Five Year Financial Summary

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                           1997        1996        1995        1994        1993
-------------------------------------------------------------------------------
(In thousands except per share amounts)

Revenues             $1,124,305  $1,095,333  $1,097,978  $1,041,403  $1,050,277
Restructuring charges
(credit)                    ---         ---       6,040    (  4,826)     89,806
Nonrecurring
operating charges         1,095      10,545         ---         ---         ---
Gains on sales of
investments in
affiliates                4,858      11,173       6,493       5,815         ---
Net loss                (70,237)    (69,112)    (45,348)    (70,220)   (116,042)
Net  loss  per  share,
basic and diluted       (  1.46)    (  1.46)    (   .98)    (  1.56)   (   2.51)
Working capital         204,534     230,804     261,140     282,893     348,756
Total assets            720,989     756,347     826,045     839,618     855,329
Total debt              104,665      65,644      69,541      61,114      26,606
Shareholders' equity    368,783     447,263     504,064     522,337     588,710


Information  contained  in  this report may  include  statements  that  are
forward-looking as defined in Section 21E of the Securities Exchange Act of
1934.   Actual results could differ materially from those projected in  the
forward-looking statements.  Additional information concerning factors that
could  cause actual results to differ materially from those in the forward-
looking  statements  is  contained  in  the  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations" section of  this
Annual Report.



MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

Summary.  The following summarized financial data sets forth the
results of operations of the Company for the three year period ended
December 31, 1997.  The complete consolidated financial statements of
the Company, including footnote disclosures, are presented on pages
27 to 45 of this annual report.

----------------------------------------------------------------------------
                                                 1997      1996      1995
----------------------------------------------------------------------------
(In millions except per share amounts)

Revenues                                       $1,124    $1,095    $1,098
Cost of revenues                                  724       692       668
----------------------------------------------------------------------------
Gross profit                                      400       403       430

Operating expenses                                454       461       478
Restructuring charge                              ---       ---         6
Nonrecurring operating charges                      1        11       ---
----------------------------------------------------------------------------
Loss from operations                            (  55)    (  69)    (  54)

Arbitration award                               (   6)      ---       ---
Gains on sales of investments in affiliates         5        11         7
All other income (expense) - net                (  10)    (   8)        2
----------------------------------------------------------------------------
Loss before income taxes                        (  66)    (  66)    (  45)

Income tax expense                              (   4)    (   3)       ---
----------------------------------------------------------------------------
Net loss                                       $(  70)   $(  69)   $(  45)
============================================================================
Net loss per share, basic and diluted          $(1.46)   $(1.46)   $( .98)
============================================================================

In 1993 the Company began the process of transformation from its
proprietary, closed-system product offerings to the open computing
environment of products based on Intel Corporation hardware and
Microsoft Corporation software.  The dedication of significant
Company resources to hardware, software, and system implementation
for this new environment contributed substantially to the Company's
operating losses for 1993 through 1996.

For hardware implementation, the Company chose to use only Intel
processors and to focus its efforts and image creation on its core
capabilities, specifically very high performance computational and
graphics capabilities.  This high-end market in the Windows NT
operating system environment is supported only by Intel-based
hardware products.  The Company expected that its four year hardware
development effort and investment in the high-end graphics market
would result in substantially increased revenues and profits in
1997, but these benefits were not realized due to actions of Intel
described separately in the "Intel Litigation" section of this
report.

In addition to the factors noted above, demand for the Company's
software products has not met expectations, and gross margin on
product sales has continued to decline due to price competition in
the industry.

The Company expects that the industry will continue to be
characterized by higher performance and lower priced products,
intense competition, rapidly changing technologies that result in
shorter product cycles, and development and support of software
standards that result in less specific hardware and software
dependencies by customers.  The Company believes that its operating
system and hardware architecture strategies are the correct choices,
that the industry has accepted Windows NT, and that Windows NT is
becoming the dominant operating system in the majority of markets
served by the Company.  Competing operating systems and products are
available in the market, and competitors of the Company offer or are
adopting Windows NT and Intel as the systems for their products.
Improvement in the Company's operating results will depend on its
ability to accurately anticipate customer requirements and
technological trends and to rapidly and continuously develop and
deliver new hardware and software products that are competitively
priced, offer enhanced performance, and meet customers' requirements
for standardization and interoperability.  To achieve and maintain
profitability, the Company must substantially increase sales volume
and/or further align its operating expenses with the level of
revenue and gross margin being generated.

Restructuring and Nonrecurring Operating Charges.  In response to
industry conditions, the Company undertook its first restructuring
plan in 1993.  During 1995, the Company undertook a second
restructuring plan designed to further adapt the Company's cost
structure to changing industry and market conditions.  The 1995 plan
as originally conceived consisted of direct reductions in workforce,
other workforce reductions through attrition, and disposition of
four unprofitable business units over the twelve month period ended
June 30, 1996.  The 1995 plan, had it been fully executed with
respect to the four business units, was expected to provide an
operating expense reduction of approximately $100 million annually
on a prospective basis.  Of this total anticipated annual savings,
approximately $66 million was to be derived from disposition of the
four unprofitable business units.

The 1995 restructuring charge totaled $6 million, primarily for
employee severance pay and related costs.  Approximately 450
positions were eliminated through direct reductions in workforce,
with approximately 350 others eliminated through attrition.  All
employee groups were affected, but the majority of eliminated
positions derived from the research and development, systems
engineering and support, and sales and marketing areas.  Cash
outlays related to the restructuring totaled $3.6 million in 1995,
funded by cash from operations and borrowings under credit
facilities.  Cash required in 1996 to fund the 1995 plan was
insignificant.  The $6 million charge is included in "Restructuring
charge" in the 1995 consolidated statement of operations.

During the fourth quarter of 1996, the Company determined that two
of the four business units included in the original 1995 plan should
be retained based on their future prospects and strategic value to
other business units.  At this same time, the Company recorded a
nonrecurring operating charge of $10.5 million, consisting of a $7.2
million revaluation of the assets of the two noncore business units
held for sale and an unrelated $3.3 million write-off of deferred
financing costs due to early termination of the Company's revolving
credit agreement with a group of lenders.  The $10.5 million charge
is included in "Nonrecurring operating charges" in the 1996
consolidated statement of operations.

In early 1997, the Company sold the two noncore business units to
third parties.  The total loss on these sales was $8.3 million, of
which $7.2 million had been included in the asset revaluation
recorded in 1996.  The remaining loss of $1.1 million is included in
"Nonrecurring operating charges" in the 1997 consolidated statement
of operations.  Revenues and losses of the two units totaled $24
million and $16 million, respectively, for 1996, and $43 million and
$7 million, respectively, for 1995.  Total assets of the units
totaled $14 million at December 31, 1996.  The two business units
did not have a material effect on the Company's results of
operations for the period in 1997 prior to their disposal.

See "Subsequent Events" following for description of the February
1998 restructuring plan for the Company's European operations.

Litigation and Other Risks and Uncertainties.  The Company has
ongoing litigation, and its business is subject to certain risks and
uncertainties, including those described below.

Intel Litigation.  The Company filed a legal action on November 17,
1997, in U.S. District Court, the Northern District of Alabama,
Northeastern Division, charging Intel Corporation, the supplier of
all of the Company's microprocessor needs, with anticompetitive
business practices.  In the lawsuit, Intergraph alleges that Intel
is attempting to coerce the Company into relinquishing to Intel
certain computer hardware patents through a series of wrongful acts,
including interference with business and contractual relations,
interference with technical assistance from third party vendors,
breach of contract, negligence, misappropriation of trade secrets,
and fraud based upon Intel's failure to promptly notify the Company
of defects in Intel's products and timely correction of such
defects, and further alleging that Intel has infringed upon the
Company's patents.  The Company's patents define the architecture of
the cache memory of an Intergraph developed microprocessor.  The
Company believes this architecture is at the core of Intel's entire
Pentium line of microprocessors and systems.  On December 3, 1997,
the Company amended its complaint to include a count charging Intel
with violations of federal antitrust laws.  Intergraph asserts
claims for compensatory and treble damages resulting from Intel's
wrongful conduct and infringing acts, and punitive damages in an
amount sufficient to punish and deter Intel's wrongful conduct.
Additionally, the Company has requested that Intel be enjoined from
continuing the alleged wrongful conduct which is anticompetitive
and/or violates federal antitrust laws, so as to permit Intergraph
uninterrupted development and sale of Intel-based products.

On November 21, 1997, the Company filed a motion in the Alabama
Court to enjoin Intel from disrupting or delaying its supply of
products and product information, pending resolution of Intergraph's
legal action.  The Court has not entered a ruling on this motion.

Intel filed a retaliatory legal action on November 17, 1997, in the
U.S. District Court, the Northern District of California,
requesting, among other things, i) that the Court declare
Intergraph's patents invalid and/or not infringed by Intel, ii) that
Intergraph be enjoined from making further assertions that Intel's
customers infringe Intergraph's patents through use of Intel's
microprocessors, iii) that the Court declare that Intel has no
obligation to disclose any of its trade secrets or other
confidential information to Intergraph, and iv) that the Court
declare that Intel's decision to discontinue the provision of trade
secrets and other confidential information to Intergraph does not
violate any doctrine of federal or state statutory or common law.
Intel filed a second legal action in the California Court on
November 24, 1997, charging Intergraph with breach of contract
related to wrongful retention of and failure to return Intel
information supplied under nondisclosure agreements, and
misappropriation of trade secrets as a result of the same.  Intel
asserts claims for damages and awards of yet undetermined amounts
and requests a preliminary and permanent injunction under which
Intergraph would return and make no further use of Intel
confidential information.

On December 8, 1997, the Alabama Court directed the Company and
Intel to file joint motions in the California cases to stay the two
legal actions brought by Intel, pending the Court's consideration of
a motion to transfer and consolidate venue.  The joint motions were
filed and stays were granted by the California Courts. On January
15, 1998, Intel filed a motion before the Alabama Court for a change
in venue to California.  A decision to transfer venue has not been
reached.

Background.  The Company's patents relate to its RISC (reduced
instruction set computing)-based Clipper microprocessor, which was
the industry's first attempt to bring mainframe computing power to
compact, low cost, integrated circuit technology.  In 1992,
Intergraph began evaluation of a transition from Clipper to Intel's
microprocessor for use in its future workstation products.  At that
time, Intel had little experience with workstations or the
workstation market and had been unsuccessful in the development of
its own RISC-based microprocessor for the workstation market.  In
1993, Intergraph began discussions with Intel regarding this
transition.  Based on Intel's representations regarding its
microprocessor development plans for the workstation market,
Intergraph began the transition from Clipper to Intel-based design,
and the two companies cooperated in introduction to the market of
the Intel/Windows NT platform as an alternative to the RISC/UNIX
platform.  The Company ceased further design of its Clipper
microprocessor at the end of 1993, and made a substantial investment
in redesign of its hardware platform for utilization of Intel
microprocessors.  The Company relied on the assurances,
representations, and commitments of Intel that they would supply
Intergraph's microprocessor needs on fair and reasonable terms, and
would provide Intergraph with the essential technical information,
assistance, and advice necessary to utilize the microprocessors to
be developed and supplied by Intel.  As a result of the assurances
of Intel and its transition to Intel-based workstations, Intergraph
is technologically and economically bound to the use of Intel's
microprocessors.

Effects.  The Company's workstations are developed for and sold in
the high-end workstation market.  Successful participation in this
market requires involvement in Intel product development programs
that provide advance information for the development of new products
to be sold by Intergraph and others and permit formulation of
standards and specifications for those new products.  Intergraph's
product design and release cycle has been severely impacted by
Intel's refusal to provide Intergraph with advance technology and
product information and immediate information on Intel defects and
corrections.  Intel has continued to provide that information to the
Company's competitors.  As a result of Intel's refusal to provide
this vital information, the launch of Intergraph's TDZ 2000 line of
workstations was delayed by approximately two months.  Additionally,
Intel's delay in shipment to the Company of its Deschutes
microprocessor and its refusal to provide related advance technical
information to the Company is impairing Intergraph's ability to
compete.  The Company's competitors began shipping hardware products
based on this microprocessor in January 1998.  The Company expects
it will begin shipping its hardware products based on the Deschutes
microprocessor at the end of March, two months behind its
competitors.

It is Intel's customary practice among all customers to allocate a
quarterly supply of microprocessors one quarter in advance of
shipment.  The Company believes Intel has allocated it an adequate
supply of microprocessors through June 30, 1998, with the exception
of the yet to be released Deschutes microprocessors.

The Company believes that Intel's actions have and will continue to
have significant adverse effects on its financial position and
results of operations, specifically in terms of lost revenues,
uncertainty of supply, and legal expenses.  The cost of converting
the Company's products to use of another microprocessor would be
prohibitive.

The Company believes it was necessary to take legal action against
Intel in order to defend its growing workstation business, its
intellectual property, and the investments of its shareholders.  The
Company is vigorously prosecuting its positions and believes it will
prevail in these matters, but at present is unable to predict an
outcome.  See "Other Risks and Uncertainties" below for additional
information regarding Intel's actions.

Bentley Litigation.  The Company is the owner of approximately 50%
of the outstanding stock of Bentley Systems, Inc. (Bentley), the
developer and owner of MicroStation, a software product utilized in
many of the Company's software applications and for which the
Company serves as a nonexclusive distributor.  In May 1997, the
Company received notice of the adverse determination of an
arbitration proceeding with Bentley in which the Company had alleged
that Bentley inappropriately and without cause terminated a
contractual arrangement with the Company, and in which Bentley had
filed a counterclaim against the Company seeking significant damages
as the result of the Company's alleged failure to use best efforts
to sell software support services pursuant to terms of the
contractual arrangement terminated by Bentley.  The arbitrator's
award against the Company was in the amount of $6.1 million and is
included in "Arbitration award" in the 1997 consolidated statement
of operations.  Approximately $5.8 million in fees otherwise owed
the Company by Bentley were offset against the amount awarded
Bentley.  In addition, the contractual arrangement that was the
subject of this arbitration was terminated effective with the award
and, as a result, the Company no longer sells the related software
support services under this agreement.  The Company and Bentley have
entered into a new agreement which establishes single support
services between the two companies.  The Company believes that
neither the arbitration related change in Bentley software support
services or its new agreement with Bentley relative to such services
will have a material impact on the Company's financial position,
results of operations or cash flows in future periods.

In a second proceeding, Bentley commenced arbitration against the
Company in March 1996, alleging that the Company failed to properly
account for and pay to Bentley certain royalties on its sales of
Bentley software products, and seeking significant damages.
Hearings on this matter are in process and may continue through the
end of the Company's third quarter of 1998.  The Company denies that
it has breached any of its contractual obligations to Bentley and is
vigorously defending its position in this proceeding, but at present
is unable to predict an outcome.

Zydex Litigation.  The Company filed a legal action in August 1995
seeking to dissolve and wind up its business arrangement with Zydex,
Inc., a company with which it jointly developed its plant design
software application ("PDS"), and seeking an order allowing the
Company to continue the business of that arrangement without further
responsibility or obligation to Zydex.  In November 1995, Zydex
filed a counterclaim against the Company alleging wrongful
dissolution of the business relationship and seeking both sole
ownership of PDS and significant compensatory and punitive damages.
In September 1997, the Court issued an order resolving all disputed
issues and requiring the parties to settle, and dismissed the case.
A closing of the final settlement agreement occurred on January 15,
1998.

