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

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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                                            | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934    
|For the Year Ended December 31, 2002        
|OR                                          
|o                                            | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from            to

Commission File Number 0-28252

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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)

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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. o

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

As
of June 30, 2002, based on the closing sales price as quoted by the Nasdaq, 26,367,453 shares of Common Stock, having an aggregate market value of approximately $73,565,194
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 20, 2003, registrant had 32,477,569 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Proxy Statement for Registrant's 2003 Annual Meeting of Stockholders to be held May 28, 2003 are incorporated by reference in Part III
of this Form 10-K Report.

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BROADVISION, INC.  ANNUAL REPORT ON FORM 10-K  YEAR ENDED DECEMBER 31, 2002

TABLE OF CONTENTS

|Part I     |                                                                                                |     |   
|---------- | ---------------------------------------------------------------------------------------------- | --- | --
|Item 1.    | Business                                                                                       |     | 3 
|Item 2.    | Properties                                                                                     |     | 15
|Item 3.    | Legal Proceedings                                                                              |     | 15
|Item 4.    | Submission of Matters to a Vote of Security Holders                                            |     | 16
|Part II    |                                                                                                |     |   
|Item 5.    | Market for Registrant's Common Equity and Related Stockholder Matters                          |     | 17
|Item 6.    | Selected Consolidated Financial Data                                                           |     | 18
|Item 7.    | Management's Discussion and Analysis of Financial Condition and Results of
Operations          |     | 19
|Item 7A.   | Quantitative and Qualitative Disclosure About Market Risk                                      |     | 52
|Item 8.    | Financial Statements and Supplementary Data                                                    |     | 54
|Item 9.    | Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure           |     | 97
|Part III   |                                                                                                |     |   
|Item 10.   | Directors and Executive Officers of the Registrant                                             |     | 97
|Item 11.   | Executive Compensation                                                                         |     | 97
|Item 12.   | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |     | 98
|Item 13.   | Certain Relationships and Related Transactions                                                 |     | 98
|Item 14.   | Controls and Procedures                                                                        |     | 98
|Part IV    |                                                                                                |     |   
|Item 15.   | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               |     | 98
|SIGNATURES |                                                                                                | 100

BroadVision®,
BroadVision One-to-One® and iGuide® are trademarks and registered trademarks in the United States of America and other
countries of BroadVision and 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.

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PART I.

ITEM 1. BUSINESS

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, 2002, 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 
|                                                   | Extend and Expand our Product Portfolio                                                              |   
|                                                   | Develop 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 
|                                                   | BroadVision Portal Applications                                                                      |   
|                                                   | BroadVision Portal Framework                                                                         |   
|                                                   | BroadVision Portal Platform                                                                          |   
|                                                   | Key Capabilities of BroadVision's Solutions                                                          |   
|                                                   | Other Products                                                                                       |   
|                                                   | Product Development                                                                                  |   
|BroadVision Global Services                        |                                                                                                      | 9 
|                                                   | Consulting Services                                                                                  |   
|                                                   | Support Services                                                                                     |   
|                                                   | Training                                                                                             |   
|                                                   | Delivery Methodology                                                                                 |   
|                                                   | IGuide                                                                                               |   
|Strategic Alliances                                |                                                                                                      | 10
|Platform Partners                                  |                                                                                                      | 10
|System Integrators and Consulting Partners         |                                                                                                      | 11
|Application Service Providers                      |                                                                                                      | 11
|Technology Partners                                |                                                                                                      | 11
|Customers and Markets                              |                                                                                                      | 11
|Sales and Marketing                                |                                                                                                      | 12
|Competition                                        |                                                                                                      | 13
|Intellectual Property and Other Proprietary Rights |                                                                                                      | 14
|Reverse Stock Split                                |                                                                                                      | 14
|Employees                                          |                                                                                                      | 14
|Executive officers                                 |                                                                                                      | 15

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Overview and Industry Background

We develop, market, and support enterprise business 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.

As
of December 31, 2002, more than 1,200 companies and government entities around the globe used our applications to facilitate their portal-based commerce and information access
initiatives.

BroadVision
was founded in 1993 and has been a publicly traded corporation since 1996. BroadVision pioneered web-based e-commerce and was among the first to offer
pre-integrated, packaged applications to power enterprise business portals.

General
information about us can be found at 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 enterprise business portal applications allow organizations to unify and extend their key business applications, information, and business processes
by taking advantage of the power of the web and new wireless and mobile devices to 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 anytime, through any web device. BroadVision enterprise portal 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 growth,
reduces costs and improves productivity.

Our
products enable companies to organize 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 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.

Supporting
this application infrastructure, as of December 31, 2002, are more than 100 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.

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 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.

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BroadVision Business Strategies

Our objective is to be the leading provider of enterprise portal applications. To achieve this objective, we have adopted the following key strategies:

Extend and Expand our Product Portfolio.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:



Develop Targeted Application Solutions.We were among the first companies to introduce packaged web-based
applications for electronic commerce, financial services and knowledge management. We are extending our best of breed enterprise portal applications with new applications designed for specific
vertical industries. These applications are being developed in conjunction with industry leaders, system integration firms and key technology vendors.

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 enterprise 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 and personalized support programs for our customers.

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 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 enablement 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.

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The
strategies described above involve substantial risks. We may be unable to implement our strategies and these strategies, even if implemented, may not lead to successful achievement
of our objective. If we are unable to implement our strategies effectively, our business may be adversely affected.

BroadVision Solutions

BroadVision provides a complete enterprise portal 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 Portal Applications

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

BroadVision One-To-One® Commerce

BroadVision One-To-One Commerce is a cross-industry portal application for cost-effectively automating and managing the entire
sales process over the web. BroadVision One-To-One Commerce combines personalized, multi-channel, direct sales capabilities with the flexibility and collaboration capabilities
of BroadVision's integrated portal framework. BroadVision® eMarketing is an optional application module that gives business managers the ability to manage closed loop
marketing campaigns directly within the BroadVision One-To-One Commerce application. The eMarketing module enables business users to create, execute and track personalized
marketing campaigns through a graphical user interface.

BroadVision One-To-One® Portal

BroadVision One-To-One Portal is a cross-industry portal application for deploying personalized
business-to-employee, business-to-business and business-to-consumer portals. It allows companies to extend enterprise
information, resources and business processes to employees, partners and customers in a unified and collaborative way.

BroadVision® One-To-One® Content

BroadVision One-To-One Content allows organizations to maximize the value of their content assets by delivering personalized content to
customers, employees, and partners exactly the way they want it via web, wireless or print. BroadVision One-To-One Content effectively manages all types of business content
throughout its entire lifecycle from design, creation, and management through deployment and distribution.

BroadVision Portal Framework

The BroadVision portal framework unifies and integrates the appropriate technologies necessary for companies to deploy content-rich, process-aware,
user-centric portals.

BroadVision One-To-One® Enterprise

BroadVision One-To-One Enterprise is a scalable, reliable and mature application platform that enables organizations to deploy and manage
enterprise portal applications. It includes a system of

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integrated tools that support personalized interactions and transactions over the web and through other wireless devices.

BroadVision® Command Center

BroadVision Command Center is a rules-based personalization system that enables non-technical users to tailor content to the needs and interests of
different users. For example, communities of web site visitors can be defined by similar demographics, transaction levels or other attributes, making the web experience more relevant and compelling
for each user.

BroadVision® Deployment Center

BroadVision Deployment Center simplifies and standardizes the process of moving enterprise portal assets from development environments to staging and production
servers.

BroadVision® Integration Services

BroadVision Integration Services is an integration solution that enables BroadVision applications to connect directly to backend systems, unlocking valuable data
and business processes for use by everyone in the extended enterprise.

BroadVision® Multi-Touchpoint Services

BroadVision Multi-Touchpoint Services extend the reach of BroadVision-powered web sites to touchpoints across the enterprise including PDAs,
web-enabled phones, ATMs, kiosks, call centers, voice channels, and other similar devices.

BroadVision® Publishing Center

BroadVision Publishing Center is a web-based tool that allows non-technical business users to publish and edit content. It allows a
distributed team of content experts to manage every aspect of site content, including creation, editing, staging, production and archiving.

BroadVision® QuickSilver

BroadVision QuickSilver is a full-featured software package for creating and publishing long, complex documents in multiple output formats (including
HTML, PDF, Postscript and ASCII) across different platforms and networks. The XML Publisher extends the power and versatility of QuickSilver to include XML file interchange support.

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.

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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.

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.

Key Capabilities of BroadVision's Solutions

We have designed all BroadVision portal 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:



Other Products

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

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Product Development

We believe that our future success will depend in large part on our ability to enhance and extend the BroadVision enterprise portal application suite: portal
applications, portal 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, 2002, we had 115 employees in our product development organization. Our research and development expenses were $41.4 million in the year ended
December 31, 2002, $78.7 million in the year ended December 31, 2001 and $51.6 million in the year ended December 31, 2000.

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 help ensure success for businesses, including strategic services, implementation services, migration
services and ongoing training and support.

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 and a robust, highly scalable application ensure. BVGS leverages a global supply chain of certified professionals to provide customers with the
highest value at the lowest possible landed 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 Services

We have tiered our support 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.

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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 LiveCycle is a multi-disciplinary implementation process that integrates business, content management, 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 all the key
issues required to launch a high-performance and profitable site.

iGuide

iGuide is a web-based application that includes step-by-step instructions, tips and templates for every stage in
the implementation process.

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, we and our
partners can help organizations go live quickly with dynamic, interactive applications.

Platform Partners

Our platform partners are industry-leading firms that possess significant market share and technology leadership. Their products include hardware, operating
systems, network products and services and database systems. With BroadVision, they integrate their products with our suite of enterprise business portal applications and commit globally to develop
joint technology, marketing and selling programs with BroadVision.

IBM:BroadVision and IBM formed a partnership in September 2000 to integrate our full suite of BroadVision
applications on IBM's RS/6000 servers in conjunction with IBM's DB2 data management software. The resulting application platform provides customers with more choices for building and deploying their
e-business web sites. BroadVision and IBM will work to integrate the solutions with IBM WebSphere for Enterprise Java Beans integration with back-end systems. In addition, IBM
Global Services has created a practice of service professionals around the world to help customers implement
BroadVision applications. In December 2001, IBM and BroadVision entered into an agreement whereby we could resell IBM's WebSphere Application Server product as a component of BroadVision
solutions.

NCR Corporation:BroadVision and NCR, a leader in data warehousing and automatic teller machine (ATM) products, announced a
worldwide agreement in November 2000 that enables companies to drive business growth through personalized communications to consumers and businesses. Specifically, NCR and BroadVision are
developing software adapters between BroadVision enterprise

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business portal applications and NCR's world-class Teradata database, customer relationship management solutions and ATMs.

Sun Microsystems:BroadVision and Sun Microsystems formed an alliance in March 2000 that provides for joint
engineering, marketing and sales initiatives to develop, promote and sell next-generation e-commerce applications based on Sun's premier Java 2 Enterprise Edition (J2EE)
technology.

System Integrators and Consulting Partners

Our system integrators and consulting partners help customers plan and implement their enterprise business portal strategiesincluding integration
with front- and back-office systems. They have developed their own industry-leading technologies and best practices that complement our applications.

Application Service Providers

Our application service provider partners develop, host and support value-added application products based on our technology. These application products 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

Additionally, we have developed key technology partnerships with leading web- and wireless-focused companies in areas complementary to our solutions,
such as data analysis and reporting, enterprise application integration, enterprise web management, call center management, content management, voice recognition, payment processing, auctioning and
XML. These technology partnerships enhance
our ability to base our products on industry standards and to take advantage of current and emerging technologies. These alliances include companies such as SeeBeyond and WebMethods.

Customers and Markets

As of December 31, 2002, we had licensed our products to over 1,200 end-user customers and partners. During the years ended December 31,
2002, 2001 and 2000, 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 building innovative enterprise business portals to increase revenues, improve productivity and
reduce operational costs.

A
sample listing of our customers by industry follows:



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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, 2002, our
direct sales organization included 121 sales representatives, managers and sales support.

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, in Ontario 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, the People's Republic of China, including Hong Kong, the Republic of China
(Taiwan) and Singapore.

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
enterprise business portal 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 to design, and then develop and deploy, their
applications.

As
of December 31, 2002, 14 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:



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Competition

If we fail to compete successfully with current or future competitors, we may lose market share. The market for enterprise portal 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:



Many
of these competitors and other current and future competitors have longer operating histories and significantly greater financial, technical, marketing and other resources than
BroadVision. 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.

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Intellectual Property and Other Proprietary Rights

Our success and ability to compete are dependent to a significant degree on our proprietary technology. Although we hold a U.S patent, issued in
January 1998, on elements of the BroadVision One-To-One Enterprise product and a U.S. patent acquired as part of the Interleaf acquisition on the elements of the
extensible electronic document processing system for creating new classes of active documents, these patents may not provide an adequate level of intellectual property protection. In addition,
litigation like the lawsuit we filed against Art Technology Group, which was settled in February 2000, 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" and "BroadVision One-To-One" 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.

Reverse Stock Split

On July 24, 2002, we announced that our Board of Directors had approved a one-for-nine reverse split of our 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. Our 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 to the July 2002 stock split.

Employees

As of December 31, 2002, we employed a total of 449 full-time employees, of whom 285 are based in North America and South America, 131 in
Europe and 33 in Asia. Of these full-time employees, 135 are in sales and marketing, 115 are in product development, 170 are in global services and client support, and 29 are in finance,
administration and operations.

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.

14

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Executive Officers

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

|Name        |  | Age |  | Position                                                    
|----------- |  | --- |  | ------------------------------------------------------------
|Pehong Chen |  | 45  |  | Chairman of the Board, Chief Executive Officer and President
|Andrew Nash |  | 40  |  | Executive Vice President and Chief Operating Officer        

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.

Andrew Nashhas served as our Executive Vice President and Chief Operating Officer since May 2002. Prior to
joining BroadVision, Mr. Nash was Chief Executive Officer of Novaroo, Inc., a privately held strategy and corporate advisory firm. From 2000 to 2001, Mr. Nash served as Chief Executive
Officer of Collaborex, Inc., a collaborative commerce application service provider. From 1998 to 2000, Mr. Nash served in multiple roles at Baan Company N.V., an enterprise application provider
for industrial enterprises, ultimately serving as Executive Vice President, Services and member of the board of directors. Mr. Nash also held the positions of CEO, Coda plc, and President, Baan
Corporate Office
Solutions during his tenure at Baan. In 1995, Mr. Nash commenced the Asia Pacific operations International Consulting Solutions, a company acquired by Deloitte Consulting. After the
acquisition, Mr. Nash became a Partner of Deloitte Consulting and served on the Global Board of Management of Deloitte Consulting/ICS. Mr. Nash previously held management positions with
Oracle and Arthur Andersen. He received a Bachelor of Commerce from the University of Melbourne (Australia) and a Graduate Diploma in Computing from Monash University (Australia).

