<TABLE>
Five Year Financial Summary

<CAPTION>
----------------------------------------------------------------------------------------
                                    1999        1998        1997        1996        1995
----------------------------------------------------------------------------------------
(In thousands except per share amounts)

<S>                             <C>       <C>         <C>         <C>         <C>

Revenues                        $914,880  $1,005,007  $1,095,625  $1,065,806  $1,097,978
Nonrecurring  operating charges   15,596      15,343       1,095      10,545       6,040
Loss from operations             (67,440)   (100,998)    (38,242)    (52,556)    (54,145)
Gains on sales of assets          11,505     112,533       4,858      11,173       6,493
Loss from continuing operations  (78,561)     (6,728)    (53,490)    (54,246)    (45,348)
Discontinued operations (1)        6,984     (12,906)    (16,747)    (14,866)        ---
Net loss                         (71,577)    (19,634)    (70,237)    (69,112)    (45,348)
Net loss from continuing
   operations per share, basic
   and diluted                  (   1.60)  (     .14) (     1.11)  (    1.15)  (     .98)
Net loss per share, basic
  and diluted                   (   1.46)  (     .41) (     1.46)  (    1.46)  (     .98)
Working capital                  168,307     216,520     204,534     230,804     261,140
Total assets                     584,944     695,974     720,989     756,347     826,045
Total debt                        62,926      83,213     104,665      65,644      69,541
Shareholders' equity            $276,700  $  355,332  $  368,783  $  447,263  $  504,064

</TABLE>


(1) On October 31, 1999, the  Company  sold  its VeriBest, Inc.  operating
  segment.  Accordingly,  the gain on  sale as  well  as the  results  of
  operations  for  this  operating  segment  have  been  classified  as
  discontinued  operations  in the consolidated  statements  of  operations
  from  the  date  of the segment's inception in January 1996  through  the
  date  of  sale.  VeriBest provided software design tools and services  to
  the  electronics  design  automation market.  See  Note  4  of  Notes  to
  Consolidated Financial Statements contained in this annual report  for  a
  complete  discussion of this transaction and its impact on the  Company's
  results of operations and financial position.




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 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this Annual Report.



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


RESULTS OF OPERATIONS

Summary.  In fourth quarter 1999, the Company sold its VeriBest
operating segment.  Accordingly, the Company's consolidated
statements of operations for the three years ended December 31, 1999
reflect VeriBest's business as a discontinued operation.  As such,
except where noted otherwise, the following discussion of the
Company's results of operations addresses only results of continuing
operations.  VeriBest's results of operations for the three years
ended December 31, 1999 are discussed separately in "Discontinued
Operation" below.

The following summarized financial data sets forth the results of
operations of the Company for each year in the three year period
ended December 31, 1999.  The complete consolidated financial
statements of the Company, including footnote disclosures, are
presented on pages 33 to 56 of this annual report.

----------------------------------------------------------------------------
                                           1999       1998       1997
----------------------------------------------------------------------------
(In millions except per share amounts)

Revenues                                 $  915     $1,005     $1,096
Cost of revenues                            625        694        709
----------------------------------------------------------------------------
Gross profit                                290        311        387

Operating expenses                          342        397        424
Nonrecurring operating charges               15         15          1
----------------------------------------------------------------------------
Loss from operations                      (  67)     ( 101)     (  38)

Interest expense                          (   6)     (   8)     (   7)
Arbitration settlements                   (   9)       ---      (   6)
Gains on sales of assets                     12        113          5
Other income (expense) - net              (   3)     (   5)     (   3)
----------------------------------------------------------------------------
Loss from continuing operations
  before income taxes                     (  73)     (   1)     (  49)

Income tax expense                        (   6)     (   6)     (   4)
----------------------------------------------------------------------------
Loss from continuing operations           (  79)     (   7)     (  53)

Discontinued operation (VeriBest)             7      (  13)     (  17)
----------------------------------------------------------------------------
Net loss                                 $(  72)    $(  20)    $(  70)
============================================================================
Net loss from continuing operations
  per share, basic and diluted           $(1.60)    $( .14)    $(1.11)
Net loss per share, basic and diluted    $(1.46)    $( .41)    $(1.46)
============================================================================

In 1993, the Company began the process of transformation of 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 the years 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 primarily to actions of
Intel described separately in the "Intel Litigation" section of this
report.  In addition, demand for the Company's software products did
not meet expectations and gross margin on product sales continued to
decline due primarily to price competition in the industry.