The final settlement included the purchase by Intergraph of 100% of
the common stock of Zydex for $26.3 million, with $16 million paid
at closing of the agreement and the remaining amount payable in 15
equal monthly installments, including interest.  The deferred
payment portion of the total purchase price is secured by a
subordinate interest in the PDS intellectual property and by an
irrevocable letter of credit in favor of the former owner of Zydex.
Interest on the unpaid amount accrues at a rate 1% less than the
rate charged by Intergraph's primary lender.  The former owner of
Zydex will retain certain rights to use, but not sell or sublicense,
PDS products for a period of 15 years following the date of closing.
In addition to the purchase price of the common stock, Intergraph
was required to pay additional royalties to Zydex in the amount of
$1 million at closing of the agreement.  These royalties have been
included in the Company's 1997 results of operations.  The January
15, 1998 cash payment to Zydex was funded by the Company's primary
lender.  See "Liquidity and Capital Resources" section below for
discussion of the Company's liquidity.

The Company has recorded the settlement in its books of account as
of the date of closing of the final settlement agreement.  The
Company believes its settlement with Zydex will improve its annual
operating results by an estimated $5 million.

PDS is currently the Company's second highest volume software
offering.  Sales of PDS software and maintenance for 1997 totaled
$48 million.  Total process and building solutions industry sales
for 1997 were $101 million, including PDS software and maintenance,
horizontal products and maintenance, and training and consulting
revenues.

Other Risks and Uncertainties.  The Company develops its own
graphics, data management, and applications software as part of its
continuing product development activities.  The Company has standard
license agreements with Microsoft Corporation for use and
distribution of the Windows NT operating system and with UNIX
Systems Laboratories for use and distribution of the UNIX operating
system.  The license agreements are perpetual and allow the Company
to sublicense the operating systems software upon payment of
required sublicensing fees.  The Company also has an extensive
program for the licensing of third-party application and general
utility software for use on systems and workstations.

The Company owns and maintains a number of registered patents and
registered and unregistered copyrights, trademarks, and service
marks.  The patents and copyrights held by the Company are the
principal means by which the Company preserves and protects the
intellectual property rights embodied in the Company's hardware and
software products.  Similarly, trademark rights held by the Company
are used to preserve and protect the goodwill represented by the
Company's registered and unregistered trademarks.

As industry standards proliferate, there is a possibility that the
patents of others may become a significant factor in the Company's
business.  Personal computer technology is widely available, and
many companies, including Intergraph, are attempting to develop
patent positions concerning technological improvements related to
personal computers and workstations.  With the possible exception of
its ongoing litigation with Intel (in which the Company expects to
prevail), it does not appear the Company will be prevented from
using the technology necessary to compete successfully, since
patented technology is typically available in the industry under
royalty bearing licenses or patent cross licenses, or the technology
can be purchased on the open market.  Any increase in royalty
payments or purchase costs would increase the Company's costs of
manufacture, however, and it is possible that some key improvement
necessary to compete successfully in markets served by the Company
may not be available.

An inability to retain significant third party license rights, in
particular the Microsoft license, to protect the Company's
copyrights, trademarks, and patents, or to obtain current technical
information or any required patent rights of others through
licensing or purchase, all of which are important to success in the
industry in which the Company competes, could significantly reduce
the Company's revenues and adversely affect its results of
operations.

Technology significant to the Company is sometimes made available in
the form of proprietary information or trade secrets of others.
Prior to the dispute with Intel, Intel had made freely available
technical information used by the Company to design, market and
support its products that use Intel components.  Such information is
claimed by Intel to be proprietary and is made available by Intel
only under nondisclosure agreements.  At present Intel is
withholding such information, attempting to cancel existing
agreements and refusing to enter into new nondisclosure agreements
with the Company.  Intel's actions are the subject matter of current
litigation, and the Company has applied to the Court for relief in
the short term, as well as at the conclusion of the lawsuit.
Intel's actions are damaging the Company by slowing the introduction
of new products using Intel components and preventing proper
maintenance and support of Company products using Intel components.
The Company expects that relief will be forthcoming from the Court.
However, if relief is denied, the Company will be materially
affected and may be forced to alter its future business plans or to
accept unfavorable terms from Intel in settlement of the lawsuit.

See Notes 1, 4, 6, 7, and 11 to Consolidated Financial Statements
for further discussion of risks and uncertainties related to the
Company.

Year 2000 Issue.  Until recently, most computer programs were
written to store only two digits of date-related information.  Such
programs are thus unable to distinguish between the year 1900 and
the year 2000.  Unless corrected or replaced, programs with this
inability could cause widespread data processing malfunctions and
computer system failures.

The Company has reviewed its product line to identify and resolve
Year 2000 issues.  All hardware and software products offered in the
Company's standard price list at January 1, 1998 are Year 2000
compliant or will be so certified as new versions and utilities are
released in 1998.  The Company is evaluating prior generations of
its hardware and software products to determine which products it
will make Year 2000 compliant.  The Company's experience with this
issue reinforces general industry expectations that engineering and
related technical applications, which typically perform few date
manipulations or comparisons, will be affected minimally by this
issue as compared to business and financial systems, which are
heavily date dependent.  The Company does not anticipate that its
product compliance costs will have a material impact on its results
of operations or financial condition.  However, there can be no
guarantee that its estimates will be achieved, and actual results
could differ materially from those anticipated.

An effort has been underway since 1996 to identify and resolve Year
2000 issues affecting the Company's internal business systems.  The
Company expects to successfully implement all internal systems and
programming changes necessary to resolve Year 2000 issues.  This
effort is expected to increase the Company's operating costs in 1998
and 1999; however, the Company does not anticipate that these costs
will have a material effect on its results of operations or
financial condition for either of those years.

To ensure the Company's critical suppliers are able to continue
uninterrupted supply, the Company is conducting a program of
investigation with these suppliers and includes Year 2000 provisions
in its new supplier agreements.  The Company is also initiating
discussions with other entities with which it interacts
electronically, including customers and financial institutions, to
ensure those parties have appropriate plans to remediate Year 2000
issues where their systems interface with the Company's systems or
otherwise impact its operations.  The Company could be adversely
impacted if suppliers, customers, and other businesses do not
address this issue successfully.  The Company continues to assess
these risks in order to reduce any potential adverse impact.

Orders.  Systems orders for 1997 were $774 million, a 7% increase
over the prior year after increases of 1% and 12% in 1996 and 1995,
respectively.  The Company substantially completed its product
transition in 1995; however, order levels in all three years were
affected by slower than anticipated customer acceptance of the
Company's products based on its Windows NT/Intel strategy, and
further affected in 1997 by the previously described actions of
Intel.  The growing availability of new products throughout 1995
resulted in orders sequentially improving with each quarter to end
that year with a 12% increase.  In 1996 and 1997, orders for the
Company's systems were characterized by heavier, though less than
anticipated, demand for the Company's hardware product offerings,
which was offset by softer demand for its software products.  New
software and certain of the new hardware products released in 1996
did not generate significant orders or revenues during the year.
Initial releases of the Company's new software products were delayed
until late 1996 and contained certain performance problems.  These
problems were resolved in subsequent releases of the products during
fourth quarter 1996 and first quarter 1997, and sales momentum began
to increase during the second quarter of 1997.  However, hardware
orders in the last half of 1997 were adversely impacted by a two
month delay in shipment of the Company's new TDZ 2000 line of
workstations resulting from Intel's wrongful conduct and delays.

Geographic Regions.  U.S. orders, including federal government
orders, totaled $407 million for the year, up 24% after a decline of
7% in 1996 and an increase of 11% in 1995.  Growth in the Company's
hardware business and a 25% increase in orders received from the
federal government accounted for the majority of the 1997 increase.
The orders decline in 1996 resulted primarily from a decrease in
orders in one of the Company's noncore business units sold in early
1997.  Excluding this business unit, U.S. orders for 1997 were up
29% and flat for 1996.  International orders totaled $367 million
for the year, a 7% decline from the prior year after increases of 9%
and 12% in 1996 and 1995, respectively.  Asia Pacific orders totaled
$73 million in 1997, a decrease of 35%, after increasing 45% in 1996
and decreasing 7% in 1995.  Growth in that region in 1996 was due
to several individually significant orders for the Company's public
safety products and related consulting services.  Such orders did
not recur in 1997.  Additionally, devaluation of Asian currencies,
most notably the Korean Won, had a negative impact on orders for the
region during the fourth quarter of 1997 and the first quarter of
1998, and could have a significant impact on business in this region
during the remainder of 1998.  European orders totaled $222 million,
relatively unchanged from the prior year, after a 5% decline in 1996
and a 19% increase in 1995.  European orders for 1995 were strong as
a result of winning several large individual orders in the last half
of that year.  European and Asian order levels in terms of U.S.
dollars were reduced by approximately 10% and 5%, respectively, in
1997 due to strengthening of the U.S. dollar against currencies of
those regions.

New Products.  In late 1995, the Company announced its Jupiter
technology, a Windows-based component software architecture that is
the foundation of many new computer-aided-design/computer-aided-
manufacturing/computer-aided-engineering (CAD/CAM/CAE) and
geographic information systems (GIS) applications software products
developed by the Company.  The first two products built on Jupiter
technology began shipping in mid-1996, including a 32 bit, two
dimensional technical drawing and concept tool and a three
dimensional system for mechanical assembly and part modeling.
Initial orders for these products did not meet Company expectations
and did not contribute substantially to 1996 revenues.  Subsequent
releases of the products in 1997 resulted in substantial orders
growth for those products.  During 1997, the Company introduced and
began shipping GeoMedia 1.0, a Jupiter-based software product which
allows users to access data warehouses virtually anywhere in the
world and simultaneously perform analyses with varying data types
and formats.

During 1996, the Company introduced a complete line of workstations
and servers for the high-end marketplace based on Intel's Pentium
Pro microprocessor.  In addition, the Company introduced a new add-
in 3D graphics card which provides workstation class 3D graphics to
the Pentium- or Pentium Pro- based personal computer.  Sales of the
Company's graphics cards were initially strong and grew throughout
1997, though sales were below the Company's expectations.  During
1997, the Company added a line of Intel/Windows-based personal
workstations priced to compete in the PC market.  The workstations
have features and performance required by professional users and
provide 3D graphics that the Company believes will be required by
users in the future.  The Company also introduced twelve new
workstations in its TD and TDZ lines, including the first Windows NT-
based workstations using dual Intel Pentium II processors.  Also
introduced were two new InterServe servers, the ImageStation Z
digital photogrammatic workstation, and the first 28-inch, high
resolution, wide-format monitor.  These new products commenced
shipping at various dates throughout the year of introduction but,
as previously described, the Company is suffering delays in new
product development and shipping due to actions of Intel, placing
the Company at a competitive disadvantage.

The Company does not expect that introduction of these new hardware
products will adversely affect the carrying value of its existing
inventories.  Additionally, the Company is unable to predict the
financial impact of these new products.  However, the Company
believes its ability to compete in the hardware business has been
materially impacted by the previously described actions of Intel.

Revenues.  Total revenues for 1997 were $1.1 billion, up 3% from the
prior year level after flat revenues in 1996 and a 5% increase in
1995.

Systems.  Sales of Intergraph systems in 1997 were $786 million, up
8% after a 2% increase in 1996 and a 7% increase in 1995.  Factors
previously cited as affecting systems orders in total and on a
geographic basis, including the actions of Intel in 1997, also
affected systems revenues over the three year period.  Competitive
conditions manifested in declining per unit sales prices continue to
adversely affect the Company's systems revenues.

Geographic Regions.  U.S. systems sales, including sales to the
federal government, increased by 17% in 1997 after an increase of 2%
in 1996 and a decline of 6% in 1995.  Growth in U.S. systems sales
was depressed in 1996 by a revenue decline in one of the Company's
noncore business units sold in early 1997. Excluding this business
unit, U.S. sales growth was 22% in 1997 and 7% in 1996.  In 1995,
U.S. systems sales were negatively impacted by the continuation of
product transition and weak demand in U.S. indirect selling
channels.  International sales totaled $385 million for the year, up
slightly from the prior year after increases of 3% and 21% in 1996
and 1995, respectively.  European sales were up 3%, after a decline
of 6% in 1996 as a result of weak demand for the Company's software
products, and growth of 19% in 1995.  Asia Pacific systems sales
were down 12% after increases of 25% in 1996 and 22% in 1995.

Software.  Sales of the Company's software applications declined by
1% in 1997 after a 9% decline in 1996 and a 4% decline in 1995.
Declines in the last three years are the result primarily of a
decrease in sales of MicroStation, which declined by 34% in 1997 and
approximately 39% in each of the previous two years (see
"MicroStation" below for further discussion), and of delays in
software releases in 1996.  Sales in 1997 of the Company's plant
design and mechanical software applications increased by a combined
22% to offset the effect of the loss in MicroStation sales.  In
terms of broad market segments, the Company's mapping/geographic
information systems, architecture/engineering/construction, and
mechanical design, engineering and manufacturing product
applications continue to dominate the Company's product mix at
approximately 57%, 27%, and 14%, respectively, of total systems
sales in 1997 (52%, 27%, and 13%, respectively, for 1996).  Sales of
Windows-based software represented approximately 87% of total
software sales in 1997, up from approximately 80% in 1996 and 72% in
1995.  UNIX-based software comprised approximately 13% of total 1997
software sales, down from approximately 20% in 1996 and 28% in 1995.

See "Subsequent Events" section following for description of the
March 1998 sale of the Company's Solid Edge and Engineering Modeling
System mechanical product lines.

Hardware.  Total hardware revenue increased 22% in 1997, after an
increase of 12% in 1996 and flat revenues in 1995.  Workstation and
server unit volume increased 67% in 1997, 42% in 1996, and 22% in
1995, while workstation and server revenue increased only 6% in
1997, 18% in 1996 and 4% in 1995.  Price competition continues to
erode per unit selling prices, and volumes were held down in 1997 by
the actions of Intel.  Revenue from other hardware products
increased 64% in 1997, after decreases of 1% and 9% in 1996 and
1995, respectively.  The increase in 1997 results primarily from an
increase in graphics cards and storage device revenues.  Intel-based
systems represented approximately 100% of hardware unit sales in
1997 and 1996 and approximately 95% in 1995.

Federal Government Sales.  Total revenue from the United States
government was approximately $177 million in 1997, $161 million in
1996, and $159 million in 1995, representing in all three years
approximately 15% of total revenue.  The Company sells to the U.S.
government under long-term contractual arrangements, primarily
indefinite delivery, indefinite quantity and cost-plus award fee
contracts, and through commercial sales of products not covered by
long-term contracts.  Approximately 42% of total federal government
revenues are earned under long-term contracts.  The Company believes
its relationship with the federal government to be good.  While it
is fully anticipated that these contracts will remain in effect
through their expiration, the contracts are subject to termination
at the election of the government.  Any loss of a significant
government contract would have an adverse impact on the results of
operations of the Company.

MicroStation.  Through the end of 1994, the Company had an exclusive
license agreement with Bentley Systems, Inc., an approximately 50%-
owned affiliate of the Company, under which the Company distributed
MicroStation, a software product developed and maintained by Bentley
and utilized in many of the Company's software applications.  As a
result of settlement of a dispute between the companies relative to
the exclusivity of the Company's distribution license, effective
January 1, 1995, the Company has a nonexclusive license to sell
MicroStation via its direct sales force and to sell MicroStation via
its indirect sales channels if MicroStation is sold with other
Intergraph products.  Also as a result of the settlement, the per
copy royalty payable by the Company to Bentley was increased
effective January 1, 1995 and again January 1, 1996 and, for 1995
only, Bentley paid the Company a per copy distribution fee based on
its MicroStation sales to resellers (such fees were $7 million).
See "Litigation and Other Risks and Uncertainties" preceding for a
description of arbitration proceedings between the Company and
Bentley.