ITEM 2. PROPERTIES

Our principal administration, research and development, sales, consulting, training and support facilities are located in Redwood City, California, where we
occupy approximately 49,000 square feet pursuant to leases expiring through 2007.

Our
European headquarters are located in Green Park, Reading, in the United Kingdom where we currently occupy approximately 6,500 square feet.

In
addition, we have offices throughout the world to support the development, sales, marketing and support of our products and services. See "Sales and Marketing" above.

ITEM 3. LEGAL PROCEEDINGS

In April 2001, we filed a Form 8-K with the Securities and Exchange Commission reporting that several purported class action lawsuits
had been filed against us and certain of our officers and directors. In each of the lawsuits, the plaintiffs sought to assert claims on behalf of a class of all persons who purchased securities of
BroadVision between January 26, 2001 and April 2, 2001. The complaints alleged that BroadVision and the individual defendants violated federal securities laws in connection with our
reporting of financial results for the quarter ended December 31, 2000. The lawsuits were consolidated into a single action. On November 5, 2001, BroadVision and the individual
defendants filed motions to dismiss the consolidated complaint. On February 22, 2002, the Court granted these motions, dismissed the consolidated complaint without prejudice and ordered the
lead

15

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plaintiff to file an amended complaint within 30 days. On March 25, 2002, the plaintiff filed its Second Amended Consolidated Complaint, which added claims for breach of fiduciary duty
and named members of our board of directors as additional defendants. All defendants filed motions to dismiss the Second Amended Consolidated Complaint on May 10, 2002. The hearing on the
defendant's motion to dismiss was heard on August 30, 2002. On September 11, 2002, the Court (1) dismissed with prejudice the claims that the defendants violated federal
securities laws, on the basis that the complaint failed to state a claim upon which relief could be granted, and (2) dismissed without prejudice the claims for breach of fiduciary duty, on the
basis that the claims were made under state law and, in the absence of any remaining federal law claims, the Court would decline to exercise supplemental jurisdiction. We are
not aware of plaintiffs filing an appeal of the Court's September 11, 2002 decision or filing another complaint in any other court. We believe that the action was without merit and will
continue to defend ourselves vigorously should plaintiffs continue to pursue any of these claims.

On
June 7, 2001, Verity, Inc. filed suit against us alleging copyright infringement, breach of contract, unfair competition and other claims. We have answered the complaint
denying all allegations and are defending ourselves vigorously. The trial date is set for July 14, 2003 in San Jose, California, in the United States District Court, Northern District, San Jose
Division. We are unable to estimate the amount or range of any potential loss from this matter.

On
July 18, 2002, Avalon Partners, Inc., doing business as Cresa Partners, filed a suit against us in the Superior Court of the State of California, San Mateo County, claiming
broker commissions related to our termination and restructuring of certain facilities leases associated with our restructuring plans taken during the second quarter of 2002. The matter was settled by
way of a settlement agreement executed by both parties in March 2003 and the parties expect the lawsuit to be dismissed in the second quarter of fiscal 2003.

We
are 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 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 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 our business, results of operations or financial condition.

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

Not applicable.

16

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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 the common stock
as reported on the Nasdaq National Market:

High

LowFiscal Year 2002First Quarter

$
30.06

$
15.30Second Quarter


15.75


2.70Third Quarter


4.59


1.23Fourth Quarter


6.15


1.10Fiscal Year 2001First Quarter

$
164.88

$
40.32Second Quarter


76.32


20.88Third Quarter


47.61


6.12Fourth Quarter


35.64


7.11


As
of March 20, 2003, there were 1,971 holders of record of our common stock. On March 20, 2003, the last sale price reported on the Nasdaq National Market System for our
common stock was $4.07 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.

17

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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 of 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                                                 |                                              |                          | 68,856
|Operating expenses:                                          |                                              |                          |       
|                                                             | Research and development                     |                          |       
|                                                             | Sales and marketing                          |                          |       
|                                                             | General and administrative                   |                          |       
|                                                             | 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 (benefit)               |                          |       
|                                                             |                                              |                          |       
|                                                             | Net (loss) income                            |                          | $     
|                                                             |                                              |                          |       
|Net (loss) earnings per share:                               |                                              |                          |       
|Basic (loss) earnings per share                              |                                              | $                        | (5.32 
|                                                             |                                              |                          |       
|Shares used in computationbasic (loss) earnings per share   |                                              |                          | 32,036
|                                                             |                                              |                          |       
|Diluted (loss) earnings per share                            |                                              | $                        | (5.32 
|                                                             |                                              |                          |       
|Shares used in computationdiluted (loss) earnings per share |                                              |                          | 32,036
|                                                             |                                              |                          |       

|                                              |  | As of December 31, |           
|--------------------------------------------- |  | ------------------ | ----------
|
|
|Consolidated Balance Sheet Data:              |  |                    |           
|Cash and cash equivalents                     |  | $                  | 77,386    
|Working capital                               |  |                    | 5,616     
|Total assets                                  |  |                    | 240,136   
|Debt and capital leases, less current portion |  |                    | 1,945     
|Accumulated deficit                           |  |                    | (1,169,204
|Total stockholders' equity                    |  |                    | 41,633    

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

Overview

We develop, market and support 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. As of
December 31, 2002, more than 1,200 companies and government entities around the globe use our applications to facilitate their portal-based commerce and information access initiatives.

BroadVision
was founded in 1993 and has been a publicly traded corporation since 1996. BroadVision pioneered web-based e-commerce and was among the first to offer
pre-integrated, packaged applications to power enterprise business portals.

BroadVision's
enterprise portal applications allow organizations to unify and extend their key business applications, information, and business processes by taking advantage of the power
of the web and new wireless and mobile devices to 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 anytime, through any web. BroadVision enterprise portal 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 growth, reduces costs
and improves productivity.

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 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. 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.

Supporting
this application infrastructure, as of December 31, 2002, are more than 100 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.

We
market our products and services worldwide through a direct sales force and independent distributors, value-added resellers (VARs) and application service providers (ASPs). In
addition, our sales are promoted through independent professional consulting organizations, known as systems integrators. We have operations in North America, Europe, and Asia/Pacific.

BroadVision
Global Services (BVGS) organization provides a full spectrum of global services to help ensure success for businesses, including strategic services, implementation services,
migration services and ongoing training and maintenance.

19

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Recent Events

We have experienced a general downturn in the economy, our industry and our business since the beginning of 2001. This downturn is likely to continue in the
future and has had and could continue to have an impact on our future financial results. As discussed in Note 9 of Notes to Consolidated Financial Statements, we have recorded significant
restructuring charges in connection with our reduction in workforce and abandonment of certain operating facilities as part of our program to restructure our operations and related facilities
initiated in the second quarter of fiscal 2001. A pre-tax charge of $153.3 million was recorded during fiscal 2001 and $110.4 million was recorded during fiscal 2002 to
provide for these actions and other related items. Costs for the abandoned facilities were estimated to include the impairment of assets, remaining lease liabilities and brokerage fees partially
offset by estimated sublease income. Estimates related to sublease costs and income are based on assumptions regarding the period required to locate and contract with suitable sublessees and sublease
rates which were based upon market trend information analyses. Adjustments to the restructuring reserve will be made in future periods, if necessary, based upon the then current actual events and
circumstances.

On
July 18, 2002, Avalon Partners, Inc., doing business as Cresa Partners, filed a suit against us in the Superior Court of the State of California, San Mateo County, claiming
broker commissions related to our termination and restructuring of certain facilities leases associated with our restructuring plans taken during the second quarter of 2002. The matter was settled by
way of a settlement agreement executed by both parties in March 2003 and the parties expect the lawsuit to be dismissed in the second quarter of fiscal 2003.

On
May 9, 2002, the Company and Pacific Shores Development LLC ("PacShores") entered into (i) the First Amendment to Lease (Lease Termination and Mutual General
Release Agreement), made effective as of April 29, 2002 (the "Buildings 4 and 5 Termination Agreement") and (ii) the First Amendment to Lease made effective as of April 29,
2002 (the "Building 6 Amendment"). Under the Buildings 4 and 5 Termination Agreement, the Triple Net Building Lease dated April 12, 2000 between PacShores, as Lessor, and the
Company, as Lessee, for Premises at Pacific Shores Center, Building 4, Redwood City, California and the Triple Net Building Lease dated February 16, 2000 between
PacShores, as Lessor, and the Company, as Lessee, for Premises at Pacific Shores Center, Building 5, Redwood City, California, were terminated. In conjunction with the termination, PacShores
released all security deposits held by it relating to those premises and we paid to PacShores a total of $45.0 million as a termination fee (the "Termination Fee"). Under the Building 6
Amendment, the parties released each other from all claims and we agreed to provide an additional $3.5 million as security deposit in the form of letters of credit. This letter of credit is
included as restricted cash and investments in our Consolidated Balance Sheet as of December 31, 2002. We paid the Termination Fee in full during the second quarter of 2002 by payment of
approximately $20.0 million from existing cash and investments and by drawing down approximately $25.0 million from our line of credit. The $25.0 million line of credit is due in
February 2004.

On
April 8, 2002, we filed a Form 8-K with the Securities and Exchange Commission to report that we had received notice from our independent public accountant,
Arthur Andersen LLP, 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.

On
May 13, 2002, we filed a Form 8-K with the Securities and Exchange Commission to report our selection of our independent public accountants, BDO
Seidman, LLP, as auditors for the fiscal year ending December 31, 2002.

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

20

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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 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.

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
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. 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 No. 97-2, as amended by SOP No. 98-9. Revenues recognized from
multiple-element software arrangements are

21

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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
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 unearned 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.

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 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 estimated reductions to revenue for potential 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

As discussed in Note 4 to our Consolidated Financial Statements, 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 No. 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 No. 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 No. 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

22

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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, 2002 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 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, 2002.
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
we 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. Based upon this analysis, we recorded a valuation allowance for our
deferred tax assets during the three months ended June 30, 2002, which resulted in a charge of $6.3 million.

Accounting for Stock-Based Compensation

We apply Accounting Principles Board (APB) Opinion Number 25,Accounting for Stock Issued to Employees, and
related interpretations when accounting for our stock option and stock purchase plans. In accordance with APB No. 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, 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.

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
Number 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 the Company's stock
option plan and employee stock purchase plan been determined consistent with SFAS No. 123, the Company's reported net income (loss) and net earnings

23

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(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                                                                                                                        |  | $                        | (170,522
|Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects                                    |  |                          | 846     
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |  |                          | (47,979 
|Pro forma net loss                                                                                                                          |  | $                        | (217,655
|Earnings per share:                                                                                                                         |  |                          |         
|Basicas reported                                                                                                                           |  | $                        | (5.32   
|Basicpro forma                                                                                                                             |  | $                        | (6.80   
|Dilutedas reported                                                                                                                         |  | $                        | (5.32   
|Dilutedpro forma                                                                                                                           |  | $                        | (6.80   

Restructuring

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; and (iii) impairment costs related to certain long-lived assets abandoned. We
account for each of these costs in accordance with SEC 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)(EITF 94-3). 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 recorded by us are not associated with nor do they benefit continuing activities.

We
account for the costs associated with lease termination and/or abandonment in accordance with EITF 88-10. Accordingly, we record the costs associated with lease
termination and/or abandonment when the leased property has no substantive future use or benefit to us. Under EITF 88-10, we record 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. We account for costs related to long-lived assets abandoned in accordance
with SFAS 144 and, accordingly, charges to expense the net carrying value of the long-lived assets when we cease to use the assets.

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

24

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determining the Restructuring obligations related to facilities as of December 31, 2002, we reduced our lease obligations by estimated sublease income of $28.8 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 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.

25

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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                            |                             | 35                                    
|                    | Services                                     |                             | 65                                    
|                    |                                              |                             |                                       
|                    |                                              |                             | Total revenues                        
|Cost of revenues:   |                                              |                             |                                       
|                    | Cost of software licenses                    |                             | 7                                     
|                    | Cost of services                             |                             | 34                                    
|                    |                                              |                             |                                       
|                    |                                              | Total cost of revenues      |                                       
|                    |                                              |                             |                                       
|                    |                                              |                             | Gross profit                          
|Operating expenses: |                                              |                             |                                       
|                    | Research and development                     |                             | 36                                    
|                    | Sales and marketing                          |                             | 42                                    
|                    | General and administrative                   |                             | 14                                    
|                    | Goodwill and intangible amortization         |                             | 3                                     
|                    | Charge for acquired in-process technology    |                             |                                      
|                    | Restructuring charge                         |                             | 95                                    
|                    | Impairment of assets                         |                             | 3                                     
|                    | 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                              
|                    |                                              |                             |                                       

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Results of Operations

|                              |              | Software |         | %       |     | Services |   | %       |         | Total |    | % |        
|----------------------------- | ------------ | -------- | ------- | ------- | --- | -------- | - | ------- | ------- | ----- | -- | - | -------
|
|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
|                              |              |          |         |         |     |          |   |         |         |       |    |   |        
|Year Ended December 31, 2000: |              |          |         |         |     |          |   |         |         |       |    |   |        
|                              | Americas     |          | $       | 145,277 |     | 58       | % | $       | 128,339 |       | 78 | % | $      
|                              | Europe       |          |         | 80,531  |     | 32       |   |         | 27,011  |       | 16 |   |        
|                              | Asia/Pacific |          |         | 25,030  |     | 10       |   |         | 9,311   |       | 6  |   |        
|                              |              |          |         |         |     |          |   |         |         |       |    |   |        
|Total                         |              | $        | 250,838 |         | 100 | %        | $ | 164,661 |         | 100   | %  | $ | 415,499
|                              |              |          |         |         |     |          |   |         |         |       |    |   |        

Revenues

2002 versus 2001

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

The
60% 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.
Continued economic uncertainty affected the spending on information technology which significantly affected our license revenue during 2002.

The
49% decrease in professional 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. Maintenance related fees for technical support and product upgrades were $38.7 million in 2002 which compares to $59.9 million in 2002.