In 1998, the Company's revenues and operating results continued to be
impacted by its dispute with Intel, as resulting delays in new
product releases eliminated the potential for revenue growth and
increased the Company's inventory obsolescence charges.
Additionally, price competition continued to adversely affect the
Company's margins.  Operating expenses were reduced in reaction to
lower sales volumes and through various restructuring actions, but
were offset to a degree by increased legal expenses related to Intel
and other matters.

Revenues and operating results in 1999 were negatively impacted by
increasingly weak demand for the Company's hardware product
offerings, as the Company was unable to recover completely from the
loss of momentum caused by Intel's actions.   As a result, in third
quarter 1999 the Company was forced to exit the personal computer
("PC") and generic server businesses and narrow the focus of its
Intergraph Computer Systems ("ICS") business unit to workstations,
specialty servers, digital video products and 3D graphics cards.  The
Company also implemented several cost-cutting measures, primarily in
the form of direct reductions in workforce, during 1999 in an effort
to align its expenses with the lower revenue levels being generated.
(See "Nonrecurring Operating Charges" following.)  The Company is
actively engaged in discussions with potential business partners for
ICS and is considering all other available alternatives to help stem
the losses in this business unit.

The Company expects that the industry will continue to be
characterized by higher performance and lower priced products,
intense competition, rapidly changing technologies, shorter product
cycles, and development and support of software standards that result
in less specific hardware and software dependencies by customers.
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, and will further depend on
its ability to successfully implement its strategic direction.  In
addition, the Company faces significant operational and financial
uncertainty of unknown duration due to its dispute with Intel.  To
achieve and maintain profitability, the Company must substantially
increase sales volume and/or continue to align its operating expenses
with the level of revenue and gross margin being generated.

Discontinued Operation.  On October 31, 1999, the Company sold its
VeriBest, Inc. operating segment to Mentor Graphics Corporation, a
global provider of electronic hardware and software design solutions
and consulting services, for approximately $11 million, primarily in
the form of cash received at closing.  The resulting gain on this
transaction of $14.4 million is reflected in "Gain on sale of
discontinued operation, net of income taxes" in the 1999 consolidated
statement of operations.

The VeriBest business unit served the electronic design automation
market, providing software design tools, design processes, and consulting
services for developers of electronic systems.

For the period in 1999 prior to sale, VeriBest incurred an operating
loss of $7.3 million on revenues of $23.7 million.  Similarly,
VeriBest incurred operating losses of $13.2 million and $16.7 million
in 1998 and 1997, on revenues of $27.8 million and $28.7 million,
respectively.  VeriBest's operating losses for 1999 and 1998 include
nonrecurring operating charges of $.9 million and $.5 million,
respectively, incurred for employee terminations as part of various
company-wide restructurings (see "Nonrecurring Operating Charges"
following.) Systems revenues declined by 11% and 17%, respectively,
in 1997 and 1998, reflecting weakening demand for the subsidiary's
software products.  In 1998, the decline in systems revenues was
partially offset by a 21% increase in maintenance revenues as the
result of sales force focus on increasing the subsidiary's
maintenance revenue base.  Results for 1997 were negatively impacted
by a 6 point decline in gross margin, primarily the result of
declining systems revenues, partially offset by a 5% decline in
operating expenses.  Losses for 1998 were reduced by a 5 point
improvement in gross margin as the result of declining royalty costs,
and by an additional 10% reduction in operating expenses.  In 1999,
VeriBest realized improvements in its revenues, margins, and
operating expenses as it directed its selling efforts toward a newly
developed line of proprietary products and realized the benefits of
its reduced headcount and revised selling strategy toward indirect
methods.  VeriBest's headcount declined by approximately 40% from
the subsidiary's inception in January 1996 through its sale in
October 1999.