The Company's sales of MicroStation have declined each year since
the 1994 change in the license agreement, by approximately 34% in
1997 and by 39% in both 1996 and 1995.  The Company estimates this
revenue decline, the per copy royalty increase, and the discontinued
distribution fee adversely affected its results of operations by
approximately $7 million, or $.14 per share in 1997, by
approximately $26 million, or $.52 per share in 1996, and by
approximately $17 million, or $.37 per share in 1995.  The Company
is unable to predict the level of MicroStation sales that will occur
in the future, but it is likely that such sales will be further
reduced.

Maintenance and Services.  Maintenance and services revenue consists
of revenues from maintenance of Company systems and from Company
provided services, primarily training and consulting.  These forms
of revenue totaled $338 million in 1997, down 9% after a decline of
5% in 1996 and essentially flat revenues in 1995.  Maintenance
revenues totaled $246 million in 1997, down 13% after decreases of
12% and 2% in 1996 and 1995, respectively.  The trend in the
industry toward lower priced products and longer warranty periods
has resulted in reduced levels of maintenance revenue, and the
Company believes this trend will continue in the future.  Services
revenue represented 8% of total revenues in 1997 and increased by 6%
from the previous year, after increasing by 31% in 1996 and 36% in
1995.  Growth in services revenue has acted to partially offset the
decline in maintenance revenue.  The Company is endeavoring to
increase revenues from its services business. Such revenues,
however, produce lower gross margins than maintenance revenues.

Gross Margin.  The Company's total gross margin was 35.6% in 1997,
down 1.2 points after declines of 2.3 points and 1.4 points in 1996
and 1995, respectively.

Margin on systems sales declined 1.2 points in 1997, 2.3 points in
1996, and 1.6 points in 1995.  Competitive pricing conditions in the
industry reduced margin on systems sales in all three years.
Margins in 1997 and 1996 were further reduced by increasing hardware
content in the product mix; in general, a higher hardware versus
software content will reduce systems margin.  Additionally, 1997
margin was adversely affected by a decrease in the mix of
international systems revenues to total Company systems revenues,
which was partially due to a stronger U.S. dollar in international
markets, and 1996 margin was negatively impacted by an increase in
MicroStation product cost.

In general, the Company's systems margin may be lowered by price
competition, a higher hardware content in the product mix, a
stronger U.S. dollar in international markets, the effects of
technological changes on the value of existing inventories, and a
higher mix of federal government sales, which generally produce
lower margins than commercial sales.  Systems margins may be
improved by higher software content in the product, a weaker dollar
in international markets, a higher mix of international systems
sales to total systems sales, and reductions in prices of component
parts, which generally tend to decline over time in the industry.
The Company is unable to predict the effects that many of these
factors may have, but expects continuing pressure on its systems
margin due primarily to industry price competition.

Margin on maintenance and services revenue declined by .8 points in
1997 after declines of 2.2 points in 1996 and 1.1 points in 1995.
The margin declines over the past three years have resulted
primarily from declining maintenance revenues.  The Company
continues to closely monitor maintenance and services cost and has
taken certain measures, including reductions in headcount, to align
cost with the current revenue level.  The Company believes that the
trend in the industry toward lower priced products and longer
warranty periods will continue to reduce its maintenance revenue,
which will pressure maintenance margin in the absence of
corresponding cost reductions.

The industry in which the Company competes is characterized by rapid
technological change.  This technological change is an important
consideration in the Company's overall inventory management program,
in which the Company endeavors to carry only parts and systems
utilizable with the technology of its current product offerings and
as spares for the contracted maintenance of systems in its installed
customer base.  The Company regularly estimates the degree of
technological obsolescence in its inventories and provides inventory
reserves on that basis.  Though the Company believes it has
adequately provided to date for any such declines in inventory
value, any unanticipated change in technology could significantly
affect the value of the Company's inventories and thereby adversely
affect margins and reported results of operations.

Operating Expenses (exclusive of nonrecurring operating charges and
restructuring charge).  Operating expenses declined by 2% in 1997,
3% in 1996, and 4% in 1995.  The total number of employees of the
Company has declined by 16% in the three year period ended December
31, 1997.

Product development expense declined 5% in 1997 after declines of 7%
and 19% in the two preceding years. Employee headcount in the
development areas has been significantly reduced over the last three
years through restructuring actions and attrition.  Additionally,
the sale of two noncore business units in early 1997 resulted in
substantial expense savings but was offset, for the most part, by a
decline in software development costs qualifying for capitalization.
Capitalization of software product development costs related to the
Company's Jupiter technology significantly reduced expenses for 1995
and 1996.  Development was completed in 1996.

Sales and marketing expense decreased 2% in 1997 after a decrease of
5% in 1996 and an increase of 2% in 1995.  The expense decline in
1997 results primarily from strengthening of the U.S. dollar against
international currencies and the sale of the two noncore business
units.  These expense reductions were partially offset by an
increase in trade show and advertising expenses for the Company's
new products.  The expense decline in 1996 resulted primarily from
restructuring actions taken in 1995.  The Company achieved
substantial sales and marketing headcount and related expense
reductions in 1995, but those gains were more than offset by
weakness of the U.S. dollar in international locations in that year
and by expenses of pursuit of new business in the Asia Pacific
region.

General and administrative expense increased by 3% in 1997 after an
increase of 4% in 1996 and a decline of 3% in 1995.  The 1997
expense increase results primarily from increased legal expenses
(see "Litigation and Other Risks and Uncertainties"), partially
offset by strengthening of the U.S. dollar against international
currencies.  Installation of new internal business systems,
increased legal expenses, and amortization of deferred financing
costs related to the Company's revolving line of credit increased
general and administrative expense in 1996.  The decline in 1995 was
the result of headcount reductions, but was limited by the weakness
of the U.S. dollar in international locations in that year and by
the increasing level of business activity in the Asia Pacific
region.

The Company capitalizes a portion of the cost of development of new
products and amortizes those costs against revenues later generated
by those products.  Though the Company regularly reviews its
capitalized development costs to ensure recognition of any decline
in value, it is possible that, for any given product, revenues will
not materialize in amounts anticipated due to industry conditions
that include intense price and performance competition, or that
product lives will be reduced due to shorter product cycles.  Should
these events occur, the carrying amount of capitalized development
costs would be reduced and produce adverse effects on systems cost
of revenues and results of operations.

Operating Results, Geographic Areas.  International markets,
particularly Europe and Asia, continue in importance to the industry
and to the Company.  The Company's operations are subject to and may
be adversely affected by a variety of risks inherent in doing
business internationally, such as government policies or
restrictions, currency exchange fluctuations, and other factors.
For 1997, sales outside the U.S. represented 53% of total revenues,
including Europe at 32% and Asia Pacific at 12% of the total.

The Company incurred a loss from operations of $54.9 million in 1997
(including $1.1 million in nonrecurring charges), $68.7 million in
1996 (including $10.5 million in nonrecurring charges), and $54.1
million in 1995 (including a restructuring charge of $6 million).
The factors that have limited the Company's revenue growth and
reduced profitability over the past three years, including declining
per unit sales prices due to competitive conditions and, in 1997,
the previously described actions of Intel, have similarly affected
each of the geographic areas in which the Company does business.
The operating loss decline in 1997 is the result of a 2% decline in
operating expenses.  The increased loss from operations in 1996
resulted primarily from flat revenues and a decline in gross margin,
partially offset by a decline in product development and sales and
marketing expenses.  The Company's VeriBest, Inc. business unit
incurred losses from operations of $16.4 million in 1997, $15.5
million in 1996, and $20.9 million in 1995, on revenues for these
same periods of $29.3 million, $31 million, and $35.1 million,
respectively.

The U.S. region incurred a loss from operations of $35.4 million in
1997 (including $1.1 million in nonrecurring charges) after
operating losses of $30.3 million in 1996 (including $10.5 million
in nonrecurring charges) and $12.3 million in 1995 (including a
restructuring charge of $4.8 million).  Systems revenues increased
by 8% over 1996; however, margin on those sales declined 1.9
percentage points.  Maintenance and services revenues declined 11%
for the same period.  These negative factors combined with sales and
marketing and general and administrative expense increases of 5% and
12%, respectively, partially offset by a 5% decline in research and
development expense, resulted in the operating loss increase.  The
operating loss increase in 1996 resulted from a 2.5 point systems
margin decline, a maintenance and service revenue decline of 10% and
a 13% increase in general and administrative expense.  Research and
development and sales and marketing expenses declined 7% and 5%,
respectively, partially offsetting these negative factors.

The European region incurred losses from operations of $20.5 million
in 1997, $29.8 million in 1996, and $27.7 million in 1995 (including
a restructuring charge of $1 million).  The improvement in 1997 is
due to a 1.1 point increase in gross margin and declines in sales
and marketing and general and administrative expenses of 11% and 4%,
respectively, due primarily to strengthening of the U.S. dollar.
These improvements were partially offset by a 14% decline in
maintenance and services revenue.  Revenues and gross margin
declined 7% and 1 percentage point, respectively, during 1996,
offset to a degree by an approximate 6% decline in both sales and
marketing and general and administrative expenses.  Software sales
were weak during the year, while maintenance revenues were adversely
impacted by lower priced products and longer warranty periods.
Operating expenses continue to decline as a result of restructuring
actions and other cost control measures.

The Asia Pacific region incurred losses from operations of $7.9
million in 1997, $5.9 million in 1996, and $10.8 million in 1995.
Up until 1997, this region was the Company's fastest growing with
total revenue increases exceeding 30% in both 1996 and 1995.  In
1997, revenues declined by 13% due to poor economic conditions and
reduced demand for the Company's public safety products and
services.  The large operating loss in 1995 resulted primarily from
operating expenses incurred in pursuit of new business.  The
region's operations in fourth quarter 1997 and first quarter 1998
were adversely impacted by the currency crisis in that region,
particularly in Korea.

Other international regions, in total representing approximately 9%
of total Company revenues in 1997, are comprised of operations in
the Middle East, Canada, and non-U.S. Americas.  These regions
earned a net operating profit of $1.6 million in 1997 after
incurring losses of  $5.4 million in 1996 and $10.1 million in 1995.
The improvement in 1997 results from revenue and gross margin
increases of 15% and 3.5 percentage points, respectively.
Additionally, operating expenses decreased by 8%.

See Note 11 of Notes to Consolidated Financial Statements for
further details of operations by geographic area.

Nonoperating Income and Expense.  Interest expense was $6.6 million
in 1997, $5.1 million in 1996, and $4.2 million in 1995.  The
Company's average outstanding debt has increased over the three year
period.  The Company's average rate of interest on the debt has
declined approximately 2 points from the 1996 level due primarily to
a change in lenders and terms under the Company's primary credit
facility.  See "Liquidity and Capital Resources" below for a
discussion of the Company's current financing arrangements.

In 1996, the Company entered into an interest rate swap agreement in
the principal amount (approximately $13 million at December 31,
1997) of its Australian floating rate term loan agreement.  The
agreement is for a period of approximately six years, and its
expiration date coincides with that of the term loan.  The agreement
was entered into to reduce the risk of increase in interest rates.
Under the agreement, the Company pays a 9.58% fixed rate of interest
and receives payment based on a variable rate of interest, and is
thus exposed to market risk of potential future decreases in
interest rates.  The weighted average receive rates of the agreement
at December 31, 1997 and 1996 were 6.49% and 7.06%, respectively.
The agreement had an insignificant effect on the total cash flows of
the Company in 1997 and 1996.  The Company does no trading in this
form of derivative instrument.

In 1997, the Company incurred a $6.1 million or $.13 per share
charge for a contract arbitration award to Bentley Systems, Inc.
This charge is included in "Arbitration award" in the 1997
consolidated statement of operations.  See "Litigation and Other
Risks and Uncertainties" and "Revenues" preceding for further
discussion of the Company's business relationship with Bentley, its
sales of MicroStation, and the financial effects on the Company of
changes in this business relationship.

Also in 1997, the Company sold a stock investment in a publicly
traded affiliate, resulting in a gain of $4.9 million or $.10 per
share.  The Company sold stock investments in affiliated companies
at gains of $11.2 million or $.23 per share in 1996 and $6.5 million
or $.14 per share in 1995.  These gains are included in "Gains on
sales of investments in affiliates" in the consolidated statements
of operations.

"Other income (expense) - net" in the consolidated statements of
operations consists primarily of interest income, foreign exchange
losses, equity in the earnings of investee companies, and other
miscellaneous items of nonoperating income and expense.  Significant
items included in these amounts are foreign exchange losses of $2.7
million in 1997 and $4.6 million in 1996, and equity in the earnings
of investee companies of $4.3 million in 1995.

Income Taxes.  The Company incurred losses before income taxes of
$66.2 million in 1997, $66.1 million in 1996, and $45.3 million in
1995.  Income tax expense in 1997 and 1996 results from taxes on
individually profitable international subsidiaries.

Note 8 of Notes to Consolidated Financial Statements contains a
reconciliation of statutory to actual income tax benefit or expense
and further details of the Company's tax position, including net
operating loss carryforwards.

Impact of Currency Fluctuations and Currency Risk Management.
Fluctuations in the value of the U.S. dollar in international
markets can have a significant impact on the Company's results of
operations.  For 1997, approximately 53% of the Company's revenues
were derived from customers outside the United States, primarily
through subsidiary operations.  Most subsidiaries sell to customers
and incur and pay operating expenses in local currency.  These local
currency revenues and expenses are translated to U.S. dollars for
reporting purposes.  A stronger U.S. dollar will decrease the level
of reported U.S. dollar orders and revenues, decrease the dollar
gross margin, and decrease reported dollar operating expenses of the
international subsidiaries.  During 1997 the U.S. dollar
strengthened on average from the prior year level, which decreased
reported dollar revenues, orders, and gross margin, but also
decreased reported dollar operating expenses in comparison to the
prior year period.  The Company estimates that strengthening of the
U.S. dollar in 1997 in its international markets, primarily Europe,
adversely impacted 1997 results of operations by approximately $.30
per share, and weakening of the U.S. dollar in 1995 improved 1995
results of operations by approximately $.22 per share.  Such
currency effects did not materially affect the Company's results of
operations in 1996.

The Company conducts business in all major markets outside the U.S.,
but the most significant of these operations with respect to
currency risk are located in Europe and Asia.  Local currencies are
the functional currencies for the Company's European subsidiaries.
The U.S. dollar is the functional currency for all other
international subsidiaries.  The Company has certain currency
related asset and liability exposures against which certain
measures, primarily hedging, are taken to reduce currency risk.
With respect to these exposures, the objective of the Company is to
protect against financial statement volatility arising from changes
in exchange rates with respect to amounts denominated for balance
sheet purposes in a currency other than the functional currency of
the local entity.  The Company therefore enters into forward
exchange contracts related to certain balance sheet items, primarily
intercompany receivables, payables, and formalized intercompany
debt.  Periodic changes in the value of these contracts offset
exchange rate related changes in the financial statement value of
these balance sheet items.  Forward exchange contracts are purchased
with maturities reflecting the expected settlement dates of these
balance sheet items (generally three months or less), and only in
amounts sufficient to offset possible significant currency rate
related changes in the recorded values of these balance sheet items,
which represent a calculable exposure for the Company from period to
period. Since this risk is calculable, and these contracts are
purchased only in offsetting amounts, neither the contracts
themselves nor the exposed foreign currency denominated balance
sheet items are likely to have a significant effect on the Company's
financial position or results of operations.  Based on the terms of
contracts outstanding and the amount of the related balance sheet
exposures at December 31, 1997, the Company's results of operations
would not be materially affected by a 10% increase or decrease in
exchange rates underlying the contracts and the exposures being
hedged.  The Company does not generally hedge exposures related to
foreign currency denominated assets and liabilities that are not of
an intercompany nature, unless a significant risk has been
identified.  It is possible the Company could incur significant
exchange gains or losses in the case of significant, abnormal
fluctuations in a particular currency.  By policy, the Company is
prohibited from market speculation via forward exchange contracts
and therefore does not take currency positions exceeding its known
financial statement exposures, and does not otherwise trade in
currencies.