2001 versus 2000

Total revenues for the year ended December 31, 2001 decreased $167.1 million or 40% on a year-over-year basis, and consisted
of a decrease in software license revenue of $149.4 million or 60% and a decrease in professional services revenue of $17.7 million or 11%.

The
60% decrease in software license revenues is attributable to an overall decline in the economy throughout the 2001 fiscal year in comparison to the 2000 fiscal year. Continued
economic uncertainty affected the spending on information technology which significantly affected our license revenue during 2001.

The
11% decrease in professional 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. The decrease in overall professional services revenue was partially offset by an increase in maintenance related revenue derived from maintenance renewal agreements. Maintenance
related fees

27

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for technical support and product upgrades were $59.9 million in 2001 which compares to $46.2 million in 2000.

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.

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) |  | $                        | 8,144 
|Cost of services(2)          |  |                          | 38,898
|                             |  |                          |       
|Total cost of revenues(3)    |  | $                        | 47,042
|                             |  |                          |       

---

2002 versus 2001

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 writeoff of pre-paid royalties for software we no longer intend to utilize. This charge was taken during the fourth quarter of fiscal year 2002. Cost of software
licenses, excluding the prepaid royalty write-off, as a percentage of software license revenue were 12% in fiscal year 2002.

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 decrease in cost of services in absolute dollar terms and as a percentage of revenue during 2002 as compared to 2001 was the result of reductions in force that occurred
during the 2002 fiscal year, which resulted in decreased salary and salary-related expenses as well as a decreased use of third party consultants. Total employees in BVGS were 170 as of
December 31, 2002 as compared to 394 as of December 31, 2001.

2001 versus 2000

For the year ended December 31, 2001, cost of software licenses increased $2.1 million or 26% on a year-over-year basis.
Cost of software licenses as a percent of license revenues was 10% in 2001 as compared to 3% in 2000. The increases in the 2001 fiscal year from the 2000 fiscal year are due to a higher level of sales
with associated royalties due on third-party products. In addition, during the year ended December 31, 2001, we recorded expense for a prepaid royalty of $500,000 to third parties for products
that we do not expect to sell in future years.

Cost
of services during 2001 decreased $21.8 million or 18% on a year-over-year basis. Cost of services as a percent of services revenues was 66% in 2001
as compared to 73% in 2000. The decrease in cost of services in absolute dollar terms and as a percentage of revenue during 2001 as compared to

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2000 was the result of reductions in force that occurred during the 2001 fiscal year, which resulted in decreased salary and salary-related expenses as well as a decreased use of third party
consultants. Total employees in BVGS were 394 as of December 31, 2001 as compared to 1,135 as of December 31, 2000.

Operating Expenses and Other Income (Expense), net

Research and development expenses consist primarily of salaries, employee-related benefit costs and consulting fees incurred in association with the development
of our products. Costs incurred for the research and development of new software products are expensed as incurred until such time that technological feasibility, in the form of a working model, is
established at which time such costs are capitalized 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, we have not capitalized any costs related to the development of software for external use.

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

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

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                     |  | $                        | 41,432 
|Sales and marketing                          |  |                          | 48,918 
|General and administrative                   |  |                          | 16,288 
|Goodwill and intangible amortization         |  |                          | 3,548  
|Charge for acquired in-process technology    |  |                          |       
|Restructuring charge                         |  |                          | 110,449
|Impairment of assets                         |  |                          | 3,129  
|Impairment of goodwill and other intangibles |  |                          |       
|                                             |  |                          |        
|Total operating expenses                     |  | $                        | 223,764
|                                             |  |                          |        
|Interest income                              |  | $                        | 4,130  
|                                             |  |                          |        
|Other income (expense), net                  |  | $                        | (12,141
|                                             |  |                          |        

2002 versus 2001

Research and development expensesfor the year were $41.4 million in 2002 as compared to $78.7 million in 2001, which
represents a decrease of 47% year-over-year. The decrease in research and development expenses is primarily attributable to a reduction in staffing levels resulting in
decreased salary and salary related costs as well as other cost-cutting efforts taken by us as part of our restructuring plan, such as consolidation of facilities.

Sales and marketing expensesfor the year were $48.9 million in 2002 as compared to $139.8 million in 2001 which represents
a decrease of 65% year-over-year. Sales and marketing expenses decreased as

29

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a result of decreased salary expense related to 2002 fiscal year reductions in force, in addition to decreased commission expense as a result of decreases in license revenue from 2001 to 2002.

General and administrative expensesfor the year were $16.3 million in 2002 as compared to $42.3 million in 2001, which
represents a decrease of 62% year-over-year. The decrease in general and administrative expenses is attributable to decreases in the general reserves of our accounts receivable
balances due to better than expected collection efforts and declining accounts receivable balances and decreased salary expense as a result of reductions in workforce as well as decreases in
facilities costs as a result of continued facilities consolidations and decreases in professional services expenses.

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 $0 in 2002 and 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 goodwill
related to the Interleaf transaction was $0 during 2002 and 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 $0 in 2002 and approximately $214,000 in 2001. 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. As described in Note 4 in the Notes to Consolidated Financial
statements, as of January 1, 2002, we no longer amortize goodwill or the assembled workforce as we have identified the assembled workforce as an intangible asset which does not meet the
criteria of recognizable intangible asset as defined by SFAS No. 142. The remaining other intangible assets are being amortized on a straight-line basis over their remaining useful
life of three months as of December 31, 2002. We periodically assess goodwill and other intangibles for impairment as discussed in Note 4 of Notes to Consolidated Financial Statements.
The remaining intangible assets that are being amortized are a result of the acquisition of Interleaf. We have accounted for the acquisition as a purchase business combination. Amortization expense is
estimated to be $887,000 in 2003. It is possible that we may continue to expand our business through acquisitions and internal development. Any additional acquisitions or impairment of goodwill and
other purchased intangibles could result in additional merger and acquisition related expenses.

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

30

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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 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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. 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.

Severance and benefitsWe recorded a charge of approximately $7.6 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
$7.6 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-Scholes 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 $6.9 million of
severance and benefits costs had been paid out during fiscal 2002 and the remaining $1.4 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 of our 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 retained by us. 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. 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. We expect 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

31

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

OtherWe recorded charges of approximately $1.1 million during fiscal year 2002 for various incremental costs incurred
as a direct result of the restructuring plan. The remaining reserve balance of $79,000 is expected to be paid in full by the end of the fourth quarter of 2003

Actual
future cash requirements may differ materially from the restructuring accruals at December 31, 2002, 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.

Interest IncomeInterest income decreased to $4.1 million for the year ended December 31, 2002 from
$11.4 million for the year ended December 31, 2001. The decrease is attributable to decreased cash balances from 2001 to 2002.

Other income (expense), netfor the 2002 fiscal year was an expense of $12.1 million as compared to expense of $18.3 million
in 2001. The main reason for the decrease in other expense is 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.

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.

Impairment of goodwill and other intangible assetsAs discussed in Note 4 to our Consolidated Financial Statements, we
adopted 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 No. 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 decline in our stock price, we would be required to test
goodwill for impairment. SFAS No. 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 No.142, the first stage 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 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 condensed consolidated financial statements. We obtained an
independent appraisal of fair value to support our conclusion. We also determined, as of December 31, 2002, that our fair value exceeded our net book value and no impairment of goodwill and
other intangible assets existed.

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

32

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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, 2002. 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 No. 142.

During
the third quarter of 2001, we determined that the goodwill and other intangible assets related to our various acquisitions may have been impaired. In accordance with SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and Accounting Principles Board Opinion No. 17,
"Intangible Assets", we performed an impairment analysis. These standards require that goodwill and other intangible assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Because we had
integrated the acquired companies' operations, we performed the test for impairment at an overall enterprise level. Our policy is to use a discounted cash flow approach. This approach includes
analyzing estimated future cash flows over the remaining life of the goodwill and other intangible assets as well as a disposition value at the end of the life of the goodwill and other intangible
assets. The resulting value was then compared to the carrying value of stockholders' equity and the difference represents goodwill and other intangible assets impairment measured on a discounted
basis. Accordingly, we recorded an impairment charge of $336.4 million during the 2001 fiscal year.

We
are attempting to reduce expenses in an effort to return to profitability during a period when revenues have been less than originally expected. Therefore, operating costs may decline
in the near future, but there can be no assurance that such decline will be enough to return BroadVision to profitability. Should revenues increase significantly, we would expect our expenses to
increase commensurate with increases in revenues.

2001 versus 2000

Research and development expensesfor the year were $78.7 million in 2001 as compared to $51.6 million in 2000, which
represents an increase of 52% year-over-year. The increase in research and development expenses is primarily attributable to increased efforts involved in the enhancement of
existing applications and the development of our next generation of products partially offset by compensation reductions and cost-cutting efforts put in place during the 2001 fiscal year.

Sales and marketing expensesfor the year were $139.8 million in 2001 as compared to $167.4 million in 2000 which represents
an decrease of 16% year-over-year. Sales and marketing expenses decreased as a result of decreased salary expense related to 2001 fiscal year reductions in force, in addition
to decreased commission expense as a result of decreases in license revenue from 2000 to 2001.

General and administrative expensesfor the year were $42.3 million in 2001 as compared to $28.1 million in 2000, which
represents an increase of 51% year-over-year. The increase in general and administrative expenses is attributable to higher professional fees primarily due to increased legal
expenses and increases in the general reserves of our accounts receivable balances as a result of the effects of the economic slowdown and its impact on the operations of certain emerging electronic
commerce customers, partially offset by decreased salary expense as a result of reductions in workforce.

Goodwill and intangible amortization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. As a result of the Interleaf transaction, we recorded goodwill and other intangible assets of

33

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$794.7 million. Amortization of goodwill and other intangibles assets related to the Interleaf acquisition was $210.8 million in 2001 as compared to $187.6 million in 2000.
Amortization of goodwill related to Fidutec was approximately $214,000 in 2001 and 2000. 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.

Charge for acquired in-process technologyIn connection with the Keyeon acquisition in 2001, $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 includes 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.

In
connection with the Interleaf acquisition which occurred in 2000, we estimated that $10.1 million of the purchase price for Interleaf 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 upon consummation of the acquisition. The value assigned to acquired in-process technology was the amount attributable to the efforts of Interleaf up to the time
of acquisition. The amount was estimated through the application of the "stages of completion" by multiplying the estimated present value of future cash flows, excluding cost of completion, by the
percentage of completion of the purchased technology at the time of the acquisition. The discount rate included a factor that took into account the uncertainty surrounding the successful development
of the acquired in-process technology.

Restructuring chargeDuring the 2001 fiscal year, we approved a restructuring plan to restructure our worldwide operations
including a reduction in workforce of approximately 859 employees and the consolidation of our operating facilities. These restructuring actions were taken to align our cost structure with changing
market conditions and to create a more efficient organization. A pre-tax charge of $153.3 million was recorded in 2001 which included severance and benefits charges, lease
abandonment costs, asset impairment charges and other charges incurred as a direct result of the restructuring. We determined a range of expected losses on lease abandonment. We accrued for losses at
the low-end of a range in accordance with SFAS No. 5,Accounting for Contingencies. The high-end of the range is
estimated at $243.1 million, an increase in the restructuring charge of $89.8 million. Total severance and benefits costs were $9.1 million and included $662,000 of
non-cash charges. Approximately $7.6 million of severance and benefits had been paid as of December 31, 2001. We terminated approximately 654 employees in North and South
America and approximately 205 employees throughout Europe and Asia Pacific during 2001. The reduction in workforce occurred through all of our departments. Total facilities and excess assets charges
during 2001 were $143.8 million and included $36.8 million of asset impairment charges. Approximately $17.1 million of facilities charges had been paid as of December 31,
2001. Other restructuring charges of $405,000 are for various incremental costs incurred as a direct result of the restructuring. Approximately $292,000 had been paid as of December 31, 2001.

Interest IncomeInterest income decreased to $11.4 million for the year ended December 31, 2001 from
$16.7 million for the year ended December 31, 2000. The decrease is attributable to decreased cash balances.

Other (expense) income, netfor the 2001 fiscal year was an expense of $18.3 million as compared to income of
$1.5 million in 2000. The main reason for the decrease in other income is due to a decrease in short term investment gains on sale of $1.6 million, an increase in cost method investment

34

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realized losses of $11.7 million, an increase in equity in net loss from unconsolidated subsidiaries of $1.9 million and an increase in losses on asset disposals of $3.1 million.

Impairment of goodwill and other intangible assetsDuring the third quarter of 2001, we determined that the goodwill and other
intangible assets related to our various acquisitions may have been impaired. In accordance with SFAS No. 121,Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Ofand Accounting Principles Board Opinion No. 17,Intangible
Assets, we performed an impairment analysis. We recorded an impairment charge of $330.2 million during the 2001 fiscal year for goodwill. Please see Note 4 of
Notes to Consolidated Financial Statements for additional information.

Income Taxes

For the year ended December 31, 2002, we recorded a current income tax provision of $7.6 million. $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. For the year ended December 31, 2001, we recorded an income tax provision of $2.1 million relating to state and foreign income taxes.

Liquidity and Capital Resources

|                                                         |  | December 31,
|-------------------------------------------------------- |  | ------------
|
|
|Cash, cash equivalents and liquid short-term investments |  | $           
|Long-term liquid investments                             |  | $           
|Restricted cash and investments                          |  | $           
|Working capital                                          |  | $           
|Working capital ratio                                    |  |             

As
of December 31, 2002, cash, cash equivalents, liquid short-term investments, liquid long-term investments and restricted cash and
investments totaled $119.2 million, which represents a decrease of $74.4 million as compared to December 31, 2001. This decrease is primarily attributed to net cash used for
operations. 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 Facility") for up to
$25.0 million. Under the revolving line of credit portion of the SVB Facility, amounts borrowed bear interest at the bank's prime rate (4.25% as of December 31, 2002) and interest is due
monthly, with the principal due in March 2003. We have two outstanding term loans under the SVB Facility. The total outstanding amount of these term loans were $2.9 million as of
December 31, 2002 and $3.9 million as of December 31, 2001. Interest on these term loans are at the bank's prime rate (4.25% as of December 31, 2002 and 4.84% as of
December 31, 2001) and prime rate plus 1.25% (5.5% as of December 31, 2002 and 6.09% as of December 31, 2001), respectively. 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 due
in 2005, and a final payment of $357,000 due in 2006.