For further information regarding VeriBest, including summarized
financial information for all periods presented, see Note 4 of Notes
to Consolidated Financial Statements.

Nonrecurring Operating Charges.  In first quarter 1998, the Company
reorganized its European operations to reflect the organization of
the Company into distinct business units and to align operating
expenses more closely with revenue levels in that region.  The cost
of this reorganization was originally estimated and recorded at $5.4
million, primarily for employee severance pay and related costs.
During the remainder of 1998, approximately $2.2 million of the costs
recorded in first quarter were reversed as the result of incurrence
of lower severance costs than originally anticipated.  In fourth
quarter, additional European reorganization costs of $2 million
were recorded for further headcount reductions.  The net year to
date charge of $5.2 million is included in "Nonrecurring operating
charges" in the 1998 consolidated statement of operations.
Approximately 80 European positions were eliminated in the sales and
marketing, general and administrative, and pre- and post- sales
support areas. Cash outlays related to this charge approximated $3.1
million in 1998, with the remainder paid in 1999.  The Company
estimates this European reorganization has resulted in annual savings
of approximately $7 million.

In fourth quarter 1998, the Company took further actions, principally
in the form of direct workforce reductions, to align the operating
expenses of its unprofitable businesses with their respective revenue
levels.  Approximately 100 positions were eliminated, primarily in
the Company's ICS and VeriBest business units.  The costs of this
reduction in force totaled approximately $1.3 million, $.8 million of
which is included in "Nonrecurring operating charges" in the 1998
consolidated statement of operations.  The remainder of the costs
relate to reductions in force in the Company's VeriBest business unit
and, accordingly, they are reflected  in "Loss from discontinued
operation, net of income taxes" in the 1998 consolidated statement of
operations.  Related cash outlays approximated $.8 million in 1998,
with the remainder paid in 1999.  The Company estimates that these
headcount reductions have resulted in an annual savings of
approximately $7 million.

The remainder of 1998 nonrecurring operating charges consists
primarily of write-offs of a) certain intangible assets, primarily
capitalized business system software no longer in use, b) goodwill
recorded on a prior acquisition of a domestic subsidiary and
determined to be of no value, and c) a noncompete agreement with a
former third party consultant.  Prior to the write-off, amortization
of these intangibles accounted for approximately $3.4 million of the
Company's annual operating expenses.

In second quarter 1999, in response to continued operating losses in
its ICS operating segment, the Company implemented a resizing of its
European computer hardware sales organization.  This resizing
involved closing most of the Company's ICS subsidiaries in Europe and
consolidating the European hardware sales effort within the
Intergraph subsidiaries in that region.  The associated cost of $2.5
million, primarily for employee severance pay, is included in
"Nonrecurring operating charges" in the 1999 consolidated statement
of operations.  Approximately 46 European positions were eliminated,
all in the sales and marketing area.  Related cash outlays
approximated $1.4 million in 1999, with the remainder expected to be
paid in 2000.  The Company estimates that this resizing will result
in annual savings of approximately $3 million.

In third quarter 1999, the Company took further actions to reduce
expenses in its unprofitable business units and restructure the
Company to fully support the vertical markets in which the Company
operates.  These actions included eliminating approximately 400
positions worldwide, consolidating offices, completing the worldwide
vertical market alignment of the sales force, and narrowing the focus
of the Company's ICS business unit to workstations, specialty
servers, digital video products and 3D graphics cards.  As a result
of these actions, the Company recorded a nonrecurring charge to
operations of approximately $20.1 million, $7 million of which is
recorded as a component of "Cost of revenues - Systems" in the
consolidated statement of operations.  This $7 million charge
represents the costs of inventory write-offs incurred as a result of
ICS's exit from the PC and generic server business.  The Company
estimates that this change in ICS's product offerings will reduce its
annual systems revenues by approximately $70 to $80 million.  The
associated margins for these products range from 15.5% to 17.5%.  The
Company has announced a new line of workstations and specialty
servers and is endeavoring to replace revenue associated with its
discontinued products with increased sales volume of its new
offerings.

