of December 31,
2001. As discussed in Note 1, the Company will no longer amortize goodwill in accordance with SFAS 142 but will periodically test for impairment under the provisions of SFAS 142.
The Company estimated that $6.4 million of the purchase price for Keyeon represented acquired in-process technology that had not yet reached technological feasibility and had no
alternative future use. Accordingly, this amount was immediately charged to expense in the Consolidated Statements of Operations during the fourth quarter of 2001. The income approach methodology was
used to value the acquired in-process technology. Under the income approach, fair value reflects the present value of the projected free cash flows that will be generated by the products,
incorporating the acquired technologies under development, assuming they will be successfully completed. These cash flows are discounted at a rate appropriate for the risk of the asset. The rate of
return depends upon the stage of completion which was estimated at fifty percent. An overall after-tax discount rate of thirty percent was applied to the cash flows expected to be
generated by the products incorporating technology currently under development.

70

---

The
following summary, prepared on an unaudited pro forma basis, reflects the condensed consolidated results of operations for the years ended December 30, 2001 and 2000 assuming
Keyeon had been acquired at the beginning of the periods presented (in thousands, except per share data):

2001

2000Revenue

$
248,423

$
415,499Net loss

$
(834,071
)
$
(163,511
)Basic and diluted net loss per share

$
(27.18
)
$
(5.66
)


The
pro forma results are not necessarily indicative of what would have occurred if the acquisition had been in effect for the period presented. In addition, they are not intended to be
a projection of future results and do not reflect any synergies that might be affected from combined operations.

E-Publishing Corporation

On April 30, 2001 and May 15, 2001, the Company entered into agreements with third parties to sell certain assets and liabilities of
E-Publishing Corporation, a wholly-owned subsidiary of the Company, which the Company acquired as part of the acquisition of Interleaf in April 2000. The Company recorded a loss on
sale of assets of approximately $1.3 million. The loss was included in other expense in the Company's second quarter of 2001 Condensed Consolidated Statements of Operations.

Note 3Property and Equipment (in thousands):

December 31,2003

2002Furniture and fixtures

$
8,030

$
9,138Computer and software


49,041


49,579Leasehold improvements


20,842


21,45677,913


80,173Less accumulated depreciation and amortization


(62,513
)

(53,573
)Total property and equipment, net

$
15,400

$
26,600


Depreciation
expense for the years ended December 31, 2003, 2002 and 2001was $11.3 million, $18.2 million and $25.4 million, respectively. The Company
recorded asset impairments of approximately $515,000 during fiscal 2003 in connection with the Company's restructuring plan, which is included in the Company's restructuring charge recorded in the
Company's Statement of Operations. In 2002, the Company recorded a $3.1 million asset impairment as a result of the physical inventories of the Company's assets.

71

---

Note 4Goodwill and Other Intangibles

Goodwill and other intangibles consist of the following (in thousands):

December 31,2003

2002Goodwill

$
437,206

$
437,206Less: Accumulated amortization


(383,785
)

(383,785
)Goodwill, net


53,421


53,421Other intangibles

$
22,732

$
22,732Less: Accumulated amortization


(19,719
)

(18,833
)Other intangibles, net


3,013


3,899


On
January 1, 2002, the Company adopted SFAS 142,Goodwill and Intangible Assets.Under SFAS 142, goodwill and
intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment at least annually using a fair value approach, and whenever there is an impairment
indicator. Other intangible assets continue to be valued and amortized over their estimated lives. The following schedule shows the Company's reported net loss for periods prior to adoption of
SFAS 142 as adjusted to add back goodwill and assembled workforce amortization as if SFAS 142 had been adopted (in thousands, except per share amounts):

|                                      |                                            | December 31,        |        
|------------------------------------- | ------------------------------------------ | ------------------- | -------
|
|Reported Net Loss                     |                                            | $                   | (35,471
|                                      | Add back amortization:                     |                     |        
|                                      |                                            | Goodwill            |        
|                                      |                                            | Assembled workforce |        
|                                      |                                            |                     |        
|Adjusted net loss                     |                                            | $                   | (35,471
|                                      |                                            |                     |        
|Basic and diluted net loss per share: |                                            |                     |        
|                                      | Reported Net Loss                          |                     | $      
|                                      | Goodwill                                   |                     |        
|                                      | Assembled workforce                        |                     |        
|                                      |                                            |                     |        
|                                      | Adjusted basic net (loss) income per share |                     | $      
|                                      |                                            |                     |        

During
fiscal 2001, the Company recorded an impairment charge of $330.2 million related to goodwill and $6.2 million related to other intangible assets originally recorded
primarily as part of the Interleaf acquisition that closed on April 14, 2000.

Pursuant
to SFAS 142, the Company is required to test its goodwill for impairment upon adoption and annually or more often if events or changes in circumstances indicate that the
asset might be impaired. While there was no accounting charge to record upon adoption, at September 30, 2002, the Company concluded that, based on the existence of impairment indicators,
including a decline in its market value, it would be required to test goodwill for impairment. SFAS 142 provides for a two-stage

72

---

approach
to determining whether and by how much goodwill has been impaired. Since the Company has only one reporting unit for purposes of applying SFAS 142, the first stage requires a
comparison of the fair value of the Company to its net book value. If the fair value is greater, then no impairment is deemed to have occurred. If the fair value is less, then the second stage must be
completed to determine the amount, if any, of actual impairment. The Company completed the first stage and has determined that its fair value at September 30, 2002 exceeded its net book value
on that date, and as a result, no impairment of goodwill was recorded in the consolidated financial statements. The Company obtained an independent appraisal of fair value to support its conclusion.
Additionally, the Company concluded that, based upon the market value of its stock in relation to the Company's net book value at December 31, 2003 and 2002, there was no impairment of goodwill
as of December 31, 2003 and 2002.

The
process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment. In estimating the fair value of the Company, the Company made
estimates and judgments about future revenues and cash flows. The Company's forecasts were based on assumptions
that are consistent with the plans and estimates the Company is using to manage the business. Changes in these estimates could change the Company's conclusion regarding impairment of goodwill and
potentially result in a non-cash goodwill impairment charge, for all or a portion of the goodwill balance at December 31, 2003.

As
discussed in Note 1, upon adoption of SFAS 142, on January 1, 2002, the Company no longer amortizes goodwill. Additionally, upon adoption of SFAS 141 and
142, the Company no longer amortizes its non-technology based intangible asset, or assembled workforce. The remaining other intangible assets are being amortized on a
straight-line basis over their remaining useful life of 3 months as of December 31, 2002. Amortization expense was $886,000 in 2003.