Borrowings
under the SVB Facility are collateralized by substantially all of our owned assets and we are subject to certain covenants, including restrictions on payment of dividends and
other distributions as well as an obligation to maintain $80.0 million in unrestricted cash and cash equivalents, short-term investments and long-term investments
(excluding equity investments) and maintain $30.0 million on deposit with SVB. As of December 31, 2002, we were in compliance with all specified financial
covenants. During the second quarter of 2002, we drew down $25.0 million on our revolving line of credit as partial funding of our PacShores Building 4 and 5 Termination Agreement.

35

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See discussion below for more information. Interest is payable monthly at the bank's prime rate (4.25% annually as of December 31, 2002) and principal is due in full in February 2004. There
were no outstanding amounts under the revolving line of credit as of December 31, 2001. As discussed in Note 13 of Notes to Consolidated Financial Statements, we renewed and amended our
revolving credit facility in March 2003 which changed the principal due date from March 2003 to February 2004. The amount available under the revolving line of credit remains
unchanged at $25.0 million. Borrowings under the renewed revolving line of credit are collateralized by all of the Company's assets and bear interest at the bank's prime rate (4.25% as of
March 1, 2003). Interest is due monthly and principal is due at expiration. The amended and restated loan and security agreement requires us to maintain certain levels in cash and cash
equivalents, short-term investment and long-term investments (excluding 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 net income (loss) levels.

As
of December 31, 2002 and December 31, 2001, commitments totaling $16.7 million and $25.0 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. These letters of credit are collateralized by a security
agreement, under which we are required to maintain in a restricted specified interest bearing account approximately $16.7 million and $29.9 million of available cash equivalents and
short-term investments as of December 31, 2002 and December 31, 2001, respectively. The $16.6 million and the $29.9 million have been presented as restricted
cash and investments in the accompanying consolidated balance sheet at December 31, 2002 and December 31, 2001, respectively.

Cash (Used For) Provided by Operating Activities

Cash used for operating activities was $99.2 million for fiscal 2002 and $77.9 million for fiscal 2001, respectively. The primary reason for the net
cash used for operating activities for fiscal 2002 is due 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 for
$74.6 million as well as a decrease in accounts payable and accrued expenses of $9.1 million, a decrease in unearned revenues and deferred maintenance of $14.4 million, a decrease
in other noncurrent assets of $2.6 million, partially offset by decreases in accounts receivable of $12.9 million and in prepaids and other of $3.6 million, and an increase in the
restructuring reserves of $6.3 million. Cash (used for) provided by operating activities was ($77.9) million for the year ended December 31, 2001 and $55.3 million for the year
ended December 31, 2000. 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 was $73.9 million for fiscal 2002 and was primarily due to net sales/maturities of investments of
$61.5 million and $13.2 million released from restricted cash and investments. Cash used for investing activities was $15.0 million for the year ended December 31, 2001 and
consists of purchases of property and equipment of $55.7 million, partially offset by net sales of investments of $32.8 million and cash acquired in the Keyeon acquisition of
$7.2 million.

36

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Cash Provided By Financing Activities

Cash provided by financing activities was $26.9 million for fiscal 2002 and consists of $2.9 million of net proceeds from the issuance of common
stock and $25.0 million in proceeds from borrowings less $977,000 of repayments on borrowings. Cash provided by financing activities was $15.5 million for the year ended
December 31, 2001 and consisted primarily of proceeds from the issuance of common stock.

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

In
connection with our restructuring plan initiated during 2001, we consolidated various operating facilities during 2001 and 2002. Lease termination costs include the abandonment of
certain excess lease facilities for the remaining lease terms. These costs totaled $101.7 million, including $18.9 million in leasehold improvements impairments, during 2002 and
$143.8 million, including $36.8 million in leasehold improvements impairments in 2001. 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.

On
May 9, 2002, the Company and PacShores entered into (i) the Buildings 4 and 5 Termination Agreement and (ii) the Building 6 Amendment. Under the Buildings 4 and 5
Termination Agreement, the Triple Net Building Lease dated April 12, 2000 between PacShores, as Lessor, and the Company, as Lessee, for Premises at Pacific Shores Center, Building 4, Redwood
City, California and the Triple Net Building Lease dated February 16, 2000 between PacShores, as Lessor, and the Company, as Lessee, for Premises at Pacific Shores Center, Building 5, Redwood
City, California, were terminated. In conjunction with the termination, PacShores released all security deposits held by it relating to those
premises in exchange for our payment to PacShores a total of $45.0 million as the Termination Fee. Under the Building 6 Amendment, the parties released each other from all claims and we agreed
to provide an additional $3.5 million as security deposit in the form of letters of credit. This letter of credit is included as restricted cash and investments in our Condensed Consolidated
Balance Sheet as of December 31, 2002. We paid the Termination Fee in full during the second quarter of 2002 by payment of approximately $20.0 million from existing cash and investments
and by drawing down approximately $25.0 million from our line of credit. The $25.0 million line of credit, as amended, is due in February 2004.

We
expect to incur significant operating expenses for the foreseeable future in order to execute our business plan. A summary of total future minimum lease payments as of
December 31, 2002, under noncancelable operating lease agreements, together with amounts included in restructuring reserves is as follows (in thousands); properties that are part of the
restructuring have been included:

Year Ended December 31,

Total future minimum lease payments2003

$
26,2812004


25,8552005


25,6522006


22,6202007


20,4952008 and thereafter


81,487Total minimum lease payments


202,390


As
of December 31, 2002, $129.4 million of future minimum lease payments, net of anticipated sublease income, is accrued in our restructuring accruals. The restructuring
accruals are net of

37

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approximately $44.8 million of sublease income of which approximately $28.8 million represents estimated sublease income for sublease agreements yet to be negotiated and the remaining
$16.0 million represents sublease income to be received under non-cancelable sublease agreements signed by December 31, 2002. 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. The operating leases
include facilities included in restructuring and excluded $44.8 million of sublease income of which approximately $28.8 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
|------------------------------- |  | ----- | ------- | ---------------- | - | --------- |  | --------- | ------ | ------------
|
|Long-term debt                  |  | $     | 2,922   |                  | $ | 977       |  | $         | 1,588  |             
|SVB Facility                    |  |       | 25,000  |                  |   |          |  |           | 25,000 |             
|Hewlett-Packard agreement       |  |       | 1,042   |                  |   | 1,042     |  |           |       |             
|Non-cancelable operating leases |  |       | 202,390 |                  |   | 26,281    |  |           | 51,507 |             
|                                |  |       |         |                  |   |           |  |           |        |             
|                                |  | $     | 231,354 |                  | $ | 28,300    |  | $         | 78,095 |             
|                                |  |       |         |                  |   |           |  |           |        |             

The
following table summarizes our letters of credit and the effect such letters of credit could have on our liquidity and cash flows in future periods if the letters of credit were
drawn upon. Restricted cash and investments represent the collateral for these letters of credit.

In
thousands:

|Total |        | Less than
1 year |   | 1-3 years |  | 4-5 years |     | Over
5 years
|----- | ------ | ---------------- | - | --------- |  | --------- | --- | ------------
|$     | 16,704 |                  | $ | 75        |  | $         | 308 |             

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 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.

38

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Quarterly Results of Operations

The following tables set forth certain unaudited condensed consolidated statement of operations data for the eight quarters ended December 31, 2002, 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 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       |       
|-------------------------------------------- | ----------------------------------------- | ------------------------ | ------
|
|
|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                                 |                                           |                          | 16,667
|Operating expenses:                          |                                           |                          |       
|                                             | Research and development                  |                          |       
|                                             | Sales and marketing                       |                          |       
|                                             | General and administrative                |                          |       
|                                             | Goodwill and intangible amortization      |                          |       
|                                             | Charge for acquired in-process technology |                          |       
|Restructuring charge                         |                                           |                          | 7,299 
|Impairment of assets                         |                                           |                          |      
|Impairment of goodwill and other intangibles |                                           |                          |      
|                                             |                                           |                          |       
|                                             |                                           | Total operating expenses |       
|                                             |                                           |                          |       
|Operating loss                               |                                           |                          | (8,262
|                                             |                                           |                          |       
|Other, net                                   |                                           |                          | (1,715
|                                             |                                           |                          |       
|Net loss                                     |                                           | $                        | (9,977
|                                             |                                           |                          |       

39

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|                                             |                                           | Dec. 31,
2002            |    | Sep. 30,
2002 |    | June 30,
2002 |    | Mar. 31,
2002 |    | Dec. 31,
2001 |    | Sep. 30,
2001 |     | June 30,
2001 |     | Mar. 31,
2001 |   
|-------------------------------------------- | ----------------------------------------- | ------------------------ | -- | ------------- | -- | ------------- | -- | ------------- | -- | ------------- | -- | ------------- | --- | ------------- | --- | ------------- | --
|As a Percentage of Revenues:                 |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|Revenues:                                    |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|                                             | Software licenses                         |                          | 39 | %             | 39 | %             | 35 | %             | 27 | %             | 43 | %             | 33  | %             | 36  | %             | 47
|                                             | Services                                  |                          | 61 |               | 61 |               | 65 |               | 73 |               | 57 |               | 67  |               | 64  |               | 53
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|                                             |                                           | Total revenues           |    | 100           |    | 100           |    | 100           |    | 100           |    | 100           |     | 100           |     | 100           |   
|Cost of revenues:                            |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|                                             | Cost of software licenses                 |                          | 16 |               | 5  |               | 3  |               | 4  |               | 7  |               | 4   |               | 5   |               | 2 
|                                             | Cost of services                          |                          | 26 |               | 32 |               | 35 |               | 40 |               | 25 |               | 32  |               | 52  |               | 42
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|                                             |                                           | Total cost of revenues   |    | 42            |    | 37            |    | 38            |    | 44            |    | 32            |     | 36            |     | 57            |   
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|Gross profit                                 |                                           | 58                       |    | 63            |    | 62            |    | 56            |    | 68            |    | 64            |     | 43            |     | 56            |   
|Operating expenses:                          |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|                                             | Research and development                  |                          | 23 |               | 29 |               | 44 |               | 46 |               | 30 |               | 33  |               | 36  |               | 29
|                                             | Sales and marketing                       |                          | 26 |               | 34 |               | 54 |               | 53 |               | 40 |               | 53  |               | 72  |               | 57
|                                             | General and administrative                |                          | 9  |               | 9  |               | 17 |               | 20 |               | 14 |               | 22  |               | 24  |               | 11
|                                             | Goodwill and intangible amortization      |                          | 3  |               | 3  |               | 3  |               | 3  |               | 25 |               | 137 |               | 114 |               | 72
|                                             | Charge for acquired in-process technology |                          |   |               |   |               |   |               |   |               | 13 |               |    |               |    |               |  
|Restructuring charge                         |                                           | 26                       |    | 233           |    | 118           |    | 18            |    | 41            |    | 20            |     | 213           |     |              |   
|Impairment of assets                         |                                           |                         |    | 3             |    |              |    | 8             |    |              |    |              |     |              |     |              |   
|Impairment of goodwill and other intangibles |                                           |                         |    |              |    |              |    |              |    |              |    | 690           |     |              |     |              |   
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|                                             |                                           | Total operating expenses |    | 87            |    | 311           |    | 236           |    | 148           |    | 163           |     | 955           |     | 459           |   
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|Operating loss                               |                                           | (29                      | )  | (248          | )  | (174          | )  | (92           | )  | (95           | )  | (891          | )   | (416          | )   | (113          | ) 
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|Other, net                                   |                                           | (6                       | )  | (1            | )  | (19           | )  | (27           | )  | (18           | )  | 3             |     | (2            | )   |              |   
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   
|Net loss                                     |                                           | (35                      | )% | (249          | )% | (193          | )% | (119          | )% | (113          | )% | (888          | )%  | (418          | )%  | (113          | )%
|                                             |                                           |                          |    |               |    |               |    |               |    |               |    |               |     |               |     |               |   

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 2002, the Financial Accounting Standards Board's Emerging Issues Task Force (EITF) reached consensus on EITF 01-14 on the topic of Income
Statement Characterization of Reimbursements Received for Out of Pocket Expenses Incurred. This topic addresses whether reimbursements received
for out-of-pocket expenses incurred should be characterized in the income statement as revenue or as a reduction of expenses incurred. The EITF concluded that reimbursements
received for out of pocket expenses incurred should be characterized as revenue in the income statement. This announcement will be applied in financial reporting periods beginning after
December 15, 2001, and comparative financial statements for prior periods will be reclassified to comply with the guidance in this announcement. The Company is currently recording reimbursement
by its customers for out-of-pocket expenses as a component of services revenue. Prior to adoption of EITF 01-14 on January 1, 2002, the Company recorded
reimbursement by its customers for out-of-pocket expenses as a reduction to cost of sales. Prior periods have been reclassified to comply with the guidance of EITF
01-14. The effect of this reclassification was to increase services revenues and increase cost of services for fiscal 2001 and fiscal 2000 by $3.9 million and $1.6 million,
respectively.

In
June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit Activities, which addresses financial
accounting and reporting for costs associated with exit activities and supersedes Emerging Issues Task Force ("EITF") 94-3,Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a

40

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Restructuring).SFAS No. 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. However,
under SFAS No. 146, a liability for one-time termination benefits is recognized when an entity has committed to a plan of termination, provided certain other requirements have been
met. In addition, under SFAS No. 146, a liability for costs to terminate a contract is not recognized until the contract has been terminated, and a liability for costs that will continue to be
incurred under a contract's remaining term without economic benefit to the entity is recognized when the entity ceases to use the right conveyed by the contract. SFAS No. 146 is effective for
exit or disposal activities initiated after December 31, 2002. The Company will adopt the provisions of SFAS No. 146 for restructuring activities initiated after December 31,
2002. The Company does not expect the adoption of SFAS No. 146 will have a material impact on its consolidated results of operations or financial position.

In
November 2002, the EITF reached a consensus on Issue 00-21, addressing how to account for arrangements that involve the delivery or performance of multiple
products, services, and/or rights to use assets. Revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following
criteria: (1) the delivered item has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value
of undelivered items; and (3) delivery of any undelivered item is probable. Arrangement consideration should be allocated among the separate units of accounting based on their relative fair
values, with the amount allocated to the delivered item being limited to the amount that is not contingent on the delivery of additional items or meeting other specified performance conditions. The
final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003 with early adoption permitted. The provisions of this Consensus are not expected to
have a significant effect on the Company's financial position or operating results.