Severance costs associated with third quarter 1999 restructuring
totaled approximately $8.7 million, $7.8 million of which is included
in "Nonrecurring operating charges" in the 1999 consolidated
statement of operations.  The remaining severance costs relate to
headcount reductions in the Company's VeriBest operating segment and,
accordingly, they are reflected in "Loss from discontinued operation,
net of income taxes" in the Company's 1999 consolidated statement of
operations.  Approximately 400 positions company-wide were eliminated
through direct reductions in workforce.  All employee groups were
affected, but the majority of eliminated positions derived from the
sales and marketing, general and administrative, and customer support
areas.  Related cash expenditures totaled approximately $5.7 million
in 1999, with the remainder expected to be paid in 2000.  The Company
estimates the annual savings resulting from this reduction in force
will approximate $22 million.

The remainder of third quarter 1999 nonrecurring operating charges
consists of write-offs of capitalized business system software no
longer required as a result of the verticalization of the Company's
business units and resulting decentralization of portions of the
corporate financial and administrative functions.

At December 31, 1999, the total remaining accrued liability for
severance related to 1999 reductions in force was approximately
$5 million and is included in "Other accrued expenses" in the
December 31, 1999 consolidated balance sheet.  These costs are
expected to be paid in 2000 and relate primarily to severance
liabilities in European countries, which typically take several
months to settle.  Severance payments to date have been funded from
existing cash balances and from proceeds from the sale of VeriBest.
For further discussion regarding the Company's liquidity, see
"Liquidity and Capital Resources" following.

Gains on Sales of Assets.  As part of the effort to focus on its
core competencies, in 1998 the Company sold its Solid Edge and
Engineering Modeling system product lines at a gain of $102.8
million and its printed circuit board manufacturing facility at
a gain of $8.3 million.  Similarly, in 1999 the Company sold its
InterCAP subsidiary at a gain of $11.5 million.  The Company's gains
on these transactions are included in "Gains on sales of assets" in
the consolidated statements of operations.  See "Nonoperating Income
and Expense" following for further details.

SCI.  Reflecting the trend toward outsourcing in the industry, in
fourth quarter 1998 the Company sold substantially all of its U.S.
manufacturing inventory and assets to SCI Technology Inc. ("SCI"), a
wholly-owned subsidiary of SCI Systems, Inc., and SCI assumed
responsibility for manufacturing of substantially all of the
Company's hardware products.  In addition, the Company licensed
certain related intellectual property to SCI, and SCI employed
approximately 300 of the Company's manufacturing employees.  The
total purchase price for the assets was approximately $62.4 million,
$42.5 million of which was received during the fourth quarter of
1998.  The final purchase price installment of $19.9 million was
received in January 1999.  Proceeds from the sale have been utilized
primarily to retire debt.  The Company's $1.5 million gain on this
transaction is included in "Gains on sales of assets" in the 1998
consolidated statement of operations.

As part of this transaction, SCI retained the option to sell to the
Company any inventory included in the initial purchase which had not
been utilized in the manufacture and sale of finished goods within
six months of the date of the sale (the "unused inventory").  On June
30, 1999, SCI exercised this option and sold to the Company unused
inventory having a value of approximately $10.2 million in exchange
for a cash payment of $2 million and a short-term installment note
payable in the principal amount of $8.2 million.  This note was paid
in three monthly installments concluding October 1, 1999 and bore
interest at a rate of 9%.  The Company's payments to SCI were funded
primarily with existing cash balances.

Significant contingencies related to this arrangement include the
ability of the Company to obtain most favorable pricing for products
purchased from SCI through higher volumes and the ability of the
Company to accurately forecast its requirements of SCI.  The Company
benefits from lower employee headcount and lower per unit costs for
materials and overhead expenses if higher volumes are achieved.  The
Company is subject to forecasting risk, and retains the risk associated
with inventory excess and obsolescence, defined in the agreement as
any component or material in SCI's inventory for more than 60 days
and which is in excess of demand as reflected in the Company's six
month forecast.