At December 31, 1997, the Company had net outstanding forward
exchange contracts of approximately $37 million ($19 million at
December 31, 1996), maturing at various dates through March 31,
1998.  The fair values of these contracts approximated original
contract amounts based on the insignificant amounts the Company
would pay or receive to transfer the contracts to third parties at
December 31, 1997.  Net cash flow from forward contract activity,
consisting of realized gains and losses from settlement of exposed
assets and liabilities at exchange rates in effect at the settlement
date rather than at the time of recording, settlement of the forward
contracts purchased to mitigate these exposures, and payment of bank
fees on the forward contracts was not significant for any year in
the three year period ended December 31, 1997.  Deferred gains and
losses as of December 31, 1997 and 1996 were not significant.

See Notes 1 and 4 of Notes to Consolidated Financial Statements for
further information related to management of currency risk.


LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1997, cash totaled $46.6 million, down $4 million
from year end 1996.  Net cash consumed by operations in 1997 was
$20.9 million versus net cash generated by operations of $26 million
in 1996 and $59.8 million in 1995 (including $22.3 million in tax
refunds, primarily from carryback of U.S. taxable losses to prior
years).  An inventory build-up consumed approximately $16 million
during 1997 as a result of anticipated increased hardware unit sales
volume and customer demand for faster delivery of products.

Net cash consumed by investing activities totaled $30.7 million in
1997, $31.7 million in 1996, and $83 million in 1995.  Included in
investing activities were capital expenditures of $24.8 million in
1997, $30.6 million in 1996, and $54.7 million in 1995 primarily for
Intergraph products used in hardware and software development and
sales and marketing activities.  In addition, investing activity in
1995 also included capital expenditures for facilities and equipment
utilized in a long-term Australian public safety contract.  Other
significant investing activities included expenditures of $10.6
million in 1997, $15.5 million in 1996, and $25.4 million in 1995
for capitalizable software development activity, and proceeds of
$5.7 million in 1997, $11.6 million in 1996, and $7.9 million in
1995 from sales of a business unit and investments in affiliated
companies.

Net cash generated from financing activities totaled $48.4 million
in 1997 and $17.8 million in 1995.  Significant sources of financing
cash included net borrowings of $44.9 million in 1997 and proceeds
from employee stock purchases and exercises of stock options of $12
million in 1995.

The Company's collection period for accounts receivable was
approximately 80 days as of December 31, 1997, representing a slight
improvement from the prior year.  Approximately 70% of the Company's
1997 revenues were derived from the U.S. government and
international customers, both of which traditionally carry longer
collection periods.  The Company is experiencing slow collection
periods throughout the Middle East region, particularly in Saudi
Arabia. Total accounts receivable from Middle Eastern customers was
approximately $21 million at December 31, 1997 and 1996.  Total U.S.
government accounts receivable was $52 million at December 31, 1997
($48 million at December 31, 1996).  The Company endeavors to
enforce its payment terms with these and other customers, and grants
extended payment terms only in very limited circumstances.

The Company expects that capital expenditures will require $25
million to $30 million in 1998, primarily for Intergraph products
used in product development and sales and marketing activities.  The
Company's revolving credit agreement contains certain restrictions
on the level of the Company's capital expenditures.

In October 1995, the Company entered into a three year revolving
credit agreement with a group of lenders.  Borrowings available
under the agreement were determined by the amounts of eligible
assets of the Company, with maximum borrowings of $50 million.  At
December 31, 1996, the Company had outstanding borrowings of $20
million, and an additional $22 million of the available credit line
was allocated to support letters of credit issued by the Company.
Borrowings were secured by a pledge of substantially all of the
Company's assets in the U.S. and Canada and, under certain
circumstances, the accounts receivable of some European subsidiaries
of the Company.  The rate of interest on all borrowings under the
agreement was, at the Company's option, the Citibank base rate of
interest plus 1.75% or the Eurodollar rate plus 2.75%.  The average
effective rate of interest was 10.6% for the period of time in 1996
during which the Company had outstanding borrowings under the
agreement.  The agreement required the Company to pay a commitment
fee at an annual rate of .5% of the average unused daily portion of
the revolving credit commitment.  In addition, the agreement
contained certain financial and restrictive covenants of the
Company.  In January 1997, the Company terminated its agreement
with this group of lenders and replaced it with a term loan and
revolving credit agreement with another lender.  As a result,
the Company wrote off $3.3 million of deferred financing costs
associated with the previous agreement.  The charge is included
in "Nonrecurring operating charges" in the 1996 consolidated
statement of operations.

Under the Company's January 1997 four year fixed term loan and
revolving credit agreement, available borrowings are determined by
the amounts of eligible assets of the Company (the "borrowing
base"), as defined in the agreement, including accounts receivable,
inventory, and property, plant, and equipment, with maximum
borrowings of $125 million.  The $25 million term loan portion of
the agreement is due at expiration of the agreement.  Borrowings are
secured by a pledge of substantially all of the Company's assets in
the U.S.  The rate of interest on all borrowings under the agreement
is the greater of 7% or the Norwest Bank Minnesota National
Association base rate of interest (8.5% at December 31, 1997) plus
 .625%.  The average effective rate of interest was 9.12% for the
period of time in 1997 during which the Company had outstanding
borrowings under this agreement.  The agreement requires the Company
to pay a facility fee at an annual rate of .15% of the maximum
amount available under the credit line, an unused credit line fee at
an annual rate of .25% of the average unused portion of the
revolving credit line, and a monthly agency fee.  At December 31,
1997, the Company had outstanding borrowings of $64.6 million, $25
million of which was classified as long-term debt in the
consolidated balance sheet, and an additional $41.3 million of the
available credit line was allocated to support letters of credit
issued by the Company and the Company's forward exchange contracts.
As of this same date, the borrowing base, representing the maximum
available credit under the line, was $121 million ($112 million at
February 27, 1998).

The term loan and revolving credit agreement contains certain
financial covenants of the Company, including minimum net worth,
minimum current ratio, and maximum levels of capital expenditures.
In addition, the agreement includes restrictive covenants that limit
or prevent various business transactions (including repurchases of
the Company's stock, dividend payments, mergers, acquisitions of or
investments in other businesses, and disposal of assets including
individual businesses, subsidiaries, and divisions) and limit or
prevent certain other business changes.

In March of 1997, the Company entered into an agreement for the sale
and leaseback of one of its facilities.  The amount borrowed totals
$8.4 million and is included in "Long-term debt" in the 1997
consolidated balance sheet.  The borrowing will be repaid over a
period of 20 years at an implicit rate of interest of 10.7%.

See "Zydex Litigation" preceding for a description of a debt
transaction entered into subsequent to December 31, 1997.

At December 31, 1997, the Company had approximately $93 million in
debt on which interest is charged under various floating rate
arrangements, primarily under its four year term loan and revolving
credit agreement, mortgages, and an Australian term loan (see Note 7
of Notes to Consolidated Financial Statements).  The Company is
exposed to market risk of future increases in interest rates on
these loans, with the exception of the Australian term loan, on
which the Company has entered into an interest rate swap agreement.

The Company is not currently generating adequate cash to fund its
operations and build cash reserves.  However, the Company believes
that existing cash balances, together with cash generated by the
sale of its Solid Edge and Engineering Modeling System product lines
to Unigraphics Solutions, Inc. (see "Subsequent Events" following),
and cash available under its term loan and revolving credit
agreement will be adequate to meet cash requirements for 1998.  The
Company, in the near term, must increase sales volume and align its
operating expenses with the level of revenue being generated in
order to fund its operations and build cash reserves without
reliance on funds generated from the sale of long-term assets and
third party financing.


FOURTH QUARTER 1997

Revenues for the fourth quarter were $300.9 million, up 2% from
fourth quarter 1996.  The Company incurred a net loss of $20.7
million ($.43 per share) for the quarter versus a fourth quarter
1996 net loss of $33.6 million ($.71 per share), including a $10.5
million ($.21 per share) nonrecurring operating charge.  In addition
to the effect of the nonrecurring charge incurred in 1996, the
improvement in fourth quarter 1997 earnings resulted from a 4%
decline in operating expenses, primarily for research and
development.  The Company estimates that the comparative strength of
the U.S. dollar in the fourth quarter of 1997 adversely impacted
results of operations by $.15 per share from the fourth quarter 1996
level.


SUBSEQUENT EVENTS

In February 1998, the Company established a plan to restructure its
European operations to further align operating expense and revenue
levels in that region.  The cost of this restructuring is estimated
at $4.4 million, primarily for severance pay and related costs.  The
60 positions planned for elimination by the end of second quarter
1998 are in the sales and marketing, general and administrative, and
pre- and post-sales support areas.  The cash outlay related to this
charge is expected to approximate the amount of the charge and will
be funded by existing cash and/or borrowings under the Company's
revolving line of credit.  The Company estimates the restructuring
action will result in annual savings of approximately $4.5 million.

On March 2, 1998, the Company closed its transaction with Electronic
Data Systems Corporation and its Unigraphics Solutions, Inc.
subsidiary, in which the Company sold certain of the assets of its
Solid Edge and Engineering Modeling System product lines for $105
million in cash.  The Company anticipates a gain on this transaction
of approximately $100 million.  Additionally, the Company estimates
the sale of this business will result in a reduction of its 1998
revenues by approximately $30 million, if not replaced, and an
improvement in its operating results of approximately $5 million,
excluding the impact of the estimated $100 million gain on the sale.

See "Zydex Litigation" preceding for a description of a debt
transaction entered into subsequent to December 31, 1997.

ORGANIZATIONAL CHANGES

Effective January 1, 1998, the Company's business organization is
comprised of Intergraph Corporation, the parent company, and three
subsidiary corporations as follows: Intergraph Corporation, the
parent company (may also be referred to as Intergraph Industry
Solutions), Intergraph Computer Systems, Inc., Intergraph Public
Safety, Inc., and VeriBest, Inc.  The Company believes that this
business structure will provide greater focus and clear accountability
of each entity as a separate business enterprise.

Intergraph Computer Systems, Inc., a wholly owned subsidiary of
Intergraph Corporation, supplies high performance Windows NT-based
graphics workstations and PCs, 3D graphics subsystems, servers, and
other hardware products.

Intergraph Industry Solutions supplies software and solutions,
including hardware, consulting and services, to the federal
government and to the process and building and infrastructure
industries.

Intergraph Public Safety, Inc. and VeriBest, Inc. are wholly owned
subsidiaries of Intergraph Corporation.  Public Safety develops,
markets, and implements systems for public safety agencies.
VeriBest serves the electronics design automation market, providing
software design tools, design processes, and consulting services for
developers of electronic systems.


INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

-----------------------------------------------------------------------
December 31,                                         1997       1996
-----------------------------------------------------------------------
(In thousands except share and per share amounts)

Assets
  Cash and cash equivalents                      $ 46,645   $ 50,674
  Accounts receivable, net                        324,654    326,117
  Inventories                                     105,032     89,411
  Other current assets                             25,693     37,718
-----------------------------------------------------------------------
     Total current assets                         502,024    503,920
  Investments in affiliates                        14,776     19,102
  Other assets                                     53,566     59,106
  Property, plant, and equipment, net             150,623    174,219
-----------------------------------------------------------------------
     Total Assets                                $720,989   $756,347
=======================================================================

Liabilities and Shareholders' Equity
  Trade accounts payable                         $ 60,945   $ 51,205
  Accrued compensation                             48,330     50,364
  Other accrued expenses                           71,126     72,798
  Billings in excess of sales                      66,680     62,869
  Short-term debt and current maturities
   of long-term  debt                              50,409     35,880
-----------------------------------------------------------------------
     Total current liabilities                    297,490    273,116
  Deferred income taxes                               460      6,204
  Long-term debt                                   54,256     29,764
-----------------------------------------------------------------------
     Total liabilities                            352,206    309,084
-----------------------------------------------------------------------
  Shareholders' equity:
     Common stock, par value $.10 per share --
      100,000,000 shares authorized;
      57,361,362 shares issued                      5,736      5,736
     Additional paid-in capital                   226,362    229,675
     Retained earnings                            269,442    339,679
     Unrealized holding gain on securities
      of affiliate                                    ---      6,858
     Cumulative translation adjustment              1,090      6,049
-----------------------------------------------------------------------
                                                  502,630    587,997
     Less --  cost of  9,183,845 treasury shares
      at December 31, 1997, and 9,656,295
      treasury shares at December 31, 1996       (133,847)  (140,734)
-----------------------------------------------------------------------
     Total shareholders' equity                   368,783    447,263
-----------------------------------------------------------------------
     Total Liabilities and Shareholders' Equity  $720,989   $756,347
=======================================================================

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


INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

------------------------------------------------------------------------------
Year Ended December 31,                           1997       1996       1995
------------------------------------------------------------------------------
(In thousands except per share amounts)

Revenues
  Systems                                    $ 786,278  $ 725,828  $ 710,168
  Maintenance and services                     338,027    369,505    387,810
------------------------------------------------------------------------------
     Total revenues                          1,124,305  1,095,333  1,097,978
------------------------------------------------------------------------------
Cost of revenues
  Systems                                      514,416    465,645    439,502
  Maintenance and services                     209,550    226,263    228,785
------------------------------------------------------------------------------
     Total cost of revenues                    723,966    691,908    668,287
------------------------------------------------------------------------------

     Gross profit                              400,339    403,425    429,691

Product development                             98,073    103,397    111,587
Sales and marketing                            251,833    256,482    268,702
General and administrative                     104,254    101,725     97,507
Restructuring charge                               ---        ---      6,040
Nonrecurring operating charges                   1,095     10,545        ---
------------------------------------------------------------------------------

     Loss from operations                      (54,916)   (68,724)   (54,145)

Interest expense                               ( 6,614)   ( 5,137)   ( 4,198)
Arbitration award                              ( 6,126)       ---        ---
Gains on sales of investments in affiliates      4,858     11,173      6,493
Other income (expense) -- net                  ( 3,439)   ( 3,424)     6,502
------------------------------------------------------------------------------

     Loss before income taxes                  (66,237)   (66,112)   (45,348)

Income tax expense                             ( 4,000)   ( 3,000)       ---
------------------------------------------------------------------------------
     Net loss                                 $(70,237)  $(69,112)  $(45,348)
==============================================================================

     Net loss per share-basic and diluted     $(  1.46)  $(  1.46)  $(   .98)
==============================================================================

Weighted average shares outstanding             47,945     47,195     46,077
==============================================================================

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


INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

-------------------------------------------------------------------------------
Year Ended December 31,                             1997       1996       1995
-------------------------------------------------------------------------------
(In thousands)

Cash Provided By (Used For):
Operating Activities:
  Net loss                                      $(70,237)  $(69,112)  $(45,348)
  Adjustments to reconcile net loss to net
  cash provided by operating activities:
    Depreciation and amortization                 60,332     75,820     80,157
    Noncash portion of arbitration award           5,835        ---        ---
    Noncash portion of nonrecurring
     operating charges and restructuring charge      ---     10,545      2,449
    Deferred income tax expense                    1,555      2,496      3,175
    Collection of income tax refunds                 719      2,113     22,264
    Gains on sales of investments in affiliates  ( 4,858)   (11,173)   ( 6,493)
    Net changes in current assets and
     liabilites                                  (14,292)    15,324      3,629
-------------------------------------------------------------------------------
    Net cash provided by (used for)
     operating activities                        (20,946)    26,013     59,833
-------------------------------------------------------------------------------