In
November 2002, the FASB issued Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others", which clarifies disclosure and recognition/measurement requirements related to certain guarantees. The disclosure requirements are effective for financial statements issued
after December 15, 2002 and the recognition/measurement requirements are effective on a prospective basis for guarantees issued or modified after December 31, 2002. The application of
the requirements of FIN 45 did not have a material impact on the Company's financial position or results of operations.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition and Disclosure." This Statement amends SFAS No. 123,
"Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this
Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The disclosure provisions of this Standard are effective for fiscal years ending after December 15, 2002 and have
been incorporated into these financial statements and accompanying footnotes.

In
January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities," which addresses consolidation by business enterprises
of variable interest entities that either: (1) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support,
or (2) the equity investors lack an essential characteristic of a controlling financial interest. FIN 46 requires disclosure of Variable Interest Entities (VIEs) in financial statements
issued after January 31, 2003, if it is reasonably possible that as of the transition date: (1) the Company will be the primary beneficiary of an existing VIE that will require
consolidation or, (2) the Company will hold a significant variable interest in, or have significant

41

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involvement with, an existing VIE. We do not have any entities that will require disclosure or new consolidation as a result of adopting the provisions of FIN 46.

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 2001 and the first three quarters of fiscal 2002 and the outlook on
future periods is unclear given the general economic conditions. Furthermore, we incurred net losses for the past eleven quarters and have not achieved positive cash flow from operations in the last
nine quarters. 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.

Failure to maintain our Nasdaq listing would harm our stock price and the liquidity of our common stock.

We effected a one-for-nine reverse stock split in July 2002. Prior to the effective time of the reverse stock split, our common
stock was trading below $1.00 per share. The Nasdaq has a $1.00 per share minimum bid requirement, pursuant to which our common stock could be de-listed from the Nasdaq National Market if
it trades below $1.00 for thirty consecutive trading days and does not

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subsequently trade above $1.00 for 10 consecutive days. There can be no assurance that our trading price will remain above the $1.00 per share requirement for the necessary time period mandated by
Nasdaq. If we do not meet the Nasdaq requirements to maintain our listing on the Nasdaq National Market, our common stock could trade on the OTC Bulletin Board or in the "pink sheets" maintained by
the National Quotation Bureau, Inc. Such alternatives are generally considered to be less efficient markets, and our stock price, as well as the liquidity of our common stock, would be
adversely impacted by a Nasdaq delisting.

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 recently renewed and amended the SVB Facility during the second quarter of fiscal 2002 and further renewed and amended the SVB Facility during the first
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. While we plan to adhere to the financial covenants of the SVB Facility and avoid an event of default, in the event
that it appears we are unable to avoid an 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.

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,

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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 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:



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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.

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. 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. Termination of any of these
alliances could harm our

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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.

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, 2002, approximately 39% 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:



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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 e-business solutions 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:



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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 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. Although we hold a U.S. patent, issued in
January 1998, on elements of the BroadVision One-To-One Enterprise product and a U.S. patent acquired as part of the Interleaf acquisition on the elements of the
extensible electronic document processing system for creating new classes of active documents, these patents may not provide an adequate level of intellectual property protection. In addition,
litigation like the lawsuit we filed against Art Technology Group, which was settled in February 2000, 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" and "BroadVision One-To-One" 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 public key cryptography technology licensed from RSA Security Inc., to provide the security and authentication necessary to affect the secure exchange of
confidential information. Advances in

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computer capabilities, new discoveries in the field of 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 RSA. 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

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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.

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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. Recent federal
legislation limits the imposition of state and local taxes on Internet-related sales. Congress has passed the Internet Tax Freedom Act, which places a moratorium through November 2003 on state
and local taxes on Internet access, unless the tax was already imposed prior to October 1, 1998, and discriminatory taxes on electronic commerce.

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.

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:



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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.

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, 2002 and 2001. 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 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, 2002. 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 $(1.7)
million and $2.1 million for the years ended December 31, 2002 and 2001, respectively. Total realized gains during fiscal 2002 and 2001 were $719,000 and $2.0 million,
respectively, and are included in other income in the accompanying Consolidated Statements of Operations.

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 |   | 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                |  | $         

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

Our
cash and cash equivalents, short-term investments and long-term investments consisted of the following as of December 31, 2001 (in thousands):

|                                      |  | Amortized
cost |         | Unrealized
gains |   | Unrealized
losses |  | Fair
value
|------------------------------------- |  | -------------- | ------- | ---------------- | - | ----------------- |  | ----------
|Cash                                  |  | $              | 25,874  |                  | $ |                  |  | $         
|Money market                          |  |                | 36,299  |                  |   | 364               |  |           
|Corporate note/bonds                  |  |                | 75,842  |                  |   | 1,056             |  |           
|Government notes/bonds                |  |                | 53,792  |                  |   | 346               |  |           
|                                      |  |                |         |                  |   |                   |  |           
|                                      |  | $              | 191,807 |                  | $ | 1,766             |  | $         
|Included in cash and cash equivalents |  | $              | 75,393  |                  | $ | 366               |  | $         
|Included in short-term investments    |  |                | 94,773  |                  |   | 895               |  |           
|Included in long-term investments     |  |                | 21,641  |                  |   | 505               |  |           
|                                      |  |                |         |                  |   |                   |  |           
|                                      |  | $              | 191,807 |                  | $ | 1,766             |  | $         

Included
in the table above in short-term investments are non-current restricted cash and investments of $29.9 million.

Remaining
maturities of our long-term investments as of December 31, 2002 are as follows:

2004Corporate notes/bonds

$
587


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 over seven separate financial institutions. The Company
markets and sells its products throughout the world and performs ongoing credit evaluations of its customers. The Company maintains reserves for potential credit losses. For the years ended
December 31, 2002, 2001 and 2000, no one customer accounted for more than 10% of fiscal year total revenue. As of December 31, 2002 one customer 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

Our financial instruments consist of cash equivalents, short-term 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

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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, 2002 was $2.1 million.
This includes $12.6 million of write-downs during 2002 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, 2002 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.

54

---

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 sheet of BroadVision, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2002, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year then ended. 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 audit. The consolidated financial statements of BroadVision, Inc. as of December 31, 2001, and for each of the two years in the period
ended December 31, 2001, 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 audit 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 audit provides a reasonable basis for our opinion.

In
our opinion, the 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, 2002, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

As
disclosed in Note 1 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 each of the two years in the period ended December 31, 2001,
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 and 2000 described in Notes 1. We also audited the adjustments described in Note 4 that were applied
to restate the 2001 and 2000 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 or 2000 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 and 2000 consolidated financial statements taken as a whole.

/s/
BDO Seidman, LLP

San
Jose, California
January 24, 2003, except for Note 13
and the penultimate paragraph of Note 6,
as to which the date is March 28, 2003

55

---

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
YEARS ENDED DECEMBER 31, 2001 AND 2000, 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 AND 2000 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

56

---



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 allowance for doubtful accounts and reserves of $5,502 and $8,194 as of December 31, 2002 and 2001, respectively                   |                                            |       
|                                       | Prepaids and other                                                                                                                                           |                                            |       
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | Total current assets                       |       
|Property and equipment, net            |                                                                                                                                                              |                                            | 26,600
|Deferred tax asset                     |                                                                                                                                                              |                                            |      
|Long-term investments                  |                                                                                                                                                              |                                            | 587   
|Restricted cash and investments        |                                                                                                                                                              |                                            | 16,704
|Equity investments                     |                                                                                                                                                              |                                            | 2,083 
|Goodwill                               |                                                                                                                                                              |                                            | 53,421
|Other intangibles, net                 |                                                                                                                                                              |                                            | 3,899 
|Other assets                           |                                                                                                                                                              |                                            | 2,874 
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | 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 |                                                                                                                                                              |                                            | 1,945 
|Other noncurrent liabilities           |                                                                                                                                                              |                                            | 68,206
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | 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; 32,440 and 31,643 shares issued and outstanding as of December 31, 2002 and 2001, respectively |                                            |       
|                                       | Additional paid-in capital                                                                                                                                   |                                            |       
|                                       | Accumulated other comprehensive loss                                                                                                                         |                                            |       
|                                       | Accumulated deficit                                                                                                                                          |                                            |       
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | Total stockholders' equity                 |       
|                                       |                                                                                                                                                              |                                            |       
|                                       |                                                                                                                                                              | Total liabilities and stockholders' equity |       
|                                       |                                                                                                                                                              |                                            |       

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

57

---

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                   |                          |                                       
|                                                | 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                                 |                                              |                          | 4,130                                 
|Other (expense) income, net                     |                                              |                          | (12,141                               
|                                                |                                              |                          |                                       
|                                                |                                              |                          | Loss before provision for income taxes
|Provision for income taxes                      |                                              |                          | 7,603                                 
|                                                |                                              |                          |                                       
|                                                |                                              |                          | Net loss                              
|                                                |                                              |                          |                                       
|Basic loss per share                            |                                              | $                        | (5.32                                 
|                                                |                                              |                          |                                       
|Diluted loss per share                          |                                              | $                        | (5.32                                 
|                                                |                                              |                          |                                       
|Shares used in computing basic loss per share   |                                              |                          | 32,036                                
|                                                |                                              |                          |                                       
|Shares used in computing diluted loss per share |                                              |                          | 32,036                                
|                                                |                                              |                          |                                       

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

58

---



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

|                                                                                                                        |            | Convertible Preferred
Stock |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   |        
|----------------------------------------------------------------------------------------------------------------------- | ---------- | --------------------------- |  | - | - |  | ------ |  | - | - |  | - | --------- |  | - | ---- | - | - | -------
|
|
|
|Balances as of December 31, 1999                                                                                        |            |                            |  | $ |  |  | 27,201 |  | $ | 3 |  | $ | 320,280   |  | $ | (226 | ) | $ | 25,925 
|Comprehensive income:                                                                                                   |            |                             |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   |        
|                                                                                                                        | Net income |                             |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   |        
|Unrealized investment loss less reclassification adjustment for gains (losses) included in net loss, net of $20,069 tax |            |                             |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   | (30,273
|                                                                                                                        |            |                             |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   |        
|                                                                                                                        |            | Total comprehensive income  |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   |        
|                                                                                                                        |            |                             |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   |        
|Issuance of common stock under employee stock purchase plan                                                             |            |                            |  |   |  |  | 121    |  |   |  |  |   | 12,155    |  |   |     |   |   |       
|Issuance of common stock from exercise of options, including tax benefits of $22,841                                    |            |                            |  |   |  |  | 1,077  |  |   |  |  |   | 49,562    |  |   |     |   |   |       
|Issuance of common stock and options to purchase common stock in connection with Interleaf acquisition                  |            |                            |  |   |  |  | 1,599  |  |   |  |  |   | 789,605   |  |   |     |   |   |       
|Issuance of warrants for common stock                                                                                   |            |                            |  |   |  |  |       |  |   |  |  |   | 1,459     |  |   |     |   |   |       
|Long-term investment in exchange for common stock                                                                       |            |                            |  |   |  |  | 8      |  |   |  |  |   | 3,000     |  |   |     |   |   |       
|Issuance of common stock from exercise of warrants                                                                      |            |                            |  |   |  |  | 1      |  |   |  |  |   | 5         |  |   |     |   |   |       
|Amortization of deferred compensation                                                                                   |            |                            |  |   |  |  |       |  |   |  |  |   |          |  |   | 226  |   |   |       
|                                                                                                                        |            |                             |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   |        
|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    |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   |        
|                                                                                                                        |            |                             |  |   |   |  |        |  |   |   |  |   |           |  |   |      |   |   |        

59

---

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

|                                                                                                                       |                          | Convertible Preferred
Stock |  |   |  |        |  |   |   |  |   |           |  |   |   |  |   |        |  
|---------------------------------------------------------------------------------------------------------------------- | ------------------------ | --------------------------- |  | - |  | ------ |  | - | - |  | - | --------- |  | - | - |  | - | ------ | -
|
|
|
|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     |  
|                                                                                                                       |                          |                             |  |   |  |        |  |   |   |  |   |           |  |   |   |  |   |        |  

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

60

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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) provided by operating activities: |                                                    |                                                     
|                                      |                                                                                            | Depreciation and amortization                      |                                                     
|                                      |                                                                                            | Deferred tax asset                                 |                                                     
|                                      |                                                                                            | Income tax benefit from stock option exercises     |                                                     
|                                      |                                                                                            | Amortization of deferred compensation              |                                                     
|                                      |                                                                                            | Stock-based compensation charge                    |                                                     
|                                      |                                                                                            | Allowance for 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                      |                                                     
|                                      |                                                                                            | Provision for deferred tax asset valuation         |                                                     
|                                      | Changes in operating assets and liabilities, net of effects from acquired business:        |                                                    |                                                     
|                                      |                                                                                            | Accounts receivable                                |                                                     
|                                      |                                                                                            | Prepaids and other                                 |                                                     
|                                      |                                                                                            | Restructuring reserve                              |                                                     
|                                      |                                                                                            | Accounts payable and accrued expenses              |                                                     
|                                      |                                                                                            | Unearned revenue and deferred maintenance          |                                                     
|                                      |                                                                                            | Increase in other noncurrent assets                |                                                     
|                                      |                                                                                            |                                                    |                                                     
|                                      |                                                                                            |                                                    | Net cash (used for) provided by operating activities
|                                      |                                                                                            |                                                    |                                                     
|Cash flows from investing activities: |                                                                                            |                                                    |                                                     
|                                      | Purchase of property and equipment                                                         |                                                    |                                                     
|                                      | Proceeds from sale of assets                                                               |                                                    |                                                     
|                                      | Transfer from restricted cash/investments                                                  |                                                    |                                                     
|                                      | Purchase of long-term investments                                                          |                                                    |                                                     
|                                      | Sales/maturity of long-term investments                                                    |                                                    |                                                     
|                                      | Direct costs of acquisition, net of cash acquired                                          |                                                    |                                                     
|                                      | Cash acquired in purchase transaction                                                      |                                                    |                                                     
|                                      | Purchase of short-term investments                                                         |                                                    |                                                     
|                                      | Sales/maturity of short-term investments                                                   |                                                    |                                                     
|                                      |                                                                                            |                                                    |                                                     
|                                      |                                                                                            |                                                    | Net cash provided by (used for) investing activities
|                                      |                                                                                            |                                                    |                                                     