Litigation and Other Risks and Uncertainties.  The Company has
extensive ongoing litigation with Intel Corporation, and its business
is subject to certain other 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 (the "Alabama Court"), charging Intel
Corporation, the supplier of all of the Company's microprocessor
supply, with anticompetitive business practices.  In the lawsuit,
Intergraph alleges that Intel attempted 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 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.  On April 10, 1998, the Alabama Court ruled in favor of
Intergraph and ordered that Intel be preliminarily enjoined from
terminating Intergraph's rights as a strategic customer in current
and future Intel programs, and from otherwise taking any action
adversely affecting Intel's business relationship with Intergraph or
Intergraph's ability to design, develop, produce, manufacture, market
or sell products incorporating, or based upon, Intel products or
information.  The Court's ruling required that Intel carry out
business with Intergraph under the same terms and conditions, with
the same rights, privileges, and opportunities as Intel makes
available to Intergraph's competitors who are also strategic
customers of Intel.  In response to the Alabama Court's decision, on
April 16, 1998, Intel appealed to the United States Court of Appeals
for the Federal Circuit (the "Appeals Court").  On November 5, 1999,
the Appeals Court vacated the preliminary injunction that had been
entered by the Alabama Court.  This ruling by the Appeals Court is
not expected to impact Company operations as Intel is bound by an
Agreement and Consent Order with the Federal Trade Commission entered
March 17, 1999 not to restrict microprocessor sales to the Company
and not to take coercive actions that were identified by the Company
in its legal action against Intel.

On June 17, 1998, Intel filed its answer in the Alabama case, which
included counterclaims against Intergraph, including claims that
Intergraph has infringed seven patents of Intel.  On July 8, 1998,
the Company filed its answer to the Intel counterclaims, among other
things denying any liability under the patent infringement asserted
by Intel.  On June 17, 1998, Intel filed a motion before the Alabama
Court seeking a summary judgment holding that Intel is licensed to
use the patents that the Company asserted against Intel in the
Company's original complaint.  This "license defense" was based on
Intel's interpretation of the facts surrounding the acquisition by
the Company of the Advanced Processor Division of Fairchild
Semiconductor Corporation in 1987.  On September 15, 1998, the
Company filed a cross motion with the Alabama Court requesting
summary adjudication in favor of the Company.  On November 13, 1998,
the Company amended its complaint to include two additional counts of
patent infringement against Intel.  The Company requested the court
to issue a permanent injunction enjoining Intel from further
infringement and to order that the financial impact of the
infringement be calculated and awarded in treble to Intergraph.  On
June 4, 1999, the Alabama Court granted the Company's September 15,
1998 motion and ruled that Intel has no license to use the Company's
Clipper patents as Intel had claimed in its motion for summary
judgment.   On October 12, 1999, the Alabama Court reversed its June
4, 1999 order and dismissed the Company's patent claims against
Intel.  The Company is confident that Intel has no license to use the
Clipper patents and believes that the court's original decision on
this issue was correct.  On October 15, 1999, the Company appealed
the Alabama Court's October 12, 1999 order.  No decision has been
entered.

The Company believes that Intel's counterclaims, including the alleged
infringement of seven Intel patents, will not result in material
adverse consequences for the Company.

At an oral hearing held February 25, 2000, the Alabama Court
indicated that the trial date for this case, previously scheduled for
June, 2000, will be continued.  A formal schedule has not been
entered, but the Company believes it likely that trial will be
rescheduled for the Summer of 2001.

On March 10, 2000 the Alabama Court entered an order dismissing the
antitrust claims of the Company against Intel, based in part upon a
February 17, 2000 decision by the Appeals Court in another case (CSU
v. Xerox).  The Company considers this dismissal to be in error and
intends to vigorously pursue its antitrust case against Intel.  At
present, the Company is considering a number of possible options
which may include bringing an immediate appeal of the order of the
Alabama Court or an appeal following the end of trial and judgment on
the merits of the Company's case in chief.  At the present time, the
Company is unable to determine the effect, if any, of this dismissal
on the Company's overall case against Intel.