Investing Activities:
  Proceeds from sales of divisions
   and investments in affiliates                   5,749     11,561      7,908
  Purchases of property, plant, and equipment    (24,785)   (30,563)   (54,689)
  Capitalized software development costs         (10,592)   (15,492)   (25,370)
  Other                                          ( 1,038)     2,816    (10,799)
-------------------------------------------------------------------------------
    Net cash used for investing activities       (30,666)   (31,678)   (82,950)
-------------------------------------------------------------------------------

Financing Activities:
  Gross borrowings                                75,896     18,366     65,652
  Debt repayment                                 (30,950)   (22,764)   (59,844)
  Proceeds of employee stock purchases and
   exercises of stock options                      3,483      3,834     12,027
-------------------------------------------------------------------------------
    Net cash provided by (used for)
     financing activities                         48,429    (   564)    17,835
-------------------------------------------------------------------------------
Effect of exchange rate changes on cash          (   846)       496        296
-------------------------------------------------------------------------------
Net decrease in cash and cash equivalents        ( 4,029)   ( 5,733)   ( 4,986)
Cash and cash equivalents at beginning of year    50,674     56,407     61,393
-------------------------------------------------------------------------------
Cash and cash equivalents at end of year        $ 46,645   $ 50,674   $ 56,407
===============================================================================

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


INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                   Unrealized
                                                                   Holding
                                             Additional            Gain on       Cumulative              Total
                                     Common  Paid-in     Retained  Securities    Translation  Treasury   Shareholders'
                                     Stock   Capital     Earnings  of Affiliate  Adjustment   Stock      Equity
----------------------------------------------------------------------------------------------------------------------
(In thousands except share amounts)
<S>                                  <C>     <C>         <C>       <C>           <C>          <C>        <C>
Balance at January 1, 1995           $5,736  $243,295    $454,139     ---        $2,458       $(183,291) $522,337

Issuance of 358,687 shares under
employee stock purchase plan            ---    (1,512)        ---     ---           ---           5,228     3,716

Issuance of 836,469 shares upon
exercise of stock options               ---    (3,881)        ---     ---           ---          12,192     8,311

Issuance of 797,931 shares upon
purchase of a business                  ---    (4,130)        ---     ---           ---          11,630     7,500

Translation adjustments                 ---       ---         ---     ---         6,192             ---     6,192

Issuance of 81,686 shares for
other purposes                          ---       168         ---     ---           ---           1,188     1,356

Net loss for the year                   ---       ---     (45,348)    ---           ---             ---   (45,348)
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995          5,736   233,940     408,791     ---         8,650        (153,053)  504,064

Issuance of 352,759 shares under
employee stock purchase plan            ---    (1,594)        ---     ---           ---           5,143     3,549

Issuance of 53,898 shares upon
exercise of stock options               ---    (  501)        ---     ---           ---             786       285

Issuance of 438,357 shares in
connection with a professional
services agreement                      ---    (2,390)        ---     ---           ---           6,390     4,000

Unrealized holding gain on
securities of affiliate                 ---       ---         ---  $6,858           ---             ---     6,858

Translation adjustments                 ---       ---         ---     ---        (2,601)            ---   ( 2,601)

Other                                   ---       220         ---     ---           ---             ---       220

Net loss for the year                   ---       ---     (69,112)    ---           ---             ---   (69,112)
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996          5,736   229,675     339,679   6,858         6,049        (140,734)  447,263

Issuance of 432,263 shares under
employee stock purchase plan            ---    (3,149)        ---     ---           ---           6,301     3,152

Issuance of 40,187 shares upon
exercise of stock options               ---    (  255)        ---     ---           ---             586       331

Unrealized holding gain on
securities of affiliate                 ---       ---         ---  (6,858)          ---             ---   ( 6,858)

Translation adjustments                 ---       ---         ---     ---        (4,959)            ---   ( 4,959)

Other                                   ---        91         ---     ---           ---             ---        91

Net loss for the year                   ---       ---     (70,237)    ---           ---             ---   (70,237)
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997         $5,736  $226,362    $269,442  $  ---        $1,090       $(133,847) $368,783
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.


INTERGRAPH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES.
Basis of Presentation:  The consolidated financial statements
include the accounts of Intergraph Corporation and its majority-
owned subsidiaries.  All significant intercompany accounts and
transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with
generally accepted accounting principles requires that management
make estimates and assumptions that affect the amounts reported in
the financial statements and determine whether contingent assets
and liabilities, if any, are disclosed in the financial statements.
The ultimate resolution of issues requiring these estimates and
assumptions could differ significantly from the resolution
currently anticipated by management and on which the financial
statements are based.

The Company's business is principally in one industry segment - the
development, manufacturing, marketing, and service of interactive
computer graphics systems.  Effective January 1, 1998, the Company
has divided its business into four separate entities: Intergraph
Computer Systems, Inc., Intergraph Industry Solutions,
Intergraph Public Safety, Inc., and VeriBest, Inc.  Computer
Systems supplies high performance Windows NT-based graphics
workstations and PCs, 3D graphics subsystems, servers, and other
hardware products.  Industry Solutions supplies software and
solutions, including hardware, consulting, and services to the
federal government and to the process and building and
infrastructure industries.  Public Safety develops, markets, and
implements systems for public safety agencies.  VeriBest serves the
electronics design automation market, providing software design
tools, design processes, and consulting services to developers of
electronic systems.  The Company's products are sold worldwide,
with United States and European revenues representing approximately
77% of total revenues for 1997.

The Company's hardware products and integrated software
applications are used for computer-aided design, manufacturing, and
engineering, mapping and geographic information services, public
safety, and technical information management in technical fields
such as utilities, facilities management, architecture,
engineering, construction, mechanical, and electronics design, and
mapping and geographic information systems.

Cash Equivalents:  The Company's excess funds are generally
invested in short-term, highly liquid, interest-bearing securities,
which may include short-term municipal bonds, time deposits, money
market preferred stocks, commercial paper, and U.S. government
securities.  The Company's investment policy limits the amount of
credit exposure to any single issuer of securities.  All cash
equivalents are stated at fair market value based on quoted market
prices.  Investments with original maturities of three months or
less are considered to be cash equivalents for purposes of
financial statement presentation.

The Company's investments in debt securities are valued at fair
market value with any unrealized gains and losses reported as a
component of shareholders' equity, net of tax.  At December 31,
1997 and 1996, the Company held various debt securities, all within
three months of maturity at those dates, with fair market values of
$10,000,000 and $16,000,000, respectively.  Gross realized gains
and losses on debt securities sold during the years ended December
31, 1997 and 1996, were not significant, and there were no
unrealized holding gains or losses on debt securities at December
31, 1997 or 1996.

Inventories:  Inventories are stated at the lower of average cost
or market and are summarized as follows:

------------------------------------------------------------
December 31,                        1997        1996
------------------------------------------------------------
(In thousands)

Raw materials                   $ 35,799     $26,601
Work-in-process                   37,357      24,008
Finished goods                    11,760      12,945
Service spares                    20,116      25,857
------------------------------------------------------------
Totals                          $105,032     $89,411
============================================================

The industry in which the Company competes is characterized by
rapid technological change.  This technological change is an
important consideration in the Company's overall inventory
management program, in which the Company endeavors to carry only
parts and systems utilizable with the technology of its current
product offerings and as spares for the contracted maintenance of
systems in its installed customer base.  The Company regularly
estimates the degree of technological obsolescence in its
inventories and provides inventory reserves on that basis.  Though
the Company believes it has adequately provided for any such
declines in inventory value to date, any unanticipated change in
technology could significantly affect the value of the Company's
inventories and thereby adversely affect gross margins and reported
results of operations.

Investments in Affiliates:  Investments in companies in which the
Company believes it has the ability to influence operations or
finances, generally 20%- to 50%-owned companies, are accounted for
by the equity method.  Investments in companies in which the
Company does not exert such influence, generally in less than 20%-
owned companies, are accounted for at fair value if such values are
readily determinable, and at cost if such values are not readily
determinable.  The Company's investments accounted for by the cost
method are insignificant.

During 1997 the Company sold its stock investment in a publicly
traded affiliate at a gain of $4,858,000.  At December 31, 1996,
the unrealized gain on this investment resulting from periodic mark-
to-market adjustments totaled $6,858,000 and is included in
"Investments in affiliates" and "Unrealized holding gain on
securities of affiliate" in the consolidated balance sheet at that
date.  The Company sold stock investments in affiliated companies
at gains of $11,173,000 in 1996 and $6,493,000 in 1995.  These
gains are included in "Gains on sales of investments in affiliates"
in the consolidated statements of operations.

Property, Plant, and Equipment:  Property, plant, and equipment,
summarized below, is stated at cost.  Depreciation is provided
using the straight line method over the estimated useful lives
described below.

----------------------------------------------------------------------
December 31,                                        1997       1996
----------------------------------------------------------------------
(In thousands)

Land and improvements (15-30 years)             $ 13,664   $ 14,943
Buildings and improvements (30 years)            136,517    146,251
Equipment, furniture, and fixtures (3-8 years)   290,217    320,561
----------------------------------------------------------------------
                                                 440,398    481,755
Allowances for depreciation                     (289,775)  (307,536)
----------------------------------------------------------------------
Totals                                          $150,623   $174,219
======================================================================

Treasury Stock:  Treasury stock is accounted for by the cost
method.  The Board of Directors of the Company has authorized the
purchase of up to 20,000,000 shares of the Company's common stock
in the open market.  As of December 31, 1997, the Company had
purchased approximately 18,800,000 shares for the treasury with the
last purchase occurring in 1994.  Further purchases of treasury
stock are restricted by terms of the Company's term loan and
revolving credit agreement.  See Note 7.  Treasury stock activity
is presented in the consolidated statements of shareholders'
equity.

Revenue Recognition:  Revenues from systems sales with no
significant post-shipment obligations are recognized as equipment
and/or software are shipped, with any post-shipment costs accrued
at that time.  Revenues on systems sales with significant post-
shipment obligations are recognized by the percentage-of-completion
method, with progress to completion measured on the basis of
completion of milestones, labor costs incurred currently versus the
total estimated cost of performing the contract over its term, or
other factors appropriate to the individual contract of sale.  The
total amount of revenues to be earned under these contracts is
generally fixed by contractual terms.  The Company regularly
reviews its progress on these contracts and revises the estimated
costs of fulfilling its obligations.  Due to uncertainties inherent
in the estimation process, it is possible that completion costs
will be further revised on some of the Company's long-term
contracts, which could delay revenue recognition and decrease the
gross margin to be earned on these contracts.  Any losses
identified in the review process are recognized in full in the
period in which determined.  Revenues from certain contracts with
the U.S. government, primarily cost-plus award fee contracts, are
recognized monthly as costs are incurred and fees are earned under
the contracts.

Maintenance and services revenues are recognized ratably over the
lives of the maintenance contracts or as services are performed.

The American Institute of Certified Public Accountants has issued
Statement of Position 97-2, Software Revenue Recognition, effective
for fiscal years beginning after December 15, 1997.  The Statement
requires each element of a software sale arrangement to be
separately identified and accounted for based on the relative fair
value of each element.  Revenue cannot be recognized on any element
of the sale arrangement if undelivered elements are essential to
functionality of the delivered elements.  The Statement replaces
the previous method of software revenue recognition, under which a
distinction was made between significant and insignificant post
shipment obligations for revenue recognition purposes.  The Company
does not expect adoption of this new accounting standard to
significantly affect its 1998 results of operations since the
Company's revenue recognition policies have historically been in
substantial compliance with the practices required by the new
pronouncement.

Billings may not coincide with the recognition of revenue.
Unbilled accounts receivable occur when revenue recognition
precedes billing to the customer, and arise primarily from
commercial sales with predetermined billing schedules, U.S.
government sales with billing at the end of a performance period,
and U.S. government cost-plus award fee contracts.  Billings in
excess of sales occur when billing to the customer precedes revenue
recognition, and arise primarily from maintenance revenue billed in
advance of performance of the maintenance activity and systems
revenue recognized on the percentage-of-completion method.

Product Development Costs:  The Company capitalizes certain costs
of computer software development incurred after the technological
feasibility of the product has been established.  Such capitalized
costs are amortized over a two-year period on a straight-line
basis.  Amortization expense included in "Cost of revenues -
Systems" in the consolidated statements of operations amounted to
$13,600,000 in 1997, $16,100,000 in 1996, and $14,700,000 in 1995.
The unamortized balance of capitalized software development costs,
included in "Other assets" in the consolidated balance sheets,
totaled $23,300,000 and $26,400,000 at December 31, 1997 and 1996,
respectively.

Although the Company regularly reviews its capitalized development
costs to ensure recognition of any decline in value, it is possible
that revenues expected to be generated by these development
activities will not materialize in amounts anticipated due to
industry conditions that include intense price and performance
competition, or that product lives will be reduced due to shorter
product cycles.  Should either of these events occur, the carrying
amount of capitalized development costs would be reduced, producing
adverse effects on systems cost of revenues and results of
operations.

Foreign Currency Exchange and Translation:  Local currencies are
the functional currencies for the Company's European subsidiaries.
The U.S. dollar is the functional currency for all other
international subsidiaries.  Foreign currency gains and losses
resulting from remeasurement or settlement of receivables and
payables denominated in a currency other than the functional
currency, together with gains and losses and fees paid in
connection with the Company's forward exchange contracts, are
included in "Other income (expense) - net" in the consolidated
statements of operations.  Net exchange losses totaled $2,700,000
in 1997, $4,600,000 in 1996, and $300,000 in 1995.  Translation
gains and losses resulting from translation of subsidiaries'
financial statements from the functional currency into dollars for
U.S. reporting purposes and foreign currency gains and losses
resulting from remeasurement of intercompany advances of a long-
term investment nature are included in the "Cumulative translation
adjustment" component of shareholders' equity.

Derivative Financial Instruments:  Derivatives utilized by the
Company consist of forward exchange contracts and interest rate
swap agreements.  The Company is prohibited by policy from taking
derivative positions exceeding its known balance sheet exposures
and from otherwise trading in derivative financial instruments.

The Company has certain currency related asset and liability
exposures against which certain measures, primarily hedging, are
taken to reduce currency risk.  With respect to these exposures,
the objective of the Company is to protect against financial
statement volatility arising from changes in exchange rates with
respect to amounts denominated for balance sheet purposes in a
currency other than the functional currency of the local entity.
The Company therefore enters into forward exchange contracts
related to certain balance sheet items, primarily intercompany
receivables, payables, and formalized intercompany debt.  Periodic
changes in the value of these contracts offset exchange rate
related changes in the financial statement value of these balance
sheet items.  These forward exchange contracts are purchased with
maturities reflecting the expected settlement dates of the balance
sheet items being hedged, which are generally less than three
months, and only in amounts sufficient to offset possible
significant currency rate related changes in the recorded values of
these balance sheet items.  The Company does not generally hedge
the exposures related to other foreign currency denominated assets
and liabilities, unless a significant risk has been identified.
Forward exchange contracts are accounted for under the fair value
method.  Under this method, realized and unrealized gains and
losses on forward exchange contracts are recognized as offsets to
gains and losses resulting from the underlying hedged transactions
in the period in which exchange rates change and are included in
"Other income (expense) - net" in the consolidated statements of
operations.  Bank fees charged on the contracts are amortized over
the period of the contract.  Gain or loss on termination of a
forward exchange contract is recognized in the period in which the
contract is terminated.  In the event of early settlement of a
hedged intercompany asset or liability, the related forward
exchange contract gains or losses are recognized in the period in
which exchange rates change.