61

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

|                                                     |                                                                                               | Years Ended December 31,                        |       
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------
|
|Cash flows from financing activities:                |                                                                                               |                                                 |       
|                                                     | Proceeds from borrowings                                                                      |                                                 |       
|                                                     | Repayments of borrowings                                                                      |                                                 |       
|                                                     | Payments on capital lease obligations                                                         |                                                 |       
|                                                     | Proceeds from issuance of warrants for common stock                                           |                                                 |       
|                                                     | Proceeds from issuance of common stock, net                                                   |                                                 |       
|                                                     |                                                                                               |                                                 |       
|                                                     |                                                                                               | Net cash provided by financing activities       |       
|                                                     |                                                                                               |                                                 |       
|Net increase (decrease) in cash and cash equivalents |                                                                                               |                                                 | 1,628 
|Cash and cash equivalents, beginning of period       |                                                                                               |                                                 | 75,758
|                                                     |                                                                                               |                                                 |       
|Cash and cash equivalents, end of period             |                                                                                               |                                                 | 77,386
|                                                     |                                                                                               |                                                 |       
|Supplemental cash flow disclosures:                  |                                                                                               |                                                 |       
|                                                     | Cash paid for interest                                                                        |                                                 | $     
|                                                     |                                                                                               |                                                 |       
|                                                     | Cash paid for income taxes                                                                    |                                                 | $     
|                                                     |                                                                                               |                                                 |       
|Non-cash investing and financing activities:         |                                                                                               |                                                 |       
|                                                     | Long-term investment acquired in exchange for common stock                                    |                                                 |       
|                                                     | 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                        |       
|                                                     | In connection with the acquisition of Interleaf, the following non-cash transaction occurred: |                                                 |       
|                                                     |                                                                                               | Fair value of assets acquired, including cash   |       
|                                                     |                                                                                               | Liabilities assumed                             |       
|                                                     |                                                                                               | Issuance of common stock                        |       
|                                                     |                                                                                               |                                                 |       
|                                                     |                                                                                               | Cash paid for acquisition and acquisition costs |       

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

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BROADVISION, INC. AND SUBSIDIARIES        Notes to Consolidated Financial Statements        December 31, 2002

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. As of December 31, 2002, more than 1,200 leading companies and government entities around the globe use BroadVision applications to enable their portal-based commerce and
information access initiatives. As of December 31, 2002, more than 100 partner firms around the world are working to ensure the Company's joint customers' success through complementary
technology, applications, tools, and services offerings that extend and enhance customers' BroadVision implementations.

Acquisitions

On June 29, 2001, the Company completed its acquisition of Keyeon LLC, or "Keyeon", formerly a joint venture in which the Company held an interest of
approximately 36%. As consideration for the acquisition, 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. 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 (See Note 2).

On
April 14, 2000, the Company completed its acquisition of Interleaf, Inc. and its subsidiaries ("Interleaf") pursuant to a statutory merger involving a
stock-for-stock exchange. 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. Net assets were recorded at fair value at the acquisition date. The excess of the purchase price over the fair value
of net assets acquired is included in goodwill and other intangible assets in the accompanying consolidated balance sheet. Amounts allocated to in-process technology were expensed in the
period in which the acquisition was consummated (see Note 2).

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.

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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 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

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 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 No. 97-2, as amended by SOP No. 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

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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 years ended 2001 and 2000 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 and 2000 by $3.9 million
and $1.6 million, respectively.

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 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 is included in sales and marketing expense and amounted to $571,000, $1.8 million and
$2.9 million in 2002, 2001 and 2000, 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.

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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 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'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; and (iii) impairment costs related to certain long-lived assets
abandoned. The Company accounts for each of these costs in accordance with SEC Staff Accounting Bulletin No. 100,Restructuring and Impairment
Charges

The
Company accounts 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)(EITF 94-3). 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 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 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 144 and, 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

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December 31, 2002, the Company reduced its lease obligations by estimated sublease income of $28.8 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 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 from December 31, 2002. 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 $(1.7)
million and $2.1 million for the years ended December 31, 2002 and 2001, respectively. Total realized gains during fiscal 2002 and 2001 were $719,000 and $2.0 million,
respectively, and are included in other income in the accompanying Consolidated Statements of Operations.

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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
costs |         | 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.

The
Company's cash and cash equivalents, short-term investments and long-term investments consisted of the following as of December 31, 2001 (in
thousands):

|                                      |  | Amortized
cost |         | Unrealized
gains |   | Unrealized
losses |  | Fair
value
|------------------------------------- |  | -------------- | ------- | ---------------- | - | ----------------- |  | ----------
|Cash                                  |  | $              | 25,874  |                  | $ |                  |  | $         
|Money market                          |  |                | 36,299  |                  |   | 364               |  |           
|Corporate note/bonds                  |  |                | 75,842  |                  |   | 1,056             |  |           
|Government notes/bonds                |  |                | 53,792  |                  |   | 346               |  |           
|                                      |  |                |         |                  |   |                   |  |           
|                                      |  | $              | 191,807 |                  | $ | 1,766             |  | $         
|Included in cash and cash equivalents |  | $              | 75,393  |                  | $ | 366               |  | $         
|Included in short-term investments    |  |                | 94,773  |                  |   | 895               |  |           
|Included in long-term investments     |  |                | 21,641  |                  |   | 505               |  |           
|                                      |  |                |         |                  |   |                   |  |           
|                                      |  | $              | 191,807 |                  | $ | 1,766             |  | $         

Included
in the table above in short-term investments are non-current restricted cash and investments of $29.9 million.

Remaining
maturities of the Company's long-term investments as of December 31, 2002 are as follows:

2004Corporate notes/bonds

$
587


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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 over seven separate financial institutions. The Company
markets and sells its products throughout the world and performs ongoing credit evaluations of its customers. The Company maintains reserves for potential credit losses. For the years ended
December 31, 2002, 2001 and 2000, no one customer accounted for more than 10% of fiscal year total revenue. As of December 31, 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.

Equity Investments

The Company's 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. The Company had no equity method investments as of December 31, 2002. Equity investments are accounted for under the cost method of accounting
when 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. Equity investments are accounted for
under the equity method of accounting when the Company has a minority interest and has 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 the Company's 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 the Company's cost method long-term equity investments in public and non-public companies as of December 31, 2002 was
$2.1 million. This includes $12.6 million of write-

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downs during 2002 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, 2002 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 expense for the year ended December 31, 2002 was
$18.2 million. The Company recorded asset impairments of approximately $18.9 million during fiscal 2002 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. The Company also recorded a $3.1 million impairment of assets related to results from the Company's asset
physical inventories during 2002.

Valuation of Long-Lived Assets

The Company periodically assesses the impairment of long-lived assets in accordance with the provisions of SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. The Company assesses the
impairment of goodwill and identifiable intangible assets in accordance with SFAS No. 121, SFAS No. 141,Business Combinationsand SFAS
No. 142,Goodwill and Other Intangible Assets. The Company adopted the provisions of SFAS No. 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 Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, Financial Accounting Standards Board Interpretation No. 44 (FIN 44), Accounting for Certain
Transactions Involving Stock Compensationan Interpretation of APB No. 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 No. 123,Accounting for Stock-Based Compensation, the
Company discloses the pro forma effects of using the fair value method of accounting for stock-based compensation arrangements. The Company accounts for equity instruments issued to
non-employees in accordance with the provisions of SFAS No. 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.

We apply Accounting Principles Board ("APB") Opinion Number 25,Accounting for Stock Issued to Employees, and
related interpretations when accounting for our stock option and stock purchase plans. In accordance with APB No. 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.

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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.

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
Statement of
Financial Accounting Standards ("SFAS") Number 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 the Company's stock option plan and employee stock purchase plan been determined consistent with SFAS No. 123, the Company's 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                                                                                                                        |  | $                        | (170,522
|Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects                                    |  |                          | 846     
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |  |                          | (47,979 
|Pro forma net loss                                                                                                                          |  | $                        | (217,655
|Earnings per share:                                                                                                                         |  |                          |         
|Basicas reported                                                                                                                           |  | $                        | (5.32   
|Basicpro forma                                                                                                                             |  | $                        | (6.80   
|Dilutedas reported                                                                                                                         |  | $                        | (5.32   
|Dilutedpro forma                                                                                                                           |  | $                        | (6.80   

Stock Splits

On July 24, 2002, we announced that our Board of Directors had approved a one-for-nine reverse split of our 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. Our 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 stock split.

On
February 8, 2000, the Company's Board of Directors declared an additional three-for-one common stock split in the form of a stock dividend for
Stockholders of record as of February 21, 2000.

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The stock dividend payment date was March 13, 2000 and the Company's common stock traded ex-dividend starting March 14, 2000, reflecting the additional
three-for-one stock split.

On
September 29, 1999, the Company's Board of Directors declared a three-for-one common stock split in the form of a stock dividend for Stockholders of
record as of October 11, 1999. The stock dividend payment date was October 25, 1999 and the Company's common stock traded ex-dividend starting October 26, 1999,
reflecting the three-for-one stock split.

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.

Per Share Information

Basic earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding less shares subject to repurchase. Diluted
earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding and, when dilutive, common equivalent shares from outstanding stock options and warrants
using the treasury stock method and shares subject to repurchase. The following table sets forth the basic and diluted earnings (loss) per share computational data for the periods presented. Excluded
from the computation of diluted earnings per share for the years ended December 31, 2002, 2001 and 2000, are options and warrants to acquire 552,000, 1,229,000 and 3,973,000 shares of common
stock, respectively, because their effects would be anti-dilutive.

|                                                                                      |                               | Years Ended December 31,                                                                                            |         
|------------------------------------------------------------------------------------- | ----------------------------- | ------------------------------------------------------------------------------------------------------------------- | --------
|
|
|Net income (loss) for basic and Diluted earnings (loss) per share                     |                               | $                                                                                                                   | (170,522
|                                                                                      |                               |                                                                                                                     |         
|Weighted-average common shares outstanding to compute basic earnings (loss) per share |                               |                                                                                                                     | 32,036  
|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 earnings (loss) per share |         
|                                                                                      |                               |                                                                                                                     |         
|Basic earnings (loss) per share                                                       |                               | $                                                                                                                   | (5.32   
|                                                                                      |                               |                                                                                                                     |         
|Diluted earnings (loss) per share                                                     |                               | $                                                                                                                   | (5.32   
|                                                                                      |                               |                                                                                                                     |         

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.

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Comprehensive Income (Loss)

Comprehensive income (loss) includes the Company's net income (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, 2002, 2001 and 2000, comprehensive loss was ($165.2) million, ($837.2) million, and $(191.9) million, respectively. The components of other
comprehensive income (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.

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. Based upon this analysis, the Company recorded a
valuation allowance for its deferred tax assets during the three months ended June 30, 2002, which increased to 100% its valuation allowance and resulted in a charge of $6.3 million
included in the provision for income taxes in the Company's Condensed Consolidated Statements of Operations and Comprehensive Loss.

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 2002, the Financial Accounting Standards Board's Emerging Issues Task Force (EITF) reached consensus on EITF 01-14 on the topic of Income
Statement Characterization of Reimbursements Received for Out of Pocket Expenses Incurred. This topic addresses whether reimbursements received
for out-of-pocket expenses incurred should be characterized in the income statement as revenue or as a

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reduction of expenses incurred. The EITF concluded that reimbursements received for out of pocket expenses incurred should be characterized as revenue in the income statement. This announcement will
be applied in financial reporting periods beginning after December 15, 2001, and comparative financial statements for prior periods will be reclassified to comply with the guidance in this
announcement. The Company is currently recording reimbursement by its customers for out-of-pocket expenses as a component of services revenue. Prior to adoption of EITF
01-14 on January 1, 2002, the Company recorded reimbursement by its customers for out-of-pocket expenses as a reduction to cost of sales. Prior periods have
been reclassified to comply with the guidance of EITF 01-14. The effect of this reclassification was to increase services revenues and increase cost of services for fiscal 2001 and fiscal
2000 by $3.9 million and $1.6 million, respectively.

In
June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit Activities, which addresses financial
accounting and reporting for costs associated with exit activities and supersedes Emerging Issues Task Force ("EITF") 94-3,Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).SFAS No. 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. However, under SFAS No. 146, a liability for one-time termination benefits is
recognized when an entity has committed to a plan of termination, provided certain other requirements have been met. In addition, under SFAS No. 146, a liability for costs to terminate a
contract is not recognized until the contract has been terminated, and a liability for costs that will continue to be incurred under a contract's remaining term without economic benefit to the entity
is recognized when the entity ceases to use the right conveyed by the contract. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. The Company
will adopt the provisions of SFAS No. 146 for restructuring activities initiated after December 31, 2002. The Company does not expect the adoption of SFAS No. 146 will have a
material impact on its consolidated results of operations or financial position.

In
November 2002, the EITF reached a consensus on Issue 00-21, addressing how to account for arrangements that involve the delivery or performance of multiple
products, services, and/or rights to use assets. Revenue arrangements with multiple deliverables are divided into separate units of
accounting if the deliverables in the arrangement meet the following criteria: (1) the delivered item has value to the customer on a standalone basis; (2) there is objective and reliable
evidence of the fair value of undelivered items; and (3) delivery of any undelivered item is probable. Arrangement consideration should be allocated among the separate units of accounting based
on their relative fair values, with the amount allocated to the delivered item being limited to the amount that is not contingent on the delivery of additional items or meeting other specified
performance conditions. The final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003 with early adoption permitted. The provisions of this
Consensus are not expected to have a significant effect on the Company's financial position or operating results.

In
November 2002, the FASB issued Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others", which clarifies disclosure and recognition/measurement requirements related to certain guarantees. The

74

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disclosure requirements are effective for financial statements issued after December 15, 2002 and the recognition/measurement requirements are effective on a prospective basis for guarantees
issued or modified after December 31, 2002. The application of the requirements of FIN 45 did not have a material impact on the Company's financial position or results of operations.

In
December 2002, the FASB issued SFAS No. 148,Accounting for Stock-Based Compensation- Transition and Disclosure. This
Statement amends SFAS No. 123,Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of this Standard
are effective for fiscal years ending after December 15, 2002 and have been incorporated into these financial statements and accompanying footnotes.

In
January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities," which addresses consolidation by business enterprises of
variable interest entities that either: (1) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or
(2) the equity investors lack an essential characteristic of a controlling financial interest. FIN 46 requires disclosure of Variable Interest Entities (VIEs) in financial statements issued
after January 31, 2003, if it is reasonably possible that as of the transition date: (1) the company will be the primary beneficiary of an existing VIE that will require consolidation
or, (2) the company will hold a significant variable interest in, or have significant involvement with, an existing VIE. The company does not have any entities that will require disclosure or
new consolidation as a result of adopting the provisions of FIN 46.