Effects.  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.  Successful participation in the high-end
workstation 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.  During 1997,
Intergraph's product design and release cycle was severely impacted
by Intel's refusal to provide Intergraph with advance technology and
product information and immediate information on Intel defects and
corrections.  Yet, Intel continued to provide this information to the
Company's competitors.  Intel's refusal to provide this vital
information delayed the Company's new product releases by one to six
months, resulting in lost sales for the Company as well as increased
discounting on available products, severely impacting the Company's
revenues and margins.  While the April 1998 ruling of the Alabama
Court required Intel to provide Intergraph with advance product
samples and technical information, the Company lost considerable
sales momentum and continued to feel residual effects from the
dispute through the end of 1998, including shipment problems
resulting from a non-Intel chipset used in certain of the Company's
workstations.  In late 1997, when the dispute looked as if it might
jeopardize the Company's supply of Intel components, an alternate
chipset supplier was selected for some designs.  In the third quarter
of 1998, that vendor had difficulty delivering enough parts to the
Company, resulting in a significant backlog that could not be shipped
until the fourth quarter.  It was not until October 1998 that all of
the Company's hardware product offerings contained the latest Intel
technology and were technologically back in line with industry
competition.  Additionally, while Intel is supplying the Company with
advance product samples and technical information, the Company
believes that their responsiveness is not at the same level as prior
to the dispute.  In 1999, demand for the Company's hardware products
continued to decline as the Company was unable to recover completely
from the loss of momentum caused by Intel's actions.   As a result,
in the third quarter, the Company exited the personal computer and
generic server businesses and narrowed the focus of its ICS business
unit to workstations, specialty servers, digital video products and
3D graphics cards.  The Company is also actively engaged in
discussions with potential business partners for ICS and is considering
all other available alternatives to help stem the losses in this
business unit.

Damages.  During the course of the Intel litigation, the Company has
employed a variety of experts to prepare estimates of the damages
suffered by the Company under various claims of injury brought by
the Company.  The following damage estimates were provided to Intel
in the August/September 1999 time frame in due course of the litigation
process: estimated damages for injury covered under non-patent claims
through June 1999 - $100 million; estimated additional damages for
injury covered under non-patent claims through December 2003 - $400
million, subject to present-value reduction.  These numbers are
estimates only and any recovery of damages in this litigation could
be substantially less than these estimates or substantially greater
than these estimates depending on a variety of factors that cannot be
determined at this time.   Factors that could lead to recovery of
substantially less that these estimates include, but are not limited
to, the failure of the Alabama Court or the Appeals Court to sustain
the legal basis for one or more of the Company's claims, the failure
of the jury to award amounts consistent with these estimates,  the
failure of the Alabama Court or the Appeals Court to sustain any jury
award in amounts consistent with these estimates, the settlement by
the Company of the Intel litigation in an amount inconsistent with
these estimates, and the failure of the Company to successfully
defend itself from Intel's patent counterclaims in the Alabama Court
and in the Appeals Court and a consequential recovery by Intel for
damages and/or a permanent injunction against the Company.  Factors
that could lead to recovery substantially greater than these
estimates include, but are not limited to, success by the Company in
recovering punitive damages on one or more of its non-patent claims.

The Company believes it was necessary to take legal action against
Intel in order to defend its workstation business, its intellectual
property, and the investments of its shareholders.  The Company is
vigorously prosecuting its positions and defending against Intel's
claims and believes it will prevail in these matters, but at present
is unable to predict an outcome.  The Company does expect, however,
that adverse effects on its operations will continue in the near
term, including increased legal and administrative expenses
associated with the lawsuit.

See "Other Risks and Uncertainties" below for additional information
regarding Intel's actions.

The Company has other ongoing litigation, none of which is considered
to represent a material contingency for the Company at this time.
However, any unanticipated unfavorable ruling in any of these
proceedings could have an adverse impact on the Company's results of
operations and cash flow.