The Company enters into interest rate swap agreements to reduce the
risk of increases in interest rates on certain of its outstanding
floating rate debt.  The Company enters into agreements in which
the principal and term of the interest rate swap match those of the
specific debt obligation being hedged.  The Company pays a fixed
rate of interest and receives payment based on a variable rate of
interest, and is thus exposed to market risk of potential decreases
in interest rates.  Interest rate swap agreements are accounted for
under the accrual method.  Under this method, the differences in
amounts paid and received under interest rate swap agreements are
recognized in the period in which the payments and receipts occur
and are included in "Interest expense" in the consolidated
statements of operations.  Gain or loss on termination of an
interest rate swap agreement is deferred and amortized as an
adjustment to interest expense over the remaining term of the
original contract life of the terminated swap agreement.  In the
event of early extinguishment of a debt obligation, any realized or
unrealized gain or loss on the related swap agreement is recognized
in income coincident with the extinguishment gain or loss.

Amounts payable to or receivable from counterparties related to
derivative financial instruments are included in "Other accrued
expenses" or "Other current assets" in the consolidated balance
sheets.  These amounts were not significant at December 31, 1997 or
1996.

See Note 4 for further details of the Company's derivative
financial instruments.

Stock-Based Compensation Plans:  The Company has two stock-based
compensation plans, a fixed stock option plan and a stock purchase
plan.

Under the fixed stock option plan, stock options may be granted to
employees at fair market value or at a price less than fair market
value at the date of grant.  No compensation expense is recognized
for options granted at fair market value.  Expense associated with
grants at less than fair market value, equal to the difference in
exercise price and fair market value at the date of grant, is
recognized over the vesting period of the options.

Under the stock purchase plan, employees purchase stock of the
Company at 85% of the closing market price of the Company's stock
as of the last pay date of each calendar month.  No compensation
expense is recognized for the difference in price paid by employees
and the fair market value of the Company's stock at the date of
purchase.

In accordance with the disclosure provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, adopted by the Company December 31, 1996, the Company
has provided pro forma basis information to reflect results of
operations and earnings per share had compensation expense been
recognized for stock options granted at market value at date of
grant and for employee stock purchases.  See Note 9.

Income Taxes:  The provision for income taxes includes federal,
international, and state income taxes currently payable or
refundable and income taxes deferred because of temporary
differences between the financial statement and tax bases of assets
and liabilities.  See Note 8.

Net Loss Per Share:  Effective December 31, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128,
Earnings Per Share.  Under this Statement, "basic earnings per
share" excludes any dilutive effects of common stock equivalents,
and "diluted earnings per share" is similar to the previously
reported fully diluted earnings per share.  Adoption of this
Statement had no impact on the Company's loss per share
calculations for any year in the three year period ended December
31, 1997, due to the antidilutive impact of the Company's employee
stock options, which are the Company's only common stock equivalent
(see Note 9).  Weighted average common and equivalent common shares
outstanding for both the basic and diluted loss per share
calculations for the years ended December 31, 1997, 1996, and 1995
were 47,945,000, 47,195,000, and 46,077,000, respectively.

Reclassifications:  Certain reclassifications have been made to the
previously reported consolidated statements of operations and cash
flows for the years ended December 31, 1996 and 1995 to provide
comparability with the current year presentation.

Subsequent Events:  See Note 15 for discussion of events occurring
subsequent to December 31, 1997 and whose effects therefore are not
included in these financial statements.

NOTE 2 -- LITIGATION AND OTHER RISKS AND UNCERTAINTIES.
In addition to those described in Notes 1, 4, 6, 7, and 11, the
Company has risks related to certain litigation and to its business
and economic environment, including those described in "Litigation
and Other Risks and Uncertainties" included in Management's
Discussion and Analysis of Financial Condition and Results of
Operations on pages 15 to 19 of this annual report.

NOTE 3 -- RESTRUCTURING AND NONRECURRING OPERATING CHARGES.
The Company recorded a restructuring charge totaling $6,040,000 in
1995 and nonrecurring operating charges totaling $10,545,000 in
1996.  For a complete description of these charges, see
"Restructuring and Nonrecurring Operating Charges" included in
Management's Discussion and Analysis of Financial Condition and
Results of Operations on page 15 of this annual report.

NOTE 4 -- FINANCIAL INSTRUMENTS.
Information related to the Company's financial instruments, other
than cash equivalents and stock investments in less than 20%-owned
companies, is summarized below.

Short- and Long-Term Debt:  The balance sheet carrying amounts of
the Company's floating rate debt (approximately $93,000,000 at
December 31, 1997), consisting primarily of loans under a revolving
credit agreement, mortgages, and a term loan (see Note 7),
approximate fair market values since interest rates on the debt
adjust periodically to reflect changes in market rates of interest.
With the exception of the Australian term loan (see Note 7), the
Company is exposed to market risk of future increases in interest
rates on these loans.  The carrying amounts of fixed rate debt
approximate fair market values based on current interest rates for
debt of the same remaining maturities and character.

Forward exchange contracts:  Outstanding notional amounts for the
Company's forward exchange contracts were $37,357,000 and
$18,618,000 at December 31, 1997 and 1996, respectively.  The table
below summarizes in U.S. dollars the face amounts of these
contracts by major currency.  For purposes of presentation, foreign
currency amounts are translated to dollars at the rates in effect
at each balance sheet date.  "Sell" amounts represent the U.S.
dollar equivalent of commitments to sell currencies, and "buy"
amounts represent the U.S. dollar equivalent of commitments to
purchase currencies.

---------------------------------------------------------------------------
December 31,                   1997                        1996
                  ----------------------------  ---------------------------
                                   Net Forward                 Net Forward
                                    Contract                    Contract
                    Sell      Buy   Position    Sell      Buy   Position
---------------------------------------------------------------------------
(In thousands)

German mark       $22,536  $ 5,217  $17,319   $18,127  $ 4,736  $13,391
Italian lira       12,271      814   11,457     6,754      395    6,359
British pound       7,573    8,827   (1,254)    3,952    8,784   (4,832)
French franc        4,362    1,836    2,526     6,018      656    5,362
Swiss franc         1,564    5,386   (3,822)      378    7,495   (7,117)
Spanish peseta      1,407    1,296      111     2,081    1,059    1,022
Belgian franc       1,254      230    1,024     2,186       75    2,111
Other currencies   14,354    4,358    9,996     5,781    3,459    2,322
---------------------------------------------------------------------------
Totals            $65,321  $27,964  $37,357   $45,277  $26,659  $18,618
===========================================================================

These notional amounts do not necessarily represent amounts to be
exchanged between the Company and the counterparties to the forward
exchange contracts, and as such, they do not represent the amount
of the Company's currency related exposures at those dates.  The
amounts potentially subject to risk, arising from the possible
inability of the counterparties to meet the terms of the contracts,
are generally limited to the amounts, if any, by which the
counterparties' obligations exceed those of the Company.  Net
receivables from counterparties related to forward exchange
contracts were not significant at December 31, 1997 or 1996.  These
carrying amounts approximated fair value at those dates due to the
short duration (generally three months or less) of the contracts.

Based on the terms of outstanding forward exchange contracts and
the amount of the related balance sheet exposures at December 31,
1997 and 1996, the Company's results of operations would not be
materially affected by a 10% increase or decrease in exchange rates
underlying the contracts and the exposures hedged.  Cash
requirements of forward exchange contracts are limited to receipt
of an amount equal to the exchange gain or payment of an amount
equal to the exchange loss at the contract settlement date, and
payment of bank fees related to the contracts.  Net cash flow from
forward contract activity, consisting of realized gains and losses
from settlement of exposed assets and liabilities at exchange rates
in effect at the settlement date rather than at the time of
recording, settlement of the forward contracts purchased to
mitigate the exposures, and payment of bank fees on the forward
contracts, was not significant for any year in the three year
period ended December 31, 1997.

Interest rate swap agreements:  In 1996, the Company entered into
an interest rate swap agreement in the principal amount of its
Australian term loan agreement (approximately $13,200,000 at
December 31, 1997).  The agreement is for a period of approximately
six years, and its expiration date coincides with that of the term
loan.  Under the agreement, the Company pays a 9.58% fixed rate of
interest and receives payment based on a variable rate of interest.
The weighted average receive rate of the agreement at December 31,
1997 and 1996 was 6.49% and 7.06%, respectively.  The fair market
value of this interest rate swap agreement at December 31, 1997 was
approximately $900,000.  Fair market value was determined by
obtaining a bank quote and represents the amount the Company would
pay should the Company's obligation under the instrument be
transferred to a third party at the reporting date.  Cash
requirements of the Company's interest rate swap agreement are
limited to the differential between the fixed rate paid and the
variable rate received.

NOTE 5 -- SUPPLEMENTARY CASH FLOW INFORMATION.
Changes in current assets and liabilities, net of the effects of
business divestitures, restructuring charges, and nonrecurring
operating charges, in reconciling net loss to net cash provided by
(used for) operations are as follows:

------------------------------------------------------------------------------
                                        Cash Provided By (Used For) Operations
Year Ended December 31,                           1997      1996      1995
------------------------------------------------------------------------------
(In thousands)

(Increase) decrease in:
 Accounts receivable                           $(25,624)  $(8,547)   $27,440
 Inventories                                    (21,296)   21,299     11,915
 Other current assets                             9,186     9,697    (24,784)
Increase (decrease) in:
 Trade accounts payable                          11,449    (1,513)     2,720
 Accrued compensation and other
   accrued expenses                               4,123    (5,344)     3,008
 Billings in excess of sales                      7,870    (  268)   (16,670)
------------------------------------------------------------------------------
Net changes in current assets and liabilities  $(14,292)  $15,324    $ 3,629
==============================================================================

Cash payments for income taxes totaled $6,100,000, $4,900,000, and
$4,800,000 in 1997, 1996, and 1995, respectively.  Cash payments
for interest in those years totaled $6,400,000, $5,000,000, and
$4,100,000, respectively.

Investing and financing transactions in 1997 that did not require
cash included the sale of two noncore business units of the Company
in part for notes receivable and future royalties totaling
$3,950,000.  Investing and financing transactions in 1996 that did
not require cash included the issuance of 438,357 shares of the
Company's common stock with a fair market value of $4,000,000 in
connection with a professional services agreement related to the
Company's efforts to build its public safety business in the Asia
Pacific region and a $6,858,000 favorable mark-to-market adjustment
of an investment in an affiliated company.  Investing and financing
transactions in 1995 that did not require cash consisted of the
acquisition of a business for total consideration of $7,500,000,
consisting of issuance of 797,931 shares of the Company's common
stock and the granting of stock options on 148,718 of the Company's
shares to employees of the acquired company.

NOTE 6 -- ACCOUNTS RECEIVABLE.
Concentrations of credit risk with respect to accounts receivable
are limited due to the diversity of the Company's customer base.
The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral.
Historically, the Company has not experienced significant losses
related to trade receivables from individual customers or from
groups of customers in any geographic area, with the exception of
the 1994 write-off of a $5,500,000 receivable from a Middle Eastern
customer.  The Company's total accounts receivable from Middle
Eastern customers approximated $20,700,000 at both December 31,
1997 and 1996.

Revenues from the U.S. government were $177,100,000 in 1997,
$160,800,000 in 1996, and $159,300,000 in 1995, representing
approximately 15% of total revenue in all three years.  Accounts
receivable from the U.S. government was approximately $52,500,000
and $48,000,000 at December 31, 1997 and 1996, respectively.  The
Company sells to the U.S. government under long-term contractual
arrangements, primarily indefinite delivery, indefinite quantity
and cost-plus award fee contracts, and through commercial sales of
products not covered by long-term contracts.  Approximately 42% of
total federal government revenues are earned under long-term
contracts.  The Company believes its relationship with the federal
government to be good.  While it is fully anticipated that these
contracts will remain in effect through their expiration, the
contracts are subject to termination at the election of the
government.  Any loss of a significant government contract would
have an adverse impact on the results of operations of the Company.

Accounts receivable includes unbilled amounts of $80,900,000 and
$82,300,000 at December 31, 1997 and 1996, respectively.  These
amounts include amounts due under long-term contracts of
approximately $35,000,000 and $27,000,000, at December 31, 1997 and
1996, respectively.

The Company maintained reserves for uncollectible accounts,
included in "Accounts receivable" in the consolidated balance
sheets at December 31, 1997 and 1996, of $14,500,000 and
$16,700,000, respectively.

NOTE 7 -- DEBT AND LEASES.
Short- and long-term debt is summarized as follows:

-----------------------------------------------------------------
December 31,                                 1997      1996
-----------------------------------------------------------------
(In thousands)

Revolving credit agreement and term loan  $ 64,640   $20,000
Australian term loan                        13,237    19,029
Long-term mortgages                         10,323    12,889
Other secured debt                          10,187     7,911
Short-term credit facilities                 5,153     3,310
Other                                        1,125     2,505
-----------------------------------------------------------------
Total debt                                 104,665    65,644
Less amounts payable within one year        50,409    35,880
-----------------------------------------------------------------
Total long-term debt                      $ 54,256   $29,764
=================================================================

In October 1995, the Company entered into a three year revolving
credit agreement with a group of lenders.  Borrowings available
under the agreement were determined by the amounts of eligible
assets of the Company, with maximum borrowings of $50,000,000.  At
December 31, 1996, the Company had outstanding borrowings of
$20,000,000, and approximately $22,000,000 of the available credit
line was allocated to support letters of credit issued by the
Company.  The rate of interest on all borrowings under the
agreement was, at the Company's option, the Citibank base rate of
interest plus 1.75% or the Eurodollar rate plus 2.75%.  The average
effective rate of interest was 10.6% for the period of time in 1996
during which the Company had outstanding borrowings under the
agreement.  The agreement contained certain financial and
restrictive covenants of the Company.

In January 1997, the Company terminated its agreement with this
group of lenders and replaced it with a term loan and revolving
credit agreement with another lender.  As a result, the Company
wrote off $3,300,000 of deferred financing costs associated with
the previous agreement.  The charge is included in "Nonrecurring
operating charges" in the 1996 consolidated statement of
operations.

Under the Company's January 1997 four year fixed term loan and
revolving credit agreement, available borrowings are determined by
the amounts of eligible assets of the Company (the "borrowing
base"), as defined in the agreement, including accounts receivable,
inventory, and property, plant, and equipment, with maximum
borrowings of $125,000,000.  The $25,000,000 term loan portion of
the agreement is due at expiration of the agreement.  Borrowings
are secured by a pledge of substantially all of the Company's
assets in the U.S.  The rate of interest on all borrowings under
the agreement is the greater of 7% or the Norwest Bank Minnesota
National Association base rate of interest (8.5% at December 31,
1997) plus .625%.  The average effective rate of interest was 9.12%
for the period of time in 1997 during which the Company had
outstanding borrowings under this agreement.  The agreement
requires the Company to pay a facility fee at an annual rate of
 .15% of the amount available under the credit line, an unused
credit line fee at an annual rate of .25% of the average unused
portion of the revolving credit line, and a monthly agency fee.  At
December 31, 1997, the Company had outstanding borrowings of
$64,640,000, $25,000,000 of which was classified as long-term debt
in the consolidated balance sheet, and an additional $41,300,000 of
the available credit line was allocated to support letters of
credit issued by the Company and the Company's forward exchange
contracts.  As of this same date, the borrowing base, representing
the maximum available credit under the line, was approximately
$121,000,000 ($112,000,000 at February 27, 1998).

The term loan and revolving credit agreement contains certain
financial covenants of the Company, including minimum net worth,
minimum current ratio, and maximum levels of capital expenditures.
In addition, the agreement includes restrictive covenants that
limit or prevent various business transactions (including
repurchases of the Company's stock, dividend payments, mergers,
acquisitions of or investments in other businesses, and disposal of
assets including individual businesses, subsidiaries, and
divisions) and limit or prevent certain other business changes.

In August 1995, the Company entered into a term loan agreement with
an Australian bank totaling 35,000,000 Australian dollars
(approximately $23,000,000).  The loan is payable in varying
installments through August 2002 and bears interest at the bank's
variable short-term lending rate, which ranged from 5.8% to 7.1% in
1997 (6.8% to 9.6% in 1996).  Letters of credit totaling
$13,200,000 are pledged as security under the loan agreement.
During 1996, the Company entered into a six year interest rate swap
agreement in the amount of the term loan to reduce the risk of
increases in interest rates, effectively converting the interest
rate on this loan to a fixed rate of 9.58%.

The Company has two long-term mortgages on certain of its European
facilities, payable in varying installments through the year 2010
and bearing interest at the floating Amsterdam Interbank Offering
Rate, which ranged from 3.1% to 3.8% in 1997 (2.9% to 3.6% in
1996), plus 1%.

Other secured debt consists of debt to various financial
institutions payable in varying installments through 2017 and
secured by certain assets of the Company, including facilities and
internally used computer equipment.  In March of 1997, the Company
entered into an agreement for the sale and leaseback of one of its
facilities.  The amount borrowed totals approximately $8,400,000
and is payable over a period of 20 years at an implicit rate of
interest of 10.7%.  The weighted average interest rate on this and
all other secured debt was approximately 11.2% for 1997 and 11.5%
for 1996.

See Note 4 for discussion of fair values of the Company's debt and
interest rate swap agreements.

The Company leases various property, plant, and equipment under
operating leases as lessee.  Rental expense for operating leases
was $30,400,000 in 1997, $34,200,000 in 1996, and $38,200,000 in
1995.  Subleases and contingent rentals are not significant.
Future minimum lease payments, by year and in the aggregate, under
noncancelable operating leases with initial or remaining terms of
one year or more are as follows:

------------------------------------------------------
                                   Operating
                               Lease Commitments
------------------------------------------------------
(In thousands)

1998                                 $21,500
1999                                  16,100
2000                                   9,400
2001                                   5,500
2002                                   2,900
Thereafter                            22,500
------------------------------------------------------
Total future minimum lease payments  $77,900
------------------------------------------------------

NOTE 8 -- INCOME TAXES.
The components of loss before income taxes are as follows:

-------------------------------------------------------------------------
Year Ended December 31,                 1997       1996       1995
-------------------------------------------------------------------------
(In thousands)

U.S.                                $(57,527)  $(42,381)  $(17,779)
International                        ( 8,710)   (23,731)   (27,569)
-------------------------------------------------------------------------
Total loss before income taxes      $(66,237)  $(66,112)  $(45,348)
=========================================================================

Income tax expense consists of the following:

-------------------------------------------------------------------------
Year Ended December 31,                 1997       1996       1995
-------------------------------------------------------------------------
(In thousands)

Current benefit (expense):
 Federal                             $ 1,400    $ 3,351    $ 5,251
 International                        (3,845)    (3,855)    (2,076)
-------------------------------------------------------------------------
  Total current                       (2,445)    (  504)     3,175
-------------------------------------------------------------------------

Deferred benefit (expense):
 Federal                              (1,726)    (2,447)    (2,685)
 International                           171     (   49)    (  490)
-------------------------------------------------------------------------
  Total deferred                      (1,555)    (2,496)    (3,175)
-------------------------------------------------------------------------
Total income tax expense             $(4,000)   $(3,000)   $   ---
=========================================================================

Deferred income taxes included in the Company's balance sheet
reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the carrying amounts for income tax return purposes.
Significant components of the Company's deferred tax assets and
liabilities are as follows:

----------------------------------------------------------------------------
December 31,                                             1997        1996
----------------------------------------------------------------------------
(In thousands)

Current Deferred Tax Assets (Liabilities):
 Inventory reserves                                  $ 15,235    $ 23,356
 Vacation pay and other employee benefit accruals       5,617       5,980
 Other financial statement reserves, primarily
   allowance for doubtful accounts                      9,226       7,624
 Profit on uncompleted sales contracts
   deferred for tax return purposes                   ( 1,759)    ( 4,297)
 Other current tax assets and liabilities, net        ( 5,916)    ( 5,068)
----------------------------------------------------------------------------
                                                       22,403      27,595
 Less asset valuation allowance                       (22,275)    (23,617)
----------------------------------------------------------------------------
 Total net current asset   (1)                            128       3,978
----------------------------------------------------------------------------

Noncurrent Deferred Tax Assets (Liabilities):
 Net operating loss and tax credit carryforwards:
   U.S. federal and state                              78,559      47,019
   International operations                            40,316      38,132
 Depreciation                                         ( 9,907)    ( 9,256)
 Capitalized software development costs               ( 7,604)    ( 9,198)
 Other noncurrent tax assets and liabilities, net     ( 7,051)    ( 6,664)
----------------------------------------------------------------------------
                                                       94,313      60,033
 Less asset valuation allowance                       (94,773)    (66,237)
----------------------------------------------------------------------------
 Total net noncurrent liability                       (   460)    ( 6,204)
----------------------------------------------------------------------------
Net deferred tax liability                           $(   332)   $( 2,226)
============================================================================

(1) Included in "Other current assets" in the consolidated balance
sheets.

The valuation allowance for deferred tax assets, which consists
primarily of reserves against the tax benefit of net operating loss
carryforwards, increased by $27,194,000 in 1997 due to the
incurrence of additional losses that may be carried forward, the
future tax benefits of which cannot be assured.  If realized, these
tax benefits will be applied to reduce income tax expense in the
year of realization.

Net operating loss carryforwards are available to offset future
earnings within the time periods specified by law.  At December 31,
1997, the Company had a U.S. federal net operating loss
carryforward of approximately $180,000,000 expiring from the year
2009 through 2012.  International net operating loss carryforwards
total approximately $103,000,000 and expire as follows:

------------------------------------------------------
                                  International
                                Net Operating Loss
December 31, 1997                 Carryforwards
------------------------------------------------------
(In thousands)

Expiration:
3 years or less                     $ 12,000
4 to 5 years                          17,000
6 to 10 years                          6,000
Unlimited carryforward                68,000
------------------------------------------------------
Total                               $103,000
======================================================

Additionally, the Company has $3,500,000 of U.S. alternative
minimum tax credit carryforwards which have no expiration date.
U.S. research and development tax credit carryforwards of
$6,800,000 are available to offset regular tax liability through
2012.

A reconciliation from income tax benefit at the U.S. federal
statutory tax rate of 35% to the Company's income tax expense is as
follows:

-------------------------------------------------------------------------------
Year Ended December 31,                            1997       1996       1995
-------------------------------------------------------------------------------
(In thousands)

Income tax benefit at federal statutory rate   $ 23,183   $ 23,139   $ 15,872
Benefit from Foreign Sales Corp. (FSC)              150      1,963        905
Tax effects of international operations, net    ( 5,617)   ( 8,657)   ( 8,629)
Tax effect of U.S. tax loss carried forward     (23,205)   (23,752)   (10,967)
Reduction of taxes provided in prior years        1,165      4,712        ---
Other - net                                         324    (   405)     2,819
-------------------------------------------------------------------------------
Income tax expense                             $( 4,000)  $( 3,000)  $    ---
===============================================================================

The Company does not provide for federal income taxes or tax
benefits on the undistributed earnings or losses of its
international subsidiaries, because earnings are reinvested and, in
the opinion of management, will continue to be reinvested
indefinitely.  At December 31, 1997, the Company had not provided
federal income taxes on earnings of individual international
subsidiaries of approximately $41,000,000.  Should these earnings
be distributed in the form of dividends or otherwise, the Company
would be subject to both U.S. income taxes and withholding taxes in
the various international jurisdictions.  Determination of the
related amount of unrecognized deferred U.S. income tax liability
is not practicable because of the complexities associated with its
hypothetical calculation.  Withholding of approximately $2,000,000
would be payable if all previously unremitted earnings as of
December 31, 1997, were remitted to the U.S. company.

NOTE 9 -- STOCK-BASED COMPENSATION PLANS.
The Intergraph Corporation 1997 Stock Option Plan was approved by
shareholders in May 1997.  Under the 1997 Plan and the Intergraph
Corporation 1992 Stock Option Plan, the Company reserved a total of
6,000,000 shares of common stock to grant as options to key
employees.  Options may be granted at fair market value or at a
price less than fair market value on the date of grant.  Options
are not exercisable prior to twenty four months from the date of
grant or later than ten years after the date of grant.  At December
31, 1997, 2,347,250 shares were available for future grants, all of
which relate to the 1997 Plan.

Under the 1995 Employee Stock Purchase Plan, 3,200,000 shares of
common stock were made available for purchase through a series of
five consecutive annual offerings each June beginning June 1, 1995.
In order to purchase stock, each participant may have up to 10% of
his or her pay, not to exceed $25,000 in any offering period,
withheld through payroll deductions.  All full time employees,
except members of the Administrative Committee of the Plan, are
eligible to participate.  The purchase price of each share is 85%
of the closing market price of the Company's common stock on the
last pay date of each calendar month.  Employees purchased 432,263,
352,759, and 358,687 shares of stock in 1997, 1996, and 1995,
respectively, under the 1995 and predecessor Plans.  At December
31, 1997, 2,223,464 shares were available for future purchases.

As allowed under the provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation, the Company has elected to apply Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related Interpretations in accounting for its
stock-based plans.  Accordingly, the Company has recognized no
compensation expense for these plans.  Had the Company accounted
for its stock-based compensation plans based on fair value of
awards at grant date consistent with the methodology of SFAS 123,
the Company's net loss and loss per share would have been increased
as indicated below.  The effects of applying SFAS 123 on a pro
forma basis are not likely to be representative of the effects on
reported pro forma net income (loss) for future years as the
estimated compensation costs reflect only options granted
subsequent to December 31, 1994.

-------------------------------------------------------------------------------
Year Ended December 31,                             1997       1996       1995
-------------------------------------------------------------------------------
(In thousands except per share amounts)

Net loss                           As reported  $(70,237)  $(69,112)  $(45,348)
                                   Pro forma    $(72,497)  $(71,447)  $(46,757)

Basic and diluted loss per share   As reported  $(  1.46)  $(  1.46)  $(   .98)
                                   Pro forma    $(  1.51)  $(  1.51)  $(  1.01)
===============================================================================

Under the methodology of SFAS 123, the fair value of the Company's
fixed stock options was estimated at the date of grant using the
Black Scholes option pricing model.  The multiple option approach
was used, with assumptions for expected option life of 1.38 years
after vest date in 1997 (1.39 years in 1996 and 1995) and 43%
expected volatility for the market price of the Company's stock in
1997 (40% in 1996 and 1995).  Dividend yield is excluded from the
calculation since it is the present policy of the Company to retain
all earnings to finance operations.  Risk free interest rates were
determined separately for each grant and are as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
           1997                          1996                          1995
----------------------------  ----------------------------  -----------------------------
Expected Life  Risk Free      Expected Life  Risk Free      Expected Life  Risk Free
(in years)     Interest Rate  (in years)     Interest Rate  (in years)     Interest Rate
----------------------------  ----------------------------  -----------------------------
<S>            <C>            <C>            <C>            <C>            <C>
3.38           6.28%          3.39           6.55%          3.39           5.95%
4.38           6.38%          4.39           6.67%          4.39           6.02%
5.38           6.34%          5.39           6.74%          5.39           6.09%
6.38           6.46%          6.39           6.79%          6.39           6.17%
=========================================================================================
</TABLE>

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable.  In addition, option
valuation models require the input of highly subjective
assumptions, including expected stock price volatility.  Because
the Company's employee stock options have characteristics
significantly different from those of traded options, and because
the subjectivity of assumptions can materially affect estimates of
fair value, the Company believes the Black-Scholes model does not
necessarily provide a reliable single measure of the fair value of
its employee stock options.

Shares issued under the Company's stock purchase plan were valued
at the difference between the market value of the stock and the
discounted purchase price of the shares on the date of purchase.
The date of grant and the date of purchase coincide for this plan.

The weighted average grant date fair values of options granted to
employees during 1997, 1996, and 1995 were $3.66, $3.92, and $4.84,
respectively, under the 1992 and 1997 stock option plans and $1.29,
$1.78, and $1.88, respectively, under the 1995 stock purchase plan.

Activity in the Company's fixed stock option plan for the years
ended December 31, 1997, 1996, and 1995 is summarized as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
                                       1997                 1996                1995
-------------------------------------------------------------------------------------------
                                       Weighted             Weighted            Weighted
                                       Average              Average             Average
                                       Exercise             Exercise            Exercise
                            Shares     Price     Shares     Price    Shares     Price
-------------------------------------------------------------------------------------------
<S>                         <C>        <C>       <C>        <C>      <C>        <C>
Outstanding at beginning
 of year                    1,831,417  $10.38    1,778,304  $10.42   1,260,637  $10.48
Granted at fair value         672,250    7.99      290,018    9.47   1,244,000   11.12
Granted at less than fair
 value                            ---     ---          ---     ---     148,718    1.25
Exercised                    ( 40,187) ( 8.23)    ( 53,898)   5.28    (836,469)   9.94
Expired                      ( 30,000) (16.00)    ( 14,982)   9.23         ---     ---
Forfeited                    (173,557) (10.65)    (168,025)  11.02    ( 38,582)   9.97
-------------------------------------------------------------------------------------------
Outstanding at end of year  2,259,923  $ 9.61    1,831,417  $10.38   1,778,304  $10.42
===========================================================================================

Exercisable at end of year    540,922  $ 9.62      247,874  $ 9.12     160,171  $ 7.68
===========================================================================================
</TABLE>

Further information relating to stock options outstanding at
December  31, 1997 is as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                Options Outstanding                    Options Exercisable
                    ---------------------------------------------  ---------------------------
                                Weighted Average   Weighted                  Weighted
Range of                        Remaining          Average                   Average
Exercise Prices     Number      Contractual Life   Exercise Price  Number    Exercise Price
----------------------------------------------------------------------------------------------
<S>                 <S>         <S>                <S>             <S>       <S>
$   .90 to $ 3.75      17,690   6.88 years         $ 1.30           17,690   $ 1.30
$  7.00 to $ 9.50   1,194,973   8.16                 8.41          261,232     8.63
$10.125 to $12.25   1,047,260   7.61                11.12          262,000    11.17
----------------------------------------------------------------------------------------------
                    2,259,923   7.89               $ 9.61          540,922   $ 9.62
==============================================================================================
</TABLE>

Options shown above with a grant date weighted average exercise
price of $1.25 per share and a range of exercise prices of $.90 to
$3.75 were granted in 1995 as the result of a business acquisition
in which the Company assumed the total shares and price obligations
under the acquired company's stock option plans.  All other option
grants during the three year period ended December 31, 1997 were at
the fair market value of the Company's stock at date of grant.

NOTE 10 -- EMPLOYEE BENEFIT PLANS.
The Intergraph Corporation Stock Bonus Plan was established in 1975
to provide retirement benefits to substantially all U.S. employees.
Effective January 1, 1987, the Company amended the Plan to qualify
it as an employee stock ownership plan (ESOP).  The Company makes
contributions to the Plan in amounts determined at the discretion
of the Board of Directors, and the contributions are funded with
Company stock.  Amounts are allocated to the accounts of
participants based on compensation.  Benefits are payable to
participants subject to the vesting provisions of the Plan.  The
Company has not made a contribution to the Plan since 1991.

In 1990, the Company established the Intergraph Corporation
SavingsPlus Plan, an employee savings plan qualified under Section
401(k) of the Internal Revenue Code, covering substantially all
U.S. employees.  Employees can elect to contribute up to 15% of
their compensation  to the Plan.  The Company matches 50% of
employee contributions up to 6% of each employee's compensation.
Company contributions to the Plan were $4,575,000, $5,687,000, and
$5,886,000, in 1997, 1996, and 1995, respectively.

The Company maintains various retirement benefit plans for
employees of its international subsidiaries, primarily defined
contribution plans that cover substantially all employees.
Contributions to the plans are made in cash and are allocated to
the accounts of participants based on compensation.  Benefits are
payable based on vesting provisions contained in each plan.
Contributions to the plans were $3,244,000, $3,678,000, and
$3,856,000 in 1997, 1996, and 1995, respectively.

NOTE 11-- OPERATIONS BY GEOGRAPHIC AREA.
International markets, particularly Europe and Asia, continue in
importance to the industry and to the Company.  The Company's
operations are subject to and may be adversely affected by a
variety of risks inherent in doing business internationally, such
as government policies or restrictions, currency exchange
fluctuations, and other factors.

The following summary of operations by geographic area includes
both sales to unaffiliated customers and intercompany sales between
geographic areas.  Sales between geographic areas are accounted for
under a transfer pricing policy.  Loss from operations by
geographic areas reflects these sales.

--------------------------------------------------------------------------
Year Ended December 31,                  1997        1996         1995
--------------------------------------------------------------------------
(In thousands)

Revenues
United States:
 Unaffiliated customers - U.S.    $   528,411  $  488,759   $  500,295
 Unaffiliated customers - export       58,589      42,061       49,035
 Consolidated subsidiaries            202,792     232,871      217,171
--------------------------------------------------------------------------
                                      789,792     763,691      766,501
--------------------------------------------------------------------------

Europe:
 Unaffiliated customers               341,476     363,255      390,715
 U.S. parent                            1,151         ---          ---
--------------------------------------------------------------------------
                                      342,627     363,255      390,715
--------------------------------------------------------------------------

Asia Pacific:
 Unaffiliated customers               111,449     127,607       91,284
 U.S. parent                            1,910       2,257        2,252
--------------------------------------------------------------------------
                                      113,359     129,864       93,536
--------------------------------------------------------------------------

Other International:
 Unaffiliated customers                84,380      73,651       66,649
 U.S. parent                            1,849       1,320          770
--------------------------------------------------------------------------
                                       86,229      74,971       67,419
--------------------------------------------------------------------------
Eliminations -- net                  (207,702)   (236,448)    (220,193)
--------------------------------------------------------------------------
Total revenues                     $1,124,305  $1,095,333   $1,097,978
==========================================================================

Loss From Operations
United States                      $ ( 35,350) $ ( 30,346)  $( 12,261)
Europe                               ( 20,504)   ( 29,837)   ( 27,663)
Asia Pacific                         (  7,930)   (  5,917)   ( 10,799)
Other International                     1,638    (  5,424)   ( 10,106)
Eliminations -- net                     7,230       2,800       6,684
--------------------------------------------------------------------------
Total loss from operations         $ ( 54,916) $ ( 68,724)  $( 54,145)
==========================================================================

Identifiable Assets
United States                      $  506,542  $ 522,966    $ 558,446
Europe                                183,826    204,913      248,459
Asia Pacific                           70,848     85,197       85,205
Other International                    49,611     40,147       46,234
Eliminations -- net                  ( 89,838)  ( 96,876)    (112,299)
--------------------------------------------------------------------------
Total identifiable assets          $  720,989  $ 756,347    $ 826,045
==========================================================================

Loss from operations in 1995 includes restructuring charges of
$4,778,000 in the U.S., $978,000 in Europe, and $284,000 in Other
International.  Loss from operations in 1996 includes a charge of
$10,545,000 in the U.S. for a $7,245,000 revaluation of the assets
of two noncore business units sold to third parties in 1997 and a
$3,300,000 write-off of deferred financing fees due to the
Company's early termination of its revolving credit agreement with
a group of lenders.  Loss from operations in 1997 includes a charge
of $1,095,000 in the U.S. for additional losses incurred upon final
disposition of the two noncore business units.

NOTE 12 -- RELATED PARTY TRANSACTIONS.
Bentley Systems, Inc.:  The Company owns approximately 50% of
Bentley Systems, Inc., the developer and owner of MicroStation, a
software product utilized in many of the Company's software
applications and for which the Company serves as a nonexclusive
distributor.  Under the Company's distributor agreement with
Bentley, the Company purchases MicroStation products for resale to
third parties.   The per copy fee payable by the Company under this
agreement was increased effective January 1, 1995 and again January
1, 1996 and, for 1995 only, Bentley paid the Company $7,414,000 in
distribution fees based on Bentley's MicroStation sales to
resellers.

The Company's purchases from Bentley totaled $5,656,000 in 1997,
$14,244,000 in 1996, and $39,329,000 in 1995.  Amounts due from
Bentley or for which the Company holds the right to delivery of
Bentley products totaled $1,076,000 and $10,700,000 at December 31,
1997 and 1996, respectively.  During the second quarter of 1997,
the Company offset receivables from Bentley of $5,835,000 against a
$6,126,000 obligation to Bentley resulting from an adverse contract
arbitration award.  See "Litigation and Other Risks and
Uncertainties" included in Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 15 to 19
of this annual report for further discussion of the Company's
arbitration proceedings and business relationship with Bentley.

Loan Program for Executive Officers:  In order to encourage
retention of Company stock by executive officers, the Company
adopted a loan program effective January 1993, under which
executive officers may borrow from the Company, on an unsecured
basis, an amount not exceeding (1) the current market value of the
common stock of the Company owned by any such executive officer,
and/or (2) the net value (current market price less exercise price)
of currently exercisable stock options owned by any such executive
officer.  Interest is charged on a monthly basis at the prevailing
prime rate.  Principal and interest must be repaid by the earliest
to occur of termination of employment, the attainment of a
designated market price for the Company's stock, the sale of a
certain number of shares of the Company's stock by loan recipients,
or the April 30, 1998 expiration of the program.  At December 31,
1996, James W. Meadlock, Chief Executive Officer and Chairman of
the Board of the Company, was indebted to the Company in the amount
of $5,530,000 under the program.  On November 21, 1997, the loan
and related interest, totaling $6,129,000 as of that date, were
paid in full.  As of December 31, 1997, there were no outstanding
loans under this program.

NOTE 13 -- SHAREHOLDER RIGHTS PLAN.
On August 25, 1993, the Company's Board of Directors adopted a
Shareholder Rights Plan.  As part of this plan, the Board of
Directors declared a distribution of one common stock purchase
right (a "Right") for each share of the Company's common stock
outstanding on September 7, 1993.  Each Right entitles the holder
to purchase from the Company one common share at a price of $50,
subject to adjustment.  The Rights are not exercisable until the
occurrence of certain events related to a person or a group of
affiliated or associated persons acquiring, obtaining the right to
acquire, or commencing a tender offer or exchange offer, the
consummation of which would result in beneficial ownership by such
a person or group of 15% or more of the outstanding common shares
of the Company.  Rights will also become exercisable in the event
of certain mergers or an asset sale involving more than 50% of the
Company's assets or earnings power.  Upon becoming exercisable,
each Right will allow the holder, except the person or group whose
action has triggered the exercisability of the Rights, to either
buy securities of Intergraph or securities of the acquiring
company, depending on the form of the transaction, having a value
of twice the exercise price of the Rights.  The Rights trade with
the Company's common stock.  The Rights are subject to redemption
at the option of the Board of Directors at a price of $.01 per
Right until the occurrence of certain events, and are exchangeable
for the Company's common stock at the discretion of the Board of
Directors under certain circumstances.  The Rights expire on
September 7, 2003.

NOTE 14 -- SUMMARY OF QUARTERLY INFORMATION -- UNAUDITED.

--------------------------------------------------------------------------------
Quarter Ended                         March 31    June 30   Sept. 30    Dec. 31
--------------------------------------------------------------------------------
(In thousands except per share amounts)

Year ended December 31, 1997:
Revenues                              $252,758   $288,609   $282,067   $300,871
Gross profit                            87,610    109,115    101,177    102,437
Net loss                               (26,289)   (16,027)   ( 7,186)   (20,735)
Net loss per share, basic and diluted  (   .55)   (   .33)   (   .15)   (   .43)
Weighted average shares outstanding     47,758     47,888     48,006     48,121

Year ended December 31, 1996:
Revenues                              $256,706   $268,166   $276,313   $294,148
Gross profit                            95,401    101,370    103,001    103,653
Net loss                               ( 6,391)   (15,179)   (13,930)   (33,612)
Net loss per share, basic and diluted  (   .14)   (   .32)   (   .29)   (   .71)
Weighted average shares outstanding     46,902     46,922     47,243     47,636
================================================================================

Second quarter 1997 losses were increased by a $.13 per share
charge for an adverse contract arbitration award to Bentley
Systems, Inc.  Third quarter 1997 losses were reduced by a $.10 per
share gain on the sale of an investment in an affiliated company.
The Company estimates that the strength of the U.S. dollar in the
fourth quarter of 1997 adversely impacted fourth quarter 1997
results of operations by approximately $.15 per share in comparison
to fourth quarter 1996.

First quarter 1996 losses were reduced by a $.20 per share gain on
the sale of the Company's stock investment in an affiliated
company.  Fourth quarter 1996 losses were increased by a $.21 per
share charge for nonrecurring operating expenses, primarily
revaluation of the assets of two noncore business units and write-
off of deferred financing fees.

NOTE 15 -- SUBSEQUENT EVENTS.

On January 15, 1998, the Company closed a settlement agreement
related to its litigation with Zydex, Inc.  Under terms of the
agreement, the Company purchased 100% of the common stock of Zydex
for $26,292,000, with $15,979,000 paid in cash at closing and the
remaining amount payable in fifteen monthly installments with
interest.  The closing date payment of cash was funded by the
Company's primary lender.  See "Zydex Litigation" included in
Management's Discussion and Analysis of Financial Condition and
Results of Operations on page 17 of this annual report
for further details.

In February 1998, the Company established a plan to restructure its
European operations to further align operating expense and revenue
levels in that region.  The cost of this restructuring is estimated
at $4,400,000, primarily for severance pay and related costs.  The
60 positions planned for elimination by the end of second quarter
1998 are in the sales and marketing, general and administrative,
and pre- and post-sales support areas.  The cash outlay related to
this charge is expected to approximate the amount of the charge and
will be funded by existing cash and/or borrowings under the
Company's revolving line of credit.  The Company estimates the
restructuring action will result in annual savings of approximately
$4,500,000.

On March 2, 1998, the Company closed its transaction with
Electronic Data Systems Corporation and its Unigraphics Solutions,
Inc. subsidiary, in which the Company sold certain of the assets of
its Solid Edge and Engineering Modeling System product lines, for
$105,000,000 in cash.  The Company anticipates a gain on this
transaction of approximately $100,000,000.  Additionally, the
Company estimates the sale of this business will result in a
reduction of its 1998 revenues by approximately $30,000,000, if not
replaced, and an improvement in its operating results of
approximately $5,000,000, excluding the impact of the estimated
$100,000,000 gain on the sale.


REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Intergraph Corporation


We have audited the accompanying consolidated balance
sheets of Intergraph Corporation and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended
December 31, 1997.  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 generally
accepted auditing standards.  Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Intergraph Corporation and
subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted
accounting principles.

                                /s/Ernst & Young LLP

Birmingham, Alabama
January 29, 1998, except for paragraph 2 of Note 15, as to
which the date is March 2, 1998.


DIVIDEND POLICY

The Company has never declared or paid a cash dividend on its
common stock.  It is the present policy of the Company's Board of
Directors to retain all earnings to finance the Company's
operations.  In addition, payment of dividends is restricted by the
Company's term loan and revolving credit agreement.

PRICE RANGE OF COMMON STOCK

Since April 1981, Intergraph common stock has traded on The NASDAQ
Stock Market under the symbol INGR.  As of January 31, 1998, there
were 48,220,459 shares of common stock outstanding, held
by approximately 6,000 shareholders of record.  The following table
sets forth, for the periods indicated, the high and low sale prices
of the Company's common stock as reported on The NASDAQ Stock
Market.

--------------------------------------------------------------------
                          1997                         1996
Period               High       Low             High        Low
--------------------------------------------------------------------

First Quarter     $11  1/4    $ 7  3/8        $20 1/8      $14 5/8
Second Quarter      8 13/16     6  1/4         16 1/4       11 1/8
Third Quarter      12           7  5/8         13 1/8        8 5/8
Fourth Quarter     14  3/16     8 15/16        12 5/8        8 5/8
====================================================================

TRANSFER AGENT AND REGISTRAR

Harris Trust and Savings Bank
Shareholder Services Division
311 W. Monroe Street
P. O. Box A-3504
Chicago, IL  60690-3504
(312) 360-5116

CORPORATE COUNSEL

Lanier Ford Shaver & Payne P.C.
200 West Court Square, Suite 5000
Huntsville, AL  35801

INDEPENDENT AUDITORS

Ernst & Young LLP
AmSouth/Harbert Plaza, Suite 1900
Birmingham, AL  35203

FORM 10-K

A copy of the Company's Form 10-K filed with the Securities and
Exchange Commission is available without charge upon written
request to Shareholder Relations, Intergraph Corporation, Huntsville, AL
35894-0001.

ANNUAL MEETING

The annual meeting of Intergraph Corporation will be held May 28,
1998, at the Corporate offices in Huntsville, Alabama.


BOARD MEMBERS AND OFFICERS

BOARD OF DIRECTORS          EXECUTIVE VICE PRESIDENTS       VICE PRESIDENTS

James W. Meadlock           Wade C. Patterson               Theron E. Anders
Chief Executive Officer     Chief Executive Officer
and Chairman of the Board   and President, Intergraph       Randall C. Bachmeyer
                            Computer Systems, Inc.

Larry J. Laster             Lawrence F. Ayers Jr.           Thomas G. Baybrook

Thomas J. Lee               Klaas Borgers                   Roger O. Coupland

Sidney L. McDonald          Edward F. Boyle                 Thomas J. Doran

Keith H. Schonrock Jr.      Penman R. Gilliam               George H. Dudley

James F. Taylor Jr.         Richard H. Lussier              Jeffrey H. Edson
Executive Vice President,
Intergraph Corporation,     Nancy B. Meadlock               Graeme J. Farrell
and Chief Executive
Officer, Intergraph         Stephen J. Phillips             Milford. B. French
Public Safety, Inc.
                            William E. Salter               Aggie L. Frizzell
Robert E. Thurber
Executive Vice President    K. David Stinson Jr.            Lewis N. Graham

                            Edward A. Wilkinson             Jeffrey P. Heath

                            Allan B. Wilson                 Rune Kahlbom

                            Manfred Wittler                 Milton H. Legg

                                                            Winston P. Newton

                                                            John R. Owens

                            VeriBest, Inc.                  Robert Patience

                            Charles E. Robertson Jr.        Preetha Pulusani
                            Chief Executive Officer and
                            President                       Stephen B. Rowles

                                                            James H. Slate

                                                            John W. Wilhoite




                                                            SECRETARY

                                                            John R. Wynn