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

75

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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 No. 142 but will periodically test for impairment under the provisions of SFAS No. 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.

The
following summary, prepared on an unaudited pro forma basis, reflects the condensed consolidated results of operations for the year 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.

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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.

Interleaf

On April 14, 2000, the Company completed its acquisition of Interleaf, Inc. and its subsidiaries ("Interleaf") pursuant to a statutory merger
involving a stock-for-stock exchange. Interleaf's software products and related services enable automated electronic business, or e-business, and also enable the
extension of e-business to wireless users. Interleaf provides customers with an integrated, easily implemented e-business solution based on extensible Markup Language, or XML,
that enables the design, creation and management of XML-based content for transformation and delivery over the Web and related services. As a result of the acquisition, the Company has the
ability to combine technological resources to develop a robust Web-based business solution and reduce time to market for the combined Company's products. Through the acquisition of all of
the equity securities of Interleaf, BroadVision acquired all of the assets and assumed liabilities of Interleaf and its existing operations which included in-process technology. Pursuant
to the terms of the Agreement and Plan of Merger and Reorganization, dated as of January 26, 2000, each outstanding share of Interleaf common stock was exchanged for 1.0395 shares of Company
common stock and all options to purchase shares of Interleaf common stock outstanding immediately prior to the consummation of the Merger were converted into options to purchase shares of Company
common stock.

The
Company issued 1,599,110 shares of Company common stock with a fair market value of $686.9 million and exchanged options to purchase 259,815 shares of Company common stock
with a fair market value of $102.7 million. The fair market value of the exchanged options to purchase 259,815 shares of Company common stock was valued using the Black-Scholes option-pricing
model. In connection with the acquisition, the Company incurred transaction costs consisting primarily of financial advisor, legal and accounting professional fees of $14.8 million, severance
costs of $1.0 million and office closure costs of $1.3 million, resulting in a total purchase price of $806.7 million. The results of operations of Interleaf have been included
with the Company's results of operations since the April 14, 2000 acquisition date.

The
acquisition was accounted for as a purchase business combination. Under this accounting treatment, the purchase price is allocated to the assets acquired and liabilities assumed
based on the estimated fair values on the date of acquisition.

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The
total purchase price paid for the Interleaf acquisition was allocated as follows (in thousands):

Property and equipment

$
2,896Net tangible liabilities assumed, excluding property and equipment


(1,041
)Identifiable intangible assets


28,910In-process technology


10,100Goodwill


765,805Total

$
806,670


The
amounts allocated to intangible assets include completed technologies of $20.4 million and assembled workforces of $8.5 million.

At
December 31, 2002, accumulated amortization related to the goodwill and other intangible assets acquired in the Interleaf acquisition totaled $402.2 million. Goodwill
amortization was $382.8 million and other intangible asset amortization was $19.3 million. As discussed in Note 4 of Notes to Consolidated Financial Statements, during the third
quarter of fiscal 2001, the Company performed an impairment assessment of identifiable intangible assets and goodwill recorded in connection with its various acquisitions. The impairment assessment
was performed primarily as a result of the significant decline in the Company's stock price, the net book value of assets significantly exceeding the Company's market capitalization, the
underperformance of the Interleaf acquisition relative to projections, and the overall decline in industry growth rates which have negatively impacted the Company's revenues and forecasted revenue
growth rate which indicate that this trend might continue for an indefinite period. Also, current economic indicators forecast that this trend may continue for an indefinite period. As a result, the
Company recorded a $336.4 million impairment charge during the third quarter of 2001 to reduce goodwill by $330.2 million and other intangible assets by $6.2 million associated
with the Company's acquisitions, primarily the Interleaf acquisition, to their estimated fair value.

As
further discussed in Note 4, upon adoption of SFAS No. 142, on January 1, 2002, the Company no longer amortizes goodwill. Additionally, upon adoption of SFAS
No. 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 is estimated
to be $887,000 in 2003.

The
Company estimated that $10.1 million of the purchase price for Interleaf 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 upon consummation of the acquisition. The value
assigned to acquired in-process technology was the amount attributable to the efforts of Interleaf up to the time of acquisition. The amount was estimated through the application of the
"stages of completion" by multiplying the estimated present value of future cash flows, excluding, cost of completion, by the percentage of completion of the purchased technology at the time of the
acquisition. The discount rate included a factor that took into account the uncertainty surrounding the successful development of the acquired in-process technology.

78

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The following summary, prepared on an unaudited pro forma basis, reflects the condensed consolidated results of operations for the twelve-month period ended
December 31, 2000, assuming Interleaf had been acquired at the beginning of the period presented (in thousands, except per share data):

2000Revenue

$
429,162Net loss

$
(236,519
)Basic and diluted net loss per share

$
(8.01
)


The
pro forma results are not necessarily indicative of what would have occurred if the acquisition had been in effect for the periods 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. The charges for in-process technology have not been included in the
unaudited pro forma results because they are nonrecurring.

Note 3Property and Equipment (in thousands):

December 31,2002

2001Furniture and fixtures

$
9,138

$
9,646Computer and software


49,579


59,182Leasehold improvements


21,456


38,44080,173


107,268Less accumulated depreciation and amortization


(53,573
)

(40,049
)Total property and equipment, net

$
26,600

$
67,219


Note 4Goodwill and Other Intangibles

Goodwill and other intangibles consist of the following:

December 31,2002

2001Goodwill

$
437,206

$
437,206Other Intangibles


22,732


22,732459,938


459,938Less:Accumulated amortization


(402,618
)

(399,071
)Goodwill and other intangibles, net

$
57,320

$
60,867


On
January 1, 2002, the Company adopted SFAS No. 142,Goodwill and Intangible Assets.Under SFAS No. 142, goodwill
and intangible assets with indefinite lives are no longer subject to amortization

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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 No. 142 as adjusted to add back goodwill and assembled workforce amortization
as if SFAS No. 142 had been adopted:

2001

2000Reported Net Loss

$
(836,259
)
$
(161,629
)Add back amortization:Goodwill


202,542


181,029Assembled workforce


2,687


2,009Adjusted net loss

$
(631,030
)
$
21,409Basic and diluted net loss per share:Reported Net Loss

$
(27.20
)
$
(5.60
)Goodwill


6.59


6.27Assembled workforce


0.09


0.07Adjusted basic net (loss) income per share

$
(20.52
)
$
0.74Goodwill


6.59


6.18Assembled Workforce


0.09


0.07Adjusted diluted net (loss) income per share

$
(20.52
)
$
0.65


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 No. 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 No. 142 provides for a two-stage 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 No. 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, 2002, there was no impairment of goodwill as of December 31, 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

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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, 2002.

As
discussed in Note 1, upon adoption of SFAS No. 142, on January 1, 2002, the Company no longer amortizes goodwill. Additionally, upon adoption of SFAS
No. 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 is estimated to be $887,000 in 2003.

Note 5Accrued Expenses (in thousands):

December 31,2002

2001Employee benefits

$
2,081

$
3,121Commissions and bonuses


2,027


5,543Sales and other taxes


11,956


7,620Restructuring


29,056


32,454Other


10,667


12,974$
55,787

$
61,712


Note 6Long-term Debt and Other Noncurrent Liabilities

Other noncurrent liabilities consist of the following:

December 31,2002

2001Restructuring

$
67,139

$
58,335Other


1,067


1,131$
68,206

$
59,466


The
Company has various credit facilities with a commercial lender which include term debt in the form of notes payable and a revolving line of credit. In March 2002, the Company
renewed and amended its revolving credit facility. The amount available under the revolving line of credit was increased from $10.0 million to $25.0 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 (4.25% as of December 31, 2002). At December 31, 2002,
$25.0 million was outstanding and the revolving credit facility is due to expire in March 2003. There were no outstanding borrowings under the revolving line of credit as of
December 31, 2001. Interest is due monthly and principal is due at expiration. The amended and restated loan and security agreement requires the Company to maintain $80.0 million in
unrestricted cash and cash equivalents, short-term investments and long-term investments (excluding

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equity investments) and $30.0 million on deposit with the Company's commercial lender. The Company was in compliance with these covenants as of December 31, 2002. As of
December 31, 2002 and December 31, 2001, outstanding term debt borrowings were approximately $2.9 million and $3.9 million, respectively and consist of two borrowings.
Borrowings bear interest at the bank's prime rate (4.25% as of December 31, 2002 and December 31, 2001) and prime rate plus 1.25% (5.75% as of December 31, 2002 and
December 31, 2001). Principal and interest are due in consecutive 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 $25.0 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 (4.25% as of March 1, 2003). At December 31, 2002, $25.0 million was outstanding and is due to expire in February, 2004. 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, short-term investment and
long-term investments (excluding 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.

Commitments
totaling $16.7 million and $25.0 million in the form of standby letters of credit were issued on the Company's behalf from financial institutions as of
December 31, 2002 and December 31, 2001 in favor of the Company's various landlords to secure obligations under the Company's facility leases. The commercial credit facilities include
covenants which impose certain restrictions on the payment of dividends and other distributions and require the Company to meet a financial covenant to maintain certain levels of available cash, cash
equivalents, short-term investments and long-term investments (excluding equity investments). Borrowings are collateralized by a security interest in substantially all of the
Company's owned assets.

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Note 7Income Taxes

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

|          |         | Years Ended December 31, |      
|--------- | ------- | ------------------------ | -----
|
|Current:  |         |                          |      
|          | Federal |                          | $    
|          | State   |                          |      
|Foreign   |         |                          | 372  
|          |         |                          |      
|          |         | Total current            |      
|Deferred: |         |                          |      
|          | Federal |                          |      
|          | State   |                          |      
|          |         |                          |      
|          |         | Total deferred           |      
|          |         |                          |      
|          |         | $                        | 7,603
|          |         |                          |      

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, |        
|----------------------------------------------------------------- |  | ------------------------ | -------
|
|Expected income tax provision (benefit)                           |  | $                        | (57,022
|Expected state income taxes (benefit), net of federal tax benefit |  |                          | (8,961 
|California net operating loss reduction                           |  |                          | 2,914  
|Foreign taxes                                                     |  |                          | 2,361  
|Utilization of foreign net operating loss carryforwards           |  |                          | (2,413 
|Change in valuation allowance                                     |  |                          | 67,070 
|Foreign losses not benefited                                      |  |                          | 2,353  
|Non deductible goodwill and intangible amortization               |  |                          | 1,418  
|Write off of acquired in-process technology                       |  |                          |       
|Tax credits                                                       |  |                          | (758   
|Other                                                             |  |                          | 641    
|                                                                  |  |                          |        
|Income tax provision                                              |  | $                        | 7,603  
|                                                                  |  |                          |        

83

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

December 31,2002

2001Deferred tax assets:Depreciation and amortization

$
7,441

$
2,278Accrued liabilities


43,898


62,049Capitalized research and development


598


957Net operating losses


174,495


100,895Tax credits


11,383


14,436Other


143


238Unrealized loss on marketable securities


5,429


777Total deferred tax assets


243,387


181,630Less valuation allowance


(234,697
)

(169,071
)8,690


12,559Deferred tax liabilitiesState tax liability


(8,690
)

(5,503
)Net deferred tax asset

$


$
7,056


The
Company has provided a valuation allowance for all of its deferred tax assets as of December 31, 2002 due to the uncertainty regarding their future realization. The total
valuation allowance increased $67,070,000 from December 31, 2001 to December 31, 2002. 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, 2002, the Company had federal and state operating loss carryforwards of approximately $462,109,000 and $144,308,000 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 $10,707,000 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 2022, if not utilized. The state net operating loss
carryforwards expire in the years 2004 through 2012. The state research and development credits can be carried forward indefinitely. As of December 31, 2002, the Company's foreign subsidiaries
had net operating loss carryforwards of $2,291,000 that can be used to offset future foreign income.

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.

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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. The amount due
is payable in quarterly installments by December 31, 2003.

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, together with amounts included in restructuring reserves is as follows (in thousands);
properties that are part of the restructuring have been included:

Year Ended December 31,

Total future minimum lease payments2003

$
26,2812004


25,8552005


25,6522006


22,6202007


20,4952008 and thereafter


81,487Total minimum lease payments


202,390


As
of December 31, 2002, $129.4 million of future minimum lease payments, net of anticipated sublease income, is accrued in the Company's restructuring accruals. The
restructuring accruals are net of approximately $44.8 million of sublease income of which approximately $28.8 million represents estimated sublease income for sublease agreements yet to
be negotiated and the remaining $16.0 million represents sublease income to be received under non-cancelable sublease agreements signed by December 31, 2002. See
Note 9 of Notes to Consolidated Financial Statements for additional information.

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Standby Letter of Credit Commitments

As of December 31, 2002, the Company had $16.7 million of outstanding commitments in the form of standby letters of credit in favor of the Company's
various landlords to secure obligations under the Company's facility leases.

Legal Proceedings

In April 2001, the Company filed a Form 8-K with the Securities and Exchange Commission reporting that several purported class action
lawsuits had been filed against the Company and certain of its officers and directors. In each of the lawsuits, the plaintiffs sought to assert claims on behalf of a class of all persons who purchased
securities of BroadVision between January 26, 2001 and April 2, 2001. The complaints alleged that BroadVision and the individual defendants violated federal securities laws in connection
with its reporting of financial results for the quarter ended December 31, 2000. The lawsuits were consolidated into a single action. On November 5, 2001, BroadVision and the individual
defendants filed motions to dismiss the consolidated complaint. On February 22, 2002, the Court granted these motions, dismissed the consolidated complaint without prejudice and ordered the
lead plaintiff to file an amended complaint within 30 days. On March 25, 2002, the plaintiff filed its Second Amended Consolidated Complaint, which added claims for breach of fiduciary
duty and named members of the Company's board of directors as additional defendants. All defendants filed motions to dismiss the Second Amended Consolidated Complaint on May 10, 2002. The
hearing on the defendant's motion to dismiss was heard on August 30, 2002. On September 11, 2002, the Court (1) dismissed with prejudice the claims that the defendants violated
federal securities laws, on the basis that the complaint failed to state a claim upon which relief could be granted, and (2) dismissed without prejudice the claims for breach of fiduciary duty,
on the basis that the claims were made under state law and, in the absence of any remaining federal law claims, the Court would decline to exercise supplemental jurisdiction. The Company is not aware
of plaintiffs filing an appeal of the Court's September 11, 2002 decision or filing another complaint in any other court. The Company believes that the action was without merit and will
continue to defend itself vigorously should plaintiffs continue to pursue any of these claims.