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, which is used in the
Company's workstation and server products, is widely available, and
many companies, including Intergraph, are attempting to develop
patent positions concerning technological improvements related to
personal computers, workstations and servers.  With the possible
exception of its ongoing litigation with Intel (in which the Company
expects to prevail), it does not appear that 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.

In addition, computer software technology is increasingly being
protected by patents, and many companies, including Intergraph, are
developing patent positions for software innovations.  It is unknown
at the present time whether patented software technology will be made
generally available under license or whether specific innovations
will be held by their inventors and not made available to others.  In
many cases, it may be possible to employ software techniques that
avoid the patents of others, but the possibility exists that some
features needed to compete successfully in a particular segment of
the software market may be unavailable or may demand unacceptable
costs due to royalty requirements.  Patented software techniques that
become de facto industry standards are among those that are likely to
raise costs or prevent the Company from competing successfully in
particular markets.

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.  Prior to the April 1998 ruling
of the Alabama Court, Intel was 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.  These actions have damaged
the Company by slowing the introduction of new products using Intel
components and preventing proper maintenance and support of Company
products using Intel components.

Year 2000 Issue.  Until recently, most computer programs were written
to store only two digits of date-related information.  Such programs
may be unable to distinguish between the year 1900 and the year 2000,
potentially causing data processing malfunctions and computer system
failures.  The Company has successfully completed all aspects of its
Year 2000 readiness program with respect to both its internal systems
and its products.  As of the date of this filing, the Company has
encountered no significant Year 2000 problems; however, there can be
no assurance that the Company has detected all of the problems that
could lead to a potential system failure or disruption of operations.
Additionally, any undetected errors or defects in the current product
offerings of the Company or its suppliers could result in increased
costs for the Company and potential litigation over Year 2000
compliance issues.

The Company employed no additional resources to complete its Year
2000 readiness program, and as a result, the related costs, which
were funded from operations and expensed as incurred, did not have a
material impact on its results of operations or financial condition.
Year 2000 related changes in customer spending patterns have not had,
and are not anticipated to have, a material impact on the Company's
orders or revenues.

See Notes 1, 5, 7, 8, and 12 to Consolidated Financial Statements for
further discussion of risks and uncertainties related to the Company.

Arbitration Settlements. The Company maintains an equity ownership
position in Bentley Systems, Incorporated ("BSI"), 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 BSI in
which the Company had alleged that BSI inappropriately and without
cause terminated a contractual arrangement with the Company, and in
which BSI 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 BSI.  The arbitrator's
award against the Company was in the amount of $6.1 million and is
included in "Arbitration settlements" in the 1997 consolidated
statement of operations.  Approximately $5.8 million in fees
otherwise owed the Company by BSI were offset against the amount
awarded to BSI.  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 BSI
have entered into a new agreement which establishes single support
services between the two companies.

In a second proceeding brought in March 1996, BSI commenced
arbitration against the Company with the American Arbitration
Association, Atlanta, Georgia, relating to the respective rights of
the companies under their April 1987 Software License Agreement and
other matters, including the Company's alleged failure to properly
account for and pay to BSI certain royalties on its sales of BSI
software products, and seeking significant damages.  On March 26,
1999, the Company and BSI executed a Settlement Agreement and Mutual
General Release ("the Agreement") to settle this arbitration and
mutually release all claims related to the arbitration or otherwise,
except for a) certain litigation between the companies that is the
subject of a separate settlement agreement and b) payment for
products and services obtained or provided in the normal course of
business since January 1, 1999.  Both the Company and BSI expressly
deny any fault, liability, or wrongdoing concerning the claims that
were the subject matter of the arbitration and have settled solely to
avoid continuing litigation with each other.

Under the terms of the Agreement, the Company on April 1, 1999 made
payment to BSI of $12 million and transferred to BSI ownership of
three million of the shares of BSI's Class A common stock owned by
the Company.  The transferred shares were valued at approximately
$3.5 million on the Company's books, and the Company's investment in
BSI (reflected in "Investments in affiliates" in the Company's
consolidated balance sheets) was reduced accordingly.  As a result of
the settlement, Intergraph's equity ownership in BSI was reduced from
approximately 50% to 33%.  Additionally