Note 5Accrued Expenses

December 31,2003

2002(in thousands)Employee benefits

$
1,511

$
2,081Commissions and bonuses


1,519


2,027Sales and other taxes


7,983


11,956Restructuring


18,549


29,056Other


5,199


10,667$
34,761

$
55,787


73

---

Note 6Long-term Debt and Other Noncurrent Liabilities

Other noncurrent liabilities consist of the following:

December 31,2003

2002(in thousands)Restructuring (see Note 9)

$
86,831

$
67,139Other


578


1,067$
87,409

$
68,206


As
December 31, 2003 and December 31, 2002, outstanding term debt borrowings were approximately $1.9 million and $2.9 million, respectively. Borrowings bear
interest at the bank's prime rate (4.00% as of December 31, 2003 and December 31, 2002) and prime rate plus 1.25%. Principal and interest are due in monthly payments through maturity
based on the terms of the facilities. Principal payments of $977,000 are due annually from 2000 through 2004, $611,000 due in 2005, and a final payment of $357,000 due in 2006.

As
discussed in Note 13 of Notes to Consolidated Financial Statements, in March 2003, the Company renewed and amended its revolving credit facility. The amount available
under the revolving line of credit remains unchanged at $27.0 million. Borrowings under the revolving line of credit are collateralized by all of the Company's assets and bear interest at the
bank's prime rate (4.0% as of December 31, 2003).

Note 7Income Taxes

The components of income tax provision are as follows (in thousands):

Years Ended December 31,2003

2002

2001Current:Federal

$


$


$
State


244


175


121Foreign


195


372


2,015Total current


439


547


2,136Deferred:Federal





4,537


State





2,519


Total deferred





7,056


Total provision

$
439

$
7,603

$
2,136


74

---



The differences between the income tax provision (benefit) computed at the federal statutory rate of 35% and the Company's actual income tax provision for the
periods presented are as follows (in thousands):

Years Ended December 31,2003

2002

2001Expected income tax provision (benefit)

$
(12,262
)
$
(57,022
)
$
(290,797
)Expected state income taxes (benefit), net of federal tax benefit


(1,683
)

(8,961
)

(45,697
)California net operating loss reduction


1,186


2,914


Foreign taxes


663


2,361


2,015Utilization of foreign net operating loss carryforwards


(533
)

(2,413
)

(390
)Change in valuation allowance


11,546


67,070


109,802Foreign losses not benefited


1,542


2,353


2,154Non deductible goodwill and intangible amortization


355


1,418


221,724Write off of acquired in-process technology








2,599Tax credits


(351
)

(758
)

Other


(24
)

641


726Income tax provision

$
439

$
7,603

$
2,136


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

|                                         |                                      | December 31,              |       
|---------------------------------------- | ------------------------------------ | ------------------------- | ------
|
|Deferred tax assets:                     |                                      |                           |       
|                                         | Depreciation and amortization        |                           | $     
|                                         | Accrued liabilities                  |                           |       
|                                         | Capitalized research and development |                           |       
|                                         | Net operating losses                 |                           |       
|                                         | Tax credits                          |                           |       
|                                         | Other                                |                           |       
|Unrealized loss on marketable securities |                                      |                           | 6,074 
|                                         |                                      |                           |       
|                                         |                                      | Total deferred tax assets |       
|                                         | Less valuation allowance             |                           |       
|                                         |                                      |                           |       
|                                         |                                      |                           | 10,533
|                                         |                                      |                           |       
|Deferred tax liabilities                 |                                      |                           |       
|                                         | State tax liability                  |                           |       
|                                         |                                      |                           |       
|                                         |                                      | Net deferred tax asset    |       
|                                         |                                      |                           |       

The
Company has provided a valuation allowance for all of its deferred tax assets as of December 31, 2003 due to the uncertainty regarding their future realization. The total
valuation

75

---

allowance
increased $11,546,000 from December 31, 2002 to December 31, 2003. None of the increase in the valuation allowance relates to income tax benefits arising from the exercise of
stock options that will be credited directly to stockholder's equity. The increase in the valuation allowance relates entirely to net operating losses and accrued liabilities.

As
of December 31, 2003, the Company had federal and state operating loss carryforwards of approximately $440,380,246 and $97,570,000 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 $11,058,000 and $2,222,000 respectively,
available to offset future tax liabilities. The Company's federal net operating loss and tax credit carryforwards expire in the years 2003 through 2023, if not utilized. The state net operating loss
carryforwards expire
in the years 2004 through 2013. The state research and development credits can be carried forward indefinitely.

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

Note 8Commitments and Contingencies

On February 15, 2002, BroadVision and Hewlett-Packard signed an agreement, which terminated Hewlett-Packard's rights to resell BroadVision software
effective February 15, 2002. In the event BroadVision becomes insolvent, files a petition for relief under the United States Bankruptcy Code, or materially breaches the agreement,
Hewlett-Packard will have rights to a limited term license for BroadVision's business-to-business customer portals software products and a limited use license for BroadVision's
One-to-One Enterprise software product. Hewlett-Packard's license will be limited in term until such time as Hewlett-Packard has received monies for sale of the products up to
a maximum of $12.0 million. In addition, the Company will pay back to Hewlett-Packard a portion of the unused prepaid royalty payments, received from Hewlett-Packard in prior periods totaling
approximately $2.4 million. This amount was included in Unearned Revenue as of December 31, 2001, and this amount was reclassified to Accrued Liabilities in fiscal 2002. As of
December 31, 2003, amounts due were paid in full.

Warranties and Indemnification

The Company provides a warranty to its customers that its software will perform substantially in accordance with documentation typically for a period of
90 days following receipt of the software. The Company also indemnifies certain customers from third-party claims of intellectual property infringement relating to the use of its products.
Historically, costs related to these guarantees have not been significant and the Company is unable to estimate the maximum potential impact of these guarantees on its future results of operations.

The
Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer is, or was, serving in such capacity. The term of the
indemnification period is for so long as such officer or director is subject to an indemnifiable event by reason of the

76

---

fact
that such person was serving in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however,
the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts paid. As a result of the Company's insurance policy
coverage, the Company believes the estimated fair value of these indemnification agreements is insignificant. Accordingly, the Company has no liabilities recorded for these agreements as of either
September 30, 2003 or December 31, 2002. The Company assesses the need for an indemnification reserve on a quarterly basis and there can be no guarantee that an indemnification reserve
will not become necessary in the future.

Leases

The Company leases its headquarters facility and its other facilities under noncancelable operating lease agreements expiring through the year 2013. Under the
terms of the agreements, the Company is required to pay property taxes, insurance and normal maintenance costs.

A
summary of total future minimum lease payments under noncancelable operating lease agreements, including future minimum lease payments for properties that are part of restructuring is
as follows (in thousands):

Year Ended December 31,

Total future
minimum lease
payments2004

$
25,2282005


24,6922006


21,6142007


18,8032008


14,6132009 and thereafter


75,048Total minimum lease payments

$
179,998


As
of December 31, 2003, $90.3 million of future minimum lease payments, net of anticipated sublease income, is included in the Company's restructuring accruals. The
restructuring accruals are net of approximately $49.4 million of sublease income of which approximately $31.2 million represents estimated sublease income for sublease agreements yet to
be negotiated and the remaining $18.2 million represents sublease income to be received under non-cancelable sublease agreements signed by December 31, 2003. See
Note 9 of Notes to Consolidated Financial Statements for additional information.

Equity Investments

In January 2000, the Company entered into a limited partnership agreement with a venture capital firm under which it is obligated to contribute capital
based upon the periodic funding requirements. The total capital commitment is $2.0 million, of which $1.1 million has been contributed through

77

---

December 31,
2003. The remaining $.9 million will be contributed in future periods based upon the capital requirements of the fund.

Standby Letter of Credit Commitments

Commitments totaling $19.8 million, of which $16.2 million are classified as non-current restricted cash and investments, and
$16.7 million in the form of standby letters of credit were issued on the Company's behalf from financial institutions as of December 31, 2003 and December 31, 2002, respectively,
in favor of the Company's various landlords to secure obligations under the Company's facility leases.

Legal Proceedings

On June 7, 2001, Verity, Inc. filed suit against the Company alleging copyright infringement, breach of contract, unfair competition and other
claims. The Company has answered the complaint denying all allegations. In August 2003, the Company reached a confidential settlement with Verity, Inc. with respect to our outstanding
litigation. The detailed terms and conditions of this settlement are confidential and cannot be disclosed without the consent of each party. The settlement did not have a material effect on the
Company's business, financial condition or results of operations.

On
July 18, 2002, Avalon Partners, Inc., doing business as Cresa Partners ("Cresa"), filed a suit against the Company in the Superior Court of the State of California, San
Mateo County, claiming broker commissions related to the Company's termination and restructuring of certain facilities leases associated with our restructuring plans taken during the second quarter of
2002. The Company settled with Avalon Partners, Inc., doing business as Cresa Partners ("Cresa") with a one-time payment of $2.2 million to Cresa in April 2003.

The
Company is also subject to various other claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the
ultimate disposition of these matters is not expected to have a material effect on the Company's business, financial condition or results of operations. Although management currently believes that the
outcome of other outstanding legal proceedings, claims and litigation involving the Company will not have a material adverse effect on its business, results of operations or financial condition,
litigation is inherently uncertain, and there can be no assurance that existing or future litigation will not have a material adverse effect on the Company's business, results of operations or
financial condition.

Note 9Restructuring

The Company approved restructuring plans to, among other things, reduce its workforce and consolidate facilities. Restructuring and asset impairment charges were
taken to align the Company's cost structure with changing market conditions and to create a more efficient organization. A pre-tax charge of $35.4 million, $110.4 million and
$153.3 million was recorded during fiscal 2003, 2002 and 2001, respectively, to provide for these actions and other related items. The Company recorded the low-end of a range of
assumptions modeled for the restructuring charges, in accordance with SFAS No. 5,Accounting for Contingencies. Adjustments to the restructuring
reserves will be made in future periods, if necessary, based upon the then current actual events and circumstances.

78

---

Activity
related to the restructuring plans initiated prior to January 1, 2003 is accounted for in accordance with EITF 94-3. Plans initiated during 2003 were
accounted for in accordance with FAS 146, with the exception of amounts that were the result of changes in estimates to restructuring plans that were initiated prior to January 1, 2003.
The charges for lease cancellations and commitments under FAS 146 were $21.7 million. FAS 146 requires a present value calculation be applied to these charges. In fiscal 2003,
there were charges of $11.6 million for lease cancellations and commitments that were accounted for in accordance with EITF 94-3.

As
of December 31, 2003, the total restructuring accrual was $105.4 million under EITF 94-3 and FAS 146. Of the total accrual $18.6 million is
current and $86.8 million is noncurrent. (See Note 5 and Note 6)

The
following table summarizes the activity related to the restructuring plans initiated in 2003, and accounted for in accordance with FAS 146, for the twelve months ended
December 31, 2003 (in thousands):

|                             |                                                     | Accrued restructuring costs at Dec. 31, 2002 |   | Amounts charged to restructuring costs and other |   | Amounts paid or written off |        | Accrued restructuring costs at
Dec. 31, 2003
|---------------------------- | --------------------------------------------------- | -------------------------------------------- | - | ------------------------------------------------ | - | --------------------------- | ------ | --------------------------------------------
|Year Ended December 31, 2003 |                                                     |                                              |   |                                                  |   |                             |        |                                             
|                             | Lease cancellations and commitments                 |                                              | $ |                                                 |   | $                           | 21,683 |                                             
|                             | Termination payments to employees and related costs |                                              |   |                                                 |   |                             | 1,535  |                                             
|                             | Write-off on disposal of assets and related costs   |                                              |   |                                                 |   |                             | 515    |                                             
|                             |                                                     |                                              |   |                                                  |   |                             |        |                                             
|                             |                                                     | $                                            |  |                                                  | $ | 23,733                      |        | $                                           
|                             |                                                     |                                              |   |                                                  |   |                             |        |                                             

79

---

The
following table summarizes the activity related to the restructuring plans initiated prior to January 1, 2003, and accounted for in accordance with EITF 94-3 (in
thousands):

|                                                    |  | Accrued restructuring costs, beginning |        | Amounts charged to restructuring costs and other |   | Amounts reversed to restructuring costs and other |   | Amounts paid or written off |     | Accrued restructuring costs, ending
|--------------------------------------------------- |  | -------------------------------------- | ------ | ------------------------------------------------ | - | ------------------------------------------------- | - | --------------------------- | --- | -----------------------------------
|Year Ended December 31, 2001                        |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Lease cancellations and commitments                 |  | $                                      |       |                                                  | $ | 106,962                                           |   | $                           |    |                                    
|Termination payments to employees and related costs |  |                                        |       |                                                  |   | 9,121                                             |   |                             |    |                                    
|Write-off on disposal of assets and related costs   |  |                                        |       |                                                  |   | 37,201                                            |   |                             |    |                                    
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|                                                    |  | $                                      |       |                                                  | $ | 153,284                                           |   | $                           |    |                                    
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Year Ended December 31, 2002                        |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Lease cancellations and commitments                 |  | $                                      | 89,859 |                                                  | $ | 82,851                                            |   | $                           |    |                                    
|Termination payments to employees and related costs |  |                                        | 817    |                                                  |   | 7,644                                             |   |                             |    |                                    
|Write-off on disposal of assets and related costs   |  |                                        | 113    |                                                  |   | 19,954                                            |   |                             |    |                                    
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|                                                    |  | $                                      | 90,789 |                                                  | $ | 110,449                                           |   | $                           |    |                                    
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Year Ended December 31, 2003                        |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|Lease cancellations and commitments                 |  | $                                      | 94,691 |                                                  | $ | 11,649                                            |   | $                           |    |                                    
|Termination payments to employees and related costs |  |                                        | 1,425  |                                                  |   | 41                                                |   |                             |    |                                    
|Write-off on disposal of assets and related costs   |  |                                        | 79     |                                                  |   | (41                                               | ) |                             | (26 | )                                  
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    
|                                                    |  | $                                      | 96,195 |                                                  | $ | 11,649                                            |   | $                           | (26 | )                                  
|                                                    |  |                                        |        |                                                  |   |                                                   |   |                             |     |                                    

The nature of the charges in 2003 are as follows:



80

---



Sublease income to be received under non-cancelable sublease agreements signed prior to December 31, 2003

$
18,183Estimated sublease income for sublease agreements yet to be negotiated


31,175Total estimated sublease income

$
49,358


We
expect to pay the following future minimum lease payment amounts related to restructured or abandoned leased space through October 2013 (in thousands):

Years Ending December 31,2004

$
18,0152005


16,4642006


14,8512007


13,7962008


7,6592009 and thereafter


40,074Total minimum lease payments

$
110,859


Of
these amounts, $18.0 million is due within the twelve months ending December 31, 2004, and has been classified as a current liability in the accompanying condensed
consolidated balance sheet. Actual future cash requirements may differ materially from the accrual at December 31, 2003, particularly if actual sublease income is significantly different from
prospective estimates.

During
the twelve months ended December 31, 2003, the Company recorded a facilities-related restructuring charge of $33.8 million. This charge related to the Company's
revisions of estimates with respect to the planned future occupancy and anticipated future subleases. These revisions were necessary due to a reduction in planned future BroadVision space needs and a
further decline in the market for commercial real estate. The Company estimated future sublease timing and rates based upon current market indicators and information obtained from a third party real
estate expert.

Actual
future cash requirements may differ materially from the restructuring accruals at December 31, 2003, particularly if actual sublease income is significantly different from
current estimates. Adjustments to the restructuring accruals will be made in future periods, if necessary, based upon the then current actual events and circumstances.

During
fiscal 2001 and fiscal 2002, the Company approved restructuring plans to, among other things, reduce its workforce and consolidate facilities. These restructuring and asset
impairment charges were taken to align the Company's cost structure with changing market conditions and to create a more efficient organization. A pre-tax charge of $110.4 million
was recorded during fiscal 2002 and a pre-tax charge of $153.3 million was recorded during fiscal 2001 to provide for these actions and other related items. The Company recorded the
low-end of a range of assumptions modeled for the restructuring charges, in accordance with SFAS No. 5,Accounting for Contingencies.
The high-end of the range was

81

---

estimated
at $117.8 million for the charge related to fiscal 2002. Adjustments to the restructuring reserves will be made in future periods, if necessary, based upon the then current actual
events and circumstances.

The
nature of the charges in 2002 are as follows:

Severance
and benefits and otherThe Company recorded a charge of approximately $8.7 million during fiscal year ended December 31, 2002 related to severance
benefits to terminated employees in the United States and various international locations. Costs incurred include severance, payroll taxes and COBRA benefits. Included in the $8.7 million is
$107,000 of non-cash charges. These non-cash charges represent a one-time compensation charge taken as a result of granting certain terminated employees extended
vesting of stock options beyond the standard vesting schedule for terminated employees. The compensation charge was calculated using the Black-Schools option pricing model. Approximately $817,000 of
severance and benefits related costs remained accrued as of December 31, 2001 as a result of the Company's 2001 restructuring plan. Approximately $8.0 million of severance and benefits
and other costs had been paid out during fiscal 2002 and the remaining $1.5 million of severance, payroll taxes and COBRA benefits is expected to be paid in full by December 31, 2003.
The Company's restructuring plan included plans to terminate the employment of approximately 430 employees in North and South America and approximately 95 employees throughout Europe and Asia/Pacific
during the first three quarters of fiscal 2002, impacting all departments within the Company. The employment of approximately 525 employees was terminated during fiscal year 2002. As a result of these
reductions, the Company expects annual salary savings of approximately $44.6 million.

Facilities/Excess
AssetsDuring fiscal year 2002, the Company revised its estimates and expectations with respect to its facilities disposition efforts due to further
consolidation and abandonment of additional facilities and to account for changes in estimates used in the Company's 2001 restructuring plan based upon actual events and circumstances. Total lease
termination costs include the impairment of related assets, remaining lease liabilities and brokerage fees offset by estimated sublease income. The estimated costs of abandoning these leased
facilities, including estimated sublease income, were based on market information analyses provided by a commercial real estate brokerage firm retained by the Company. Based on the factors above, a
facilities/excess assets charge of $101.7 million was recorded during fiscal year 2002 and includes non-cash asset impairment charges of approximately $18.9 million.

Approximately
$89.9 million of facilities related costs remained accrued as of December 31, 2001 as a result of the Company's 2001 restructuring plan. Net cash payments
during fiscal year 2002 related to abandoned facilities amounted to $78.0 million. Actual future cash requirements may differ materially from the accrual at December 31, 2002,
particularly if actual sublease income is significantly different from historical estimates. As of December 31, 2002, $94.7 million of lease termination costs, net of anticipated
sublease income, is expected to be paid by the end of the second quarter of fiscal 2013. The Company expects to pay approximately $26.9 million over the next twelve months and the remaining
$67.8 million from January 1, 2004 through June of fiscal 2013. The $94.7 million is net of approximately $44.8 million of estimated sublease income of which approximately
$28.8 million represents sublease agreements yet to be negotiated.

82

---

Note 10Stockholders' Equity

Convertible Preferred Stock

As of December 31, 2003, there were no outstanding shares of convertible preferred stock. The Board of Directors and the stockholders have approved
authorized shares of convertible preferred stock to 10,000,000.

Warrants

As of December 31, 2003, there were warrants outstanding to acquire 9,628 shares of common stock at an average price of $188. These warrants were issued in
1997 and 2000 in connection with revenue transactions. The warrants were valued using the Black-Scholes option-pricing model and revenues recorded net of the fair value of the warrants.

Common Stock

On July 24, 2002, the Company announced that its Board of Directors had approved a one-for-nine reverse split of its common stock.
The reverse split was effective July 29, 2002. Each nine shares of outstanding common stock of the Company automatically converted into one share of common stock. The accompanying consolidated
financial statements and related financial information contained herein have been retroactively restated to give effect for this stock split.

During
June 2001, the Company completed an acquisition in which it acquired Keyeon. Please see Note 2, Acquired Business, to Consolidated Financial Statements.

During
fiscal 2003 there were no increases in the aggregate number of shares of common stock available to be issued under the Company's Equity Incentive Stock Option Plan. During
May 2001, the Board of Directors and the stockholders approved an increase in the aggregate number of shares of
common stock available to be issued under the Company's Equity Incentive Stock Option Plan by 12,000,000 shares.

The
Company applies APB Opinion 25 and related interpretations when accounting for its stock option and stock purchase plans. As of December 31, 2002, the Company had reserved
96 million 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 date of grant. The vesting of individual options may vary but in each
case at least 25% of the total number of shares subject to options will become exercisable per year. These options generally expire ten years after the grant date. When an employee option is exercised
prior to vesting, any unvested shares so purchased are subject to repurchase by the Company at the original purchase price of the stock upon termination of employment. The Company's right to
repurchase lapses at a minimum rate of 20% per year over five years from the date the option was granted or, for new employees, the date of hire. Such right is exercisable only within 90 days
following termination of employment. There were 133 unvested shares that were repurchased by the Company during the year ended December 31, 2003 at a weighted-average price of $7.81. As of
December 31, 2002 and 2001, 270 and 7,952 shares were subject to repurchase.

83

---

The
Company's President and Chief Executive Officer ("CEO") has options to purchase 2,204,444 shares of common stock at an average exercise price of $30.16 per share. The table below is
a summary of grants as of December 31, 2003.

Date Granted

Options Granted

Options Price

Vested

Vesting Period (months)04/01/1995

500,000

$
4.00

500,000

6006/23/1999

500,000


60.00

450,000

6005/25/2001

500,000


66.51

322,917

4811/27/2001

4,444


35.01

4,444

2402/19/2002

55,555


18.63

25,463

4810/30/2002

644,445


2.16

187,964

48Totals

2,204,444




1,490,788


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

|                                                                 |  | Years ended December 31,
|---------------------------------------------------------------- |  | ------------------------
|
|
|Outstanding at beginning of period                               |  | 6,036                   
|Granted                                                          |  | 190                     
|Exercised                                                        |  | (170                    
|Forfeited                                                        |  | (1,928                  
|                                                                 |  |                         
|Outstanding at end of period                                     |  | 4,128                   
|                                                                 |  |                         
|Options exercisable at end of period                             |  | 2,060                   
|                                                                 |  |                         
|Weighted-average fair value of options granted during the period |  |                         
|                                                                 |  |                         

84

---



The
following table summarizes stock options outstanding under the plan as of December 31, 2003:

|              |  |       |  |      |  |   |        | Exercisable
|------------- |  | ----- |  | ---- |  | - | ------ | -----------
|
|
|$1.50$1.50   |  | 308   |  | 8.81 |  | $ | 1.50   |            
|2.162.16     |  | 771   |  | 8.83 |  |   | 2.16   |            
|2.367.92     |  | 1,178 |  | 8.71 |  |   | 5.33   |            
|8.5011.25    |  | 5     |  | 4.92 |  |   | 4.92   |            
|12.5031.93   |  | 215   |  | 5.87 |  |   | 22.71  |            
|35.0135.01   |  | 353   |  | 7.91 |  |   | 35.01  |            
|35.2560.00   |  | 623   |  | 5.46 |  |   | 56.48  |            
|66.5166.56   |  | 599   |  | 7.40 |  |   | 66.51  |            
|80.0987.19   |  | 21    |  | 7.01 |  |   | 87.17  |            
|121.94448.31 |  | 55    |  | 6.17 |  |   | 174.39 |            
|              |  |       |  |      |  |   |        |            
|              |  | 4,128 |  | 7.80 |  | $ | 27.17  |            

The
Company grants options outside of the Company's stock option plan. The terms of these options are generally identical to those granted under the Company's plan. A summary of options
outside of the plan is presented below:

|                                                                 |  | Years ended December 31,
|---------------------------------------------------------------- |  | ------------------------
|
|
|Outstanding at beginning of period                               |  | 2,471                   
|Granted                                                          |  | 178                     
|Exercised                                                        |  | (198                    
|Forfeited                                                        |  | (837                    
|                                                                 |  |                         
|Outstanding at end of period                                     |  | 1,614                   
|                                                                 |  |                         
|Exercisable at end of period                                     |  | 609                     
|                                                                 |  |                         
|Weighted-average fair value of options granted during the period |  |                         
|                                                                 |  |                         

85

---

The
following table summarizes stock options, granted outside the plan, outstanding as of December 31, 2003:

|              |  |       |  |      |  |   |        | Exercisable
|------------- |  | ----- |  | ---- |  | - | ------ | -----------
|
|
|$0.80$.80    |  | 50    |  | 2.16 |  | $ | .80    |            
|1.501.50     |  | 1,023 |  | 8.81 |  |   | 1.50   |            
|2.5530.50    |  | 338   |  | 7.98 |  |   | 9.86   |            
|31.93116.75  |  | 160   |  | 6.69 |  |   | 61.55  |            
|164.25241.88 |  | 39    |  | 6.30 |  |   | 241.55 |            
|381.94381.94 |  | 4     |  | 6.09 |  |   | 381.94 |            
|              |  |       |  |      |  |   |        |            
|              |  | 1,614 |  | 8.15 |  | $ | 15.96  |            

During
the year ended December 31, 2003 the Company recorded compensation expense of $342,000. This charge was recorded as a result of granting terminated employees continued
vesting of their stock options for a period beyond their actual termination date. The compensation charge was calculated using the Black-Scholes model. $131,000 of the charge is recorded in general
and administrative
expense, $67,000 is recorded in sales and marketing and the remaining $144,000 is included in restructuring charge as it related to employees terminated under the Company's restructuring plan.

During
the year ended December 31, 2002 the Company recorded compensation expense of $846,000. This charge was recorded as a result of granting terminated employees continued
vesting of their stock options for a period beyond their actual termination date. The compensation charge was calculated using the Black-Scholes model. $739,000 of the charge is recorded in general
and administrative expense and the remaining $107,000 is included in restructuring charge as it related to employees terminated under the Company's restructuring plan.

During
the second quarter of 2001, the Company announced a voluntary stock option exchange program, or Offer, for its employees and directors. Under the program, BroadVision employees
and directors had the opportunity, if they so chose, to cancel outstanding "underwater" stock options, which were options that had an exercise price that was higher than the price of the Company's
Common Stock on the date that the Offer expired, previously granted to them in exchange for an equal number of new options to be granted at a future date. The Offer remained outstanding until
5:00p.m., Pacific Daylight Time, on May 25, 2001 (the "Expiration Date"). The exercise price of the new options was equal to the fair market value of our common stock on the date of grant,
which was November 27, 2001. Acceptance of the Offer required a participant electing to exchange any underwater options to also exchange any other options granted to him or her during the six
months before or after the Expiration Date. The exchange program was designed to comply with FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, and is
not expected to result in any additional compensation charges or variable plan accounting. Employees located in Sweden were not eligible for this program. A total of 937 individuals elected to
participate in the Offer. These individuals tendered a total of 2.7 (just divided by 9) million options to purchase common stock in return for the Company's promise to grant new options on the
grant date of November 27, 2001. A

86

---

total
of 1.1 million options were granted at the fair market value of $35.01 per share, the opening price of the Company's common stock on November 27, 2001, to those employees who had
been continuously employed with the Company from the date they tendered their original options through November 27, 2001.

Note 11Employee Benefit Plan

The
Company provides for a defined contribution employee retirement plan in accordance with section 401(k) of the Internal Revenue Code. Eligible employees are entitled to
contribute up to 50% of their annual compensation, subject to certain limitations ($12,000, with an additional $2,000 catch up for persons 50 years and older for the year ended
December 31, 2003).

Note 12Geographic, Segment and Significant Customer Information

The Company operates in one segment, electronic business commerce solutions. The Company's reportable segment includes the Company's facilities in North and South
America (Americas), Europe and Asia Pacific and the Middle East (Asia/Pacific). The Company's chief operating decision maker is considered to be the Company's CEO. The CEO reviews financial
information presented on a consolidated basis accompanied by disaggregated information about revenues by geographic region and by product for purposes of making operating decisions and assessing
financial performance.

The
disaggregated revenue information reviewed by the CEO is as follows (in thousands):

Years Ended December 31,2003

2002

2001Software licenses

$
30,230

$
40,483

$
101,480Services


35,839


36,763


87,083Maintenance


22,012


38,652


59,860Total Revenues

$
88,081

$
115,898

$
248,423


The
Company sells its products and provides services worldwide through a direct sales force and through a channel of independent distributors, value-added resellers ("VARs") and
application service providers ("ASPs"). In addition, the sales of the Company's products are promoted through independent professional consulting organizations known as systems integrators. The
Company provides services worldwide through its BroadVision Global Services Organization and indirectly through distributors, VARs, ASPs, and systems integrators. The Company currently operates in
three primary geographical territories, Americas, Europe and Asia/Pacific.

87

---

Disaggregated
financial information regarding the Company's products and services and geographic revenues is as follows (in thousands):

Years Ended December 31,2003

2002

2001Revenues:Americas

$
45,135

$
70,125

$
150,248Europe


35,458


39,511


75,130Asia/Pacific


7,488


6,262


23,045Total Company

$
88,081

$
115,898

$
248,423


During
the years ended December 31, 2003, 2002 and 2001 no customer accounted for 10% or more of the Company's revenues.

December 31,2003

2002Long-lived assets:Americas

$
73,016

$
84,727Europe


537


1,175Asia/Pacific


636


892Total Company

$
74,189

$
86,794


Note 13Subsequent Events

In February 2004, the Company renewed and amended its revolving credit facility. The amount available under the revolving line of credit remains unchanged
at $27.0 million. Borrowings under the revolving line of credit are collateralized by all of the Company's assets and bear interest at the bank's prime rate (4.00% per annum as of
March 1, 2004). At December 31, 2003, $27.0 million was outstanding. Interest is due monthly and principal is due at expiration. The amended and restated loan and security
agreement requires the Company to maintain certain levels in cash and cash equivalents and short-term investments (excluding long-term investments and equity investments).
Additionally, the amended and restated loan and security agreement requires the Company to maintain certain levels on deposit with the Company's commercial lender and certain quarterly net income
(loss) levels.

88

---



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

On April 8, 2002, we received notice from our independent public accountant Arthur Andersen LLP ("Andersen") of its resignation as our auditor as a result
of our plans to change independent public accountants for the fiscal year ending December 31, 2002 due to an anticipated future non-audit business relationship between the two
companies.

The
reports of Andersen on our financial statements for the fiscal year ended December 31, 2001 contained no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles.

During
our fiscal year ended December 31, 2001, and through April 8, 2002, there were no disagreements with Andersen on any matter of accounting principles or practices,
financial statement disclosures or auditing scope or procedures, which disagreements if not resolved to the satisfaction of Andersen would have caused them to make reference thereto in their report.

During
our fiscal year ended December 31, 2001, except as described below, there were no reportable events (as defined in Regulation S-K Item 304(a)(1)(v)). In
a letter dated March 30, 2001, Andersen informed us that they noted certain matters involving our internal controls that they considered to be reportable conditions under standards established
by the American Institute of Certified Public Accountants. The reportable conditions related to our purchase requisition processes and invoice processing procedures. Members of our Audit Committee of
the Board of Directors discussed this matter with Andersen. We have implemented procedures to address this matter. We have authorized Andersen to respond fully to the inquiries of the successor
accountant concerning this matter.

On
May 7, 2002, we engaged the services of BDO Seidman, LLP as our new independent auditors for our fiscal year ended December 31, 2002. Our Board of Directors, with the
recommendation of the Audit Committee of the Board of Directors, authorized and approved the engagement of BDO Seidman. In deciding to select BDO Seidman, the Audit Committee and our management
considered auditor independence issues raised by commercial relationships we have or may have with certain accounting firms. With respect to BDO Seidman, we do not have any commercial relationship
with BDO Seidman that would impair its independence. During our two most recent fiscal years ended
December 31, 2001, and the subsequent interim period through May 7, 2002, we did not consult with BDO Seidman regarding any of the matters or events set forth in Item
304(a)(2)(i) and (ii) of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES

Our Chief Executive Officer and our Chief Financial Officer are responsible for establishing and maintaining "disclosure controls and procedures" (as defined in
the rules promulgated under the Securities Exchange Act of 1934, as amended) for our company. Based on their evaluation of our disclosure controls and procedures (as defined in the rules promulgated
under the Securities Exchange Act of 1934), our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31,
2003, the end of the period covered by this report, subject to the improvement of our internal controls subsequent to the end of the third quarter as described below.

89

---

Changes in Internal Control Over Financial Reporting

As reported in our quarterly report on Form 10-Q for the third quarter ended September 30, 2003, subsequent to the end of such quarter
we implemented the following changes to our internal control over financial reporting:



These
additional procedures were implemented, in part, due to a material weakness letter we received from our independent accountants in October 2003. Management believes the new
controls address the
key issues raised in the material weakness letter. We will continue to monitor the effectiveness of our internal controls and procedures on an ongoing basis and will take further action, as
appropriate.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal
controls will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time,
controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and not be detected. Our disclosure controls and procedures are designed to provide reasonable assurance of
achieving their objectives, and our Chief Executive Officer and the Chief Financial Officer have concluded that these controls and procedures are effective at the "reasonable assurance" level.

PART III

Certain information required by Part III is incorporated by reference to this Report from the Company's definitive proxy statement for its 2004 Annual
Meeting of Stockholders to be filed pursuant to Regulation 14A (the "Proxy Statement").

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Other than the identification of executive officers, which is set forth in Part I, Item 1 hereof, the information required by this Item is
incorporated by reference to the sections entitled "Election of Directors", "Section 16(A) Beneficial Ownership Reporting Compliance" and "Code of Business Ethics and Conduct" in the content of
the Proxy Statement.

90

---

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the section entitled "Executive Compensation" in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference to the section entitled "Security Ownership of Certain Beneficial Owners and Management" and
"Equity Compensation Plan Information" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference to the section entitled "Certain Transactions" in the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference to the sections entitled "Independent Auditors' Fees" and "Pre-Approval Policies
and Procedures" in the Proxy Statement.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K





91

---





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 15th day of March 2004.

| |  | BROADVISION, INC.
| |  | -----------------
| |  | By:              

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Pehong Chen 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 CHENPehong Chen             |  | Chairman of the Board, Chief Executive
Officer and President (Principal Executive Officer) |  | March 15, 2004
|/s/WILLIAM E. MEYERWilliam E. Meyer   |  | Executive Vice President and Chief Financial Officer                                       |  | March 15, 2004
|/s/DAVID L. ANDERSONDavid L. Anderson |  | Director                                                                                   |  | March 15, 2004
|/s/TODD A. GARRETTTodd A. Garrett     |  | Director                                                                                   |  | March 15, 2004
|/s/KOH BOON HWEEKoh Boon Hwee         |  | Director                                                                                   |  | March 15, 2004
|                                      |  |                                                                                            |  |               

92

---

|/s/JAMES D. DIXONJames D. Dixon       |  | Director |  | March 15, 2004
|------------------------------------- |  | -------- |  | --------------
|/s/CARL PASCARELLACarl Pascarella     |  | Director |  | March 15, 2004
|/s/T. MICHAEL NEVENST. Michael Nevens |  | Director |  | March 15, 2004

93

---



REPORT ON FINANCIAL STATEMENT SCHEDULE  OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The audits referred to in our report dated January 22, 2004, relating to the consolidated financial statements of BroadVision, Inc., which is
contained in Item 8 of this Form 10-K, included the audit of the financial statement schedule listed in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based upon our audits. The financial statement schedule of
BroadVision, Inc. as of December 31, 2001 and for the year then ended were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on this
financial statement schedule, when considered in relation to the basic financial statements taken as a whole, in their report dated March 29, 2002.

In
our opinion, the financial statement schedule as of and for the years ended December 31, 2003 and 2002, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.

|/s/ BDO Seidman, LLP |  | 
|-------------------- |  | 

San
Jose, California
January 22, 2004

94

---



THIS IS A COPY OF THE REPORT PREVIOUSLY ISSUED IN CONNECTION WITH BROADVISION, INC.'S 2001 REPORT ON FORM 10-K AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.

REPORT ON FINANCIAL STATEMENT SCHEDULE  OF INDEPENDENT PUBLIC ACCOUNTANTS

To
the Board of Directors and Stockholders of BroadVision, Inc. and Subsidiaries:

We
have audited in accordance with auditing standards generally accepted in the United States of America, the consolidated financial statements of BroadVision, Inc. and
subsidiaries included in this annual report on Form 10-K and have issued our report thereon dated January 23, 2002. Our audits were made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The schedule, Schedule II, is the responsibility of the Company's management, is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

|/s/ ARTHUR ANDERSEN LLP |  | 
|----------------------- |  | 

San
Jose, California
March 29, 2002

95

---



BROADVISION, INC. AND SUBSIDIARIES  SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS  (in thousands)

|                                              |  | Balance at
Beginning of
Period |       | Charged to
Costs and
Expenses |   | Deductions(1) |   | Balance at End of
Period
|--------------------------------------------- |  | ------------------------------ | ----- | ----------------------------- | - | ------------- | - | ------------------------
|Allowance for doubtful accounts and reserves: |  |                                |       |                               |   |               |   |                         
|Year Ended December 31, 2003                  |  | $                              | 5,502 |                               | $ | (812          | ) | $                       
|                                              |  |                                |       |                               |   |               |   |                         
|Year Ended December 31, 2002                  |  | $                              | 8,194 |                               | $ | 3,979         |   | $                       
|                                              |  |                                |       |                               |   |               |   |                         
|Year Ended December 31, 2001                  |  | $                              | 4,015 |                               | $ | 8,298         |   | $                       
|                                              |  |                                |       |                               |   |               |   |                         

---

96

---



BROADVISION, INC. ANNUAL REPORT ON FORM 10-K DECEMBER 31, 2003    INDEX TO EXHIBITS

|Exhibit     |  | Description                                                                                                                                                                                                  
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1(1)      |  | Amended and Restated Certificate of Incorporation.                                                                                                                                                           
|3.2(13)     |  | Certificate of Amendment of Certificate of Incorporation.                                                                                                                                                    
|3.3(1)      |  | Amended and restated Bylaws.                                                                                                                                                                                 
|4.1(1)      |  | References are hereby made to Exhibits 3.1 to 3.2.                                                                                                                                                           
|4.3(1)      |  | Second Amended and Restated Investor's Rights Agreement dated April 15, 1996 among the Company and certain of its stockholders.                                                                              
|10.1(16)(a) |  | Equity Incentive Plan as amended May 1, 2002 (the "Equity Incentive Plan").                                                                                                                                  
|10.2(1)(a)  |  | Form of Incentive Stock Option under the Equity Incentive Plan.                                                                                                                                              
|10.3(1)(a)  |  | Form of Nonstatutory Stock Option under the Equity Incentive Plan.                                                                                                                                           
|10.4(1)(a)  |  | Form of Nonstatutory Stock Option (Performance-Based).                                                                                                                                                       
|10.5(16)(a) |  | 1996 Employee Stock Purchase Plan as amended May 1, 2002 (the "Employee Stock Purchase Plan").                                                                                                               
|10.6(1)(a)  |  | Employee Stock Purchase Plan Offering (Initial Offering).                                                                                                                                                    
|10.7(1)(a)  |  | Employee Stock Purchase Plan Offering (Subsequent Offering).                                                                                                                                                 
|10.8(1)(b)  |  | Terms and Conditions dated January 1, 1995 between IONA Technologies LTD and the Company.                                                                                                                    
|10.9(1)     |  | Series D Preferred Stock Option Agreement dated February 27, 1996 between the Company and Pehong Chen.                                                                                                       
|10.10(1)(a) |  | Stock Option Plan.                                                                                                                                                                                           
|10.11(1)(a) |  | Form of Incentive Stock Option under the Stock Option Plan.                                                                                                                                                  
|10.12(1)(a) |  | Form of Nonstatutory Stock Option under the Stock Option Plan.                                                                                                                                               
|10.13(2)    |  | Lease dated February 5, 1997 between the Company and Martin/Campus Associates, L.P.                                                                                                                          
|10.14(3)    |  | Loan and Security Agreement dated July 2, 1997 between the Company and Silicon Valley Bank.                                                                                                                  
|10.15(4)    |  | First Amendment to Loan and Security Agreement dated February 5, 1998 between the Company and Silicon Valley Bank.                                                                                           
|10.16(5)    |  | Agreement and Plan of Merger and Reorganization dated January 26, 2000 among the Company, Infiniti Acquisition Sub, Inc. and Interleaf, Inc.                                                                 
|10.17(6)    |  | Triple Net Building Lease dated April 12, 2000 between Pacific Shores Development LLC, as Lessor, and the Company, as Lessee, for Premises at Pacific Shores Center, Building 4, Redwood City, California.   
|10.18(6)    |  | Triple Net Building Lease dated February 15, 2000 between Pacific Shores Development LLC, as Lessor, and the Company, as Lessee, for Premises at Pacific Shores Center, Building 5, Redwood City, California.
|10.19(6)    |  | Triple Net Building Lease dated February 15, 2000 between Pacific Shores Development LLC, as Lessor, and the Company, as Lessee, for Premises at Pacific Shores Center, Building 6, Redwood City, California.
|10.20(7)(a) |  | 2000 Non-Officer Incentive Plan.                                                                                                                                                                             
|10.21(8)    |  | Lease dated March 21, 2000 between VEF III Funding LLC, as Landlord, and Interleaf, Inc., as Tenant, for premises located at 400 Fifth Avenue, Waltham, Massachusetts.                                       
|10.22(8)    |  | Amendment of Lease dated April 26, 2000 between VEF III Funding LLC, as Landlord, and Interleaf, Inc., as Tenant, for premises located at 400 Fifth Avenue, Waltham, Massachusetts.                          
|            |  |                                                                                                                                                                                                              

97

---

|10.23(9)(b)  |  | Independent Software Vendor Agreement dated June 30, 1998 between the Company and IONA Technologies, PLC, as amended.                                                                                                                                      
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.24(10)    |  | Fourth Loan Modification Agreement dated August 3, 2001 between the Company and Silicon Valley Bank.                                                                                                                                                       
|10.25(11)    |  | Loan Modification Agreement dated November 1, 2001 between the Company and Silicon Valley Bank.                                                                                                                                                            
|10.26(11)(a) |  | Offer Letter dated October 19, 2001 between the Company and Francis Barton.                                                                                                                                                                                
|10.27(12)    |  | Amended and Restated Loan and Security Agreement dated March 31, 2002 between the Company and Silicon Valley Bank.                                                                                                                                         
|10.28(14)    |  | Agreement to Resolve Certain Tenant Improvement Disputes with Respect to B-4, B-5 & B-6 dated January 8, 2002 between the Company and Pacific Shores Development LLC.                                                                                      
|10.29(14)    |  | First Amendment to Lease (Building 4 and 51700 and 1800 Seaport Boulevard) (Lease Termination and Mutual General Release Agreement) dated May 9, 2002 between the Company and Pacific Shores Development
LLC.                                             
|10.30(14)    |  | First Amendment to Lease (Building 61600 Seaport Boulevard) dated May 9, 2002 between the Company and Pacific Shores Development LLC.                                                                                                                     
|10.31(14)    |  | Offer Letter dated May 14, 2002 between the Company and Andrew Nash.                                                                                                                                                                                       
|10.32(15)    |  | Offer Letter dated September 3, 2002 between the Company and Philip L. Oreste.                                                                                                                                                                             
|10.33(15)    |  | Form of Indemnity Agreement between the Company and each of its directors and executive officers.                                                                                                                                                          
|10.34(17)    |  | Offer letter dated March 4, 2003 by and between the Company and William Meyer.                                                                                                                                                                             
|10.35(18)    |  | First Amendment to the Amended and Restated Loan and Security Agreement dated February 28, 2003 between the Company and Silicon Valley Bank.                                                                                                               
|10.36(18)    |  | Second Amendment to the Amended and Restated Loan and Security Agreement dated June 30, 2003 between the Company and Silicon Valley Bank.                                                                                                                  
|10.37(18)    |  | BroadVision, Inc. Change in Control Severance Benefit Plan, established effective May 22, 2003.                                                                                                                                                            
|10.38(18)    |  | BroadVision, Inc. Executive Severance Benefit Plan, established effective May 22, 2003.                                                                                                                                                                    
|10.39(18)    |  | Third Amendment to the Amended and Restated Loan and Security Agreement dated June 30, 2003 between the Company and Silicon Valley Bank.                                                                                                                   
|10.40        |  | Offer Letter dated June 28, 2002 between the Company and Warren Utt.                                                                                                                                                                                       
|10.41        |  | Offer Letter dated September 23, 2002 between the Company and Alex Kormushoff.                                                                                                                                                                             
|10.42        |  | Fourth Amendment to the Amended and Restated Loan and Security Agreement dated January 21, 2004 between the Company and Silicon Valley Bank.                                                                                                               
|10.43        |  | Fifth Modification to Amended and Restated Loan and Security Agreement dated February 27, 2004 between the Company and Silicon Valley Bank.                                                                                                                
|21.1         |  | Subsidiaries of the Company.                                                                                                                                                                                                                               
|23.2         |  | Consent of BDO Seidman, LLP.                                                                                                                                                                                                                               
|24.1         |  | Power of Attorney, pursuant to which amendments to this Annual Report on 10-K may be filed, is included on the signature pages hereto.                                                                                                                     
|31.1         |  | Certification of the Chief Executive Officer of BroadVision                                                                                                                                                                                                
|31.2         |  | Certification of the Chief Financial Officer of BroadVision                                                                                                                                                                                                
|32.1         |  | Certification of the Chief Executive Officer and Chief Financial Officer of BroadVision pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C.§ 1350, as adopted)

---

98

---

99

---



QuickLinks