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 and is defending itself vigorously. The trial date is set for July 14, 2003 in San Jose, California, in the United States District Court, Northern
District, San Jose Division. The Company is unable to estimate the amount or range of any potential loss from this matter.

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
matter was settled by way of a settlement agreement executed by both parties in March 2003 and the parties expect the lawsuit to be dismissed in the second quarter of fiscal 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

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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

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 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 |   | Other   |   | Total |       
|----------------------------------- |  | ---------------------- | ------ | ------------------------ | - | ------- | - | ----- | ------
|Reserve balances, December 31, 2001 |  | $                      | 817    |                          | $ | 89,859  |   | $     | 113   
|Restructuring charges               |  |                        | 7,644  |                          |   | 101,742 |   |       | 1,063 
|Cash payments                       |  |                        | (6,929 | )                        |   | (78,019 | ) |       | (1,097
|Non-cash portion                    |  |                        | (107   | )                        |   | (18,891 | ) |       |      
|                                    |  |                        |        |                          |   |         |   |       |       
|Reserve balances, December 31, 2002 |  | $                      | 1,425  |                          | $ | 94,691  |   | $     | 79    
|                                    |  |                        |        |                          |   |         |   |       |       

The
nature of the charges summarized above is as follows:

Severance
and benefitsThe Company recorded a charge of approximately $7.6 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 $7.6 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 $6.9 million of severance and benefits costs had
been paid out during fiscal 2002 and the remaining $1.4 million of severance, payroll taxes and COBRA benefits is expected to be paid in full by December 31, 2003. The Company's
restructuring

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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.

OtherThe
Company recorded charges of approximately $1.1 million during fiscal year 2002 for various incremental costs incurred as a direct result of the restructuring
plan. The remaining reserve balance of $79,000 is expected to be paid in full by the end of the fourth quarter of 2003.

Note 10Stockholders' Equity

Convertible Preferred Stock

As of December 31, 2002, 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.



As
of December 31, 2002, there were warrants outstanding to acquire 9,628 shares of common stock at an average price of $187.53. 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.

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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 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.

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 2002 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 No. 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. 3,165 unvested shares were repurchased by the Company during the year ended December 31, 2002 at a weighted-average price of $11.77. As of
December 31, 2002, 270 shares were subject to repurchase at a weighted-average price of $8.48. At December 31, 2001 and 2000, 7,952 and 68,094 shares, respectively, were subject to
repurchase.

The
Company's President and Chief Executive Officer ("CEO") has options to purchase 2,219,999 shares of common stock at an average exercise price of $30.16 per share. On April 1,
1995, the Company's President and CEO was granted options to purchase 500,000 shares of common stock at an exercise price of $4.00 per share. These options vest ratably over a 60-month
period commencing on grant whereas the first year is subject to cliff vesting. As of December 31, 2002, all of the 500,000 options were exercised. On June 23, 1999, the CEO was granted
additional options to purchase 500,000 shares of common stock at an exercise price of $60.00 per share. The options vest ratably, 20% after year 1 and the remainder ratably over the next
48 months, over a 60-month period commencing on grant. As of December 31, 2002, 350,001 of the 500,000 additional options were vested. On May 25, 2001, the CEO was
granted additional options to purchase 500,000 shares of common stock at an
exercise price of $66.51 per share. The options vest ratably over the next 48 months, commencing on grant. As of December 31, 2002, 197,917 options from the May 25, 2001 grant
were vested. On

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November 27, 2001, the CEO was granted additional options to purchase 4,444 shares of common stock at an exercise price of $35.01 per share. The options vest ratably over the next
24 months, commencing on grant. As of December 31, 2002, 2,407 options from the November 27, 2001 grant were vested. On February 19, 2002, the CEO was granted additional
options to purchase 55,555 shares of common stock at an exercise price of $18.63 per share. The options vest ratably over the next 48 months, commencing on grant. As of December 31,
2002, 11,574 options from the February 19, 2002 grant were vested. On October 30, 2002, the CEO was granted additional options to purchase 1,160,000 shares of common stock at an exercise
price of $2.16 per share. The options vest ratably over the next 48 months, commencing on grant. As of December 31, 2002, 48,333 options from the October 30, 2002 grant were
vested.

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

|                                                                 |  | Years ended December 31,
|---------------------------------------------------------------- |  | ------------------------
|
|
|Outstanding at beginning of period                               |  | 5,239                   
|Granted                                                          |  | 3,635                   
|Exercised                                                        |  | (226                    
|Forfeited                                                        |  | (2,612                  
|Outstanding at end of period                                     |  | 6,036                   
|Options exercisable at end of period                             |  | 1,861                   
|                                                                 |  |                         
|Weighted-average fair value of options Granted during the period |  |                         
|                                                                 |  |                         

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The
following table summarizes stock options outstanding under the plan as of December 31, 2002:

|              |  |       |  |      |  |        |  | Exercisable
|------------- |  | ----- |  | ---- |  | ------ |  | -----------
|
|
|$1.501.50    |  | 423   |  | 9.81 |  | 1.50   |  | 14         
|2.162.16     |  | 1,494 |  | 9.83 |  | 2.16   |  | 54         
|2.367.92     |  | 877   |  | 8.89 |  | 5.20   |  | 136        
|8.5012.15    |  | 626   |  | 9.06 |  | 10.07  |  | 82         
|12.5030.50   |  | 433   |  | 6.42 |  | 19.03  |  | 318        
|35.0135.01   |  | 686   |  | 8.91 |  | 35.01  |  | 412        
|35.2560.00   |  | 674   |  | 6.45 |  | 55.33  |  | 484        
|66.5166.51   |  | 662   |  | 8.40 |  | 66.51  |  | 267        
|87.19448.31  |  | 160   |  | 7.36 |  | 188.34 |  | 93         
|475.31475.31 |  | 1     |  | 7.49 |  | 475.31 |  | 1          
|              |  |       |  |      |  |        |  |            
|              |  | 6,036 |  | 8.66 |  | 26.32  |  | 1,861      

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                               |  | 975                     
|Granted                                                          |  | 2,123                   
|Exercised                                                        |  | (9                      
|Forfeited                                                        |  | (618                    
|Outstanding at end of period                                     |  | 2,471                   
|Exercisable at end of Period                                     |  | 458                     
|                                                                 |  |                         
|Weighted-average fair value of options granted during the period |  |                         
|                                                                 |  |                         

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The
following table summarizes stock options, granted outside the plan, outstanding as of December 31, 2002:

|              |  |       |  |      |  |   |        | Exercisable
|------------- |  | ----- |  | ---- |  | - | ------ | -----------
|
|
|$0.80$.80    |  | 50    |  | 3.16 |  | $ | .80    |            
|1.501.50     |  | 1,773 |  | 9.81 |  |   | 1.50   |            
|2.5530.50    |  | 255   |  | 7.97 |  |   | 12.41  |            
|31.93116.75  |  | 334   |  | 7.42 |  |   | 74.11  |            
|164.25241.88 |  | 48    |  | 7.29 |  |   | 240.82 |            
|258.66258.66 |  | 1     |  | 7.01 |  |   | 258.66 |            
|310.50310.50 |  | 5     |  | 2.67 |  |   | 310.50 |            
|381.94381.94 |  | 4     |  | 7.09 |  |   | 381.94 |            
|435.98453.46 |  | 1     |  | 7.09 |  |   | 435.98 |            
|              |  |       |  |      |  |   |        |            
|              |  | 2,471 |  | 9.10 |  | $ | 18.49  |            

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 year ended December 31, 2001 the Company recorded compensation expense of $1.0 million. 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. $350,000 of the charge is recorded in
general and administrative expense and the remaining $664,000 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

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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 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.

Pro Forma Disclosure

Employee Stock Purchase 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 555,278, 293,112 and 120,889 shares to employees in the years ended December 31, 2002, 2001 and 2000, respectively. Under SFAS No. 123, compensation cost is recognized for
the fair value of the employees' purchase rights, which was estimated using the Black-Scholes option pricing model with no expected dividends, an expected life of approximately 2 months, and
the following weighted-average assumptions:

|                        |  | Years ended December 31, |  
|----------------------- |  | ------------------------ | -
|
|Risk-free interest rate |  | 1.06                     | %
|Volatility              |  | 122                      | %

The
weighted-average fair value of the purchase rights granted in the years ended December 31, 2002, 2001, and 2000, was $2.94, $18.00, and $115.83, 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, |  
|----------------------- |  | ------------------------ | -
|
|Expected life           |  | 3.5 years                |  
|Risk-free interest rate |  | 1.93                     | %
|Volatility              |  | 122                      | %

Had
compensation cost for the Company's stock option plan and stock purchase plan been determined consistent with SFAS No. 123, the Company's reported net income (loss) and net
earnings

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

|                                       |             | Years ended December 31, |  
|-------------------------------------- | ----------- | ------------------------ | -
|
|Net (loss) income:                     |             |                          |  
|                                       | As reported |                          | $
|                                       | Pro forma   |                          | $
|Basic net (loss) earnings per share:   |             |                          |  
|                                       | As reported |                          | $
|                                       | Pro forma   |                          | $
|Diluted net (loss) earnings per share: |             |                          |  
|                                       | As reported |                          | $
|                                       | Pro forma   |                          | $

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 for the year ended December 31, 2002).

As
of August 15, 2001, the Company discontinued the 50% match for all employee contributions. The Company contributed $2.3 million for the year ended December 31,
2001, all of which has been funded or accrued as of December 31, 2001.

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,
|----------------- | -------------- | ------------------------
|
|Software licenses |                | $                       
|Services          |                |                         
|Maintenance       |                |                         
|                  |                |                         
|                  | Total Revenues |                         
|                  |                |                         

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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.

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

|          |               | Years Ended December 31,
|--------- | ------------- | ------------------------
|
|Revenues: |               |                         
|          | Americas      |                         
|          | Europe        |                         
|          | Asia/Pacific  |                         
|          |               |                         
|          | Total Company |                         
|          |               |                         

|                   |               | December 31,
|------------------ | ------------- | ------------
|
|Long-lived assets: |               |             
|                   | Americas      |             
|                   | Europe        |             
|                   | Asia/Pacific  |             
|                   |               |             
|                   | Total Company |             
|                   |               |             

During
the years ended December 31, 2002, 2001 and 2000 no customer accounted for 10% or more of the Company's revenues.

Note 13Subsequent Events

In March 2003, the Company renewed and amended its revolving credit facility. The amount available under the revolving line of credit remains unchanged at
$25.0 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 (4.25% as of March 1, 2003). At
December 31, 2002, $25.0 million was outstanding and is due to expire in February, 2004. 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, short-term investment and long-term investments (excluding 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.

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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
matter was settled by way of a settlement agreement executed by both parties in March 2003 and the parties expect the lawsuit to be dismissed in the second quarter of fiscal 2003.

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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 past two fiscal years contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles.

During
our two most recent fiscal years, 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 two most recent fiscal years, 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.

PART III

Certain information required by Part III is incorporated by reference in this Report from the Company's definitive proxy statement for its 2003 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 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

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

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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
Related Stockholder Matters" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference to the sections entitled "Executive Compensation" and "Certain Transactions" in the Proxy
Statement.

ITEM 14. CONTROLS AND PROCEDURES

(a)  Based
on his evaluation of our disclosure controls and procedures conducted within 90 days of the date of filing this report on Form 10-K, our
Chief Executive Officer, who is also acting in the capacity of chief financial officer, has concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) promulgated under the Securities Exchange Act of 1934) are effective.

(b)  There
have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above.

Limitations on the Effectiveness of Controls

The Company's management, including the Chief Executive 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 control. 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, control 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.

PART IV

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

(a)  The
following documents are filed as a part of this Report.





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(b)  Reports
on Form 8-K.

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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 31st day of March 2003.

| |  | 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 31, 2003
|/s/DAVID L. ANDERSONDavid L. Anderson |  | Director                                                                                   |  | March 31, 2003
|/s/TODD A. GARRETTTodd A. Garrett     |  | Director                                                                                   |  | March 31, 2003
|/s/KOH BOON HWEEKoh Boon Hwee         |  | Director                                                                                   |  | March 31, 2003
|/s/JAMES D. DIXONJames D. Dixon       |  | Director                                                                                   |  | March 31, 2003
|/s/CARL PASCARELLACarl Pascarella     |  | Director                                                                                   |  | March 31, 2003

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CERTIFICATIONS

I, Pehong Chen, certify that:



|Date: |  | March 31, 2003 |                                                  
|----- |  | -------------- | -------------------------------------------------
|      |  |                | /s/PEHONG CHENPehong Chen Chief Executive
Officer

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I,
Pehong Chen, certify that:



|Date: |  | March 31, 2003 |                                                         
|----- |  | -------------- | --------------------------------------------------------
|      |  |                | /s/PEHONG CHENPehong Chen Acting Chief Financial
Officer

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REPORT ON FINANCIAL STATEMENT SCHEDULE  OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The audit referred to in our report dated January 24, 2003, except for Note 13 and the penultimate paragraph of Note 6, as to which the date
is March 28, 2003, 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 audit. The financial statement schedule of BroadVision, Inc. as of December 31, 2001 and 2000 and for the two years 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 year ended December 31, 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.



San
Jose, California
January 24, 2003, except for Note 13
and the penultimate paragraph of Note 6,
as to which the date is March 28, 2003

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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.



San
Jose, California
March 29, 2002

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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, 2002                  |  | $                              | 8,194 |                               | $ | 3,979          |  | $                       
|                                              |  |                                |       |                               |   |                |  |                         
|Year Ended December 31, 2001                  |  | $                              | 4,015 |                               | $ | 8,298          |  | $                       
|                                              |  |                                |       |                               |   |                |  |                         
|Year Ended December 31, 2000                  |  | $                              | 1,446 |                               | $ | 2,687          |  | $                       
|                                              |  |                                |       |                               |   |                |  |                         

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BROADVISION, INC. ANNUAL REPORT ON FORM 10-K DECEMBER 31, 2001        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.
|            |  |                                                                                                                                                                                                              

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|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.                           
|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.                                                                                                             
|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.                                                                        
|99.1         |  | CEO and Acting CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.§ 1350, as adopted)                                                                                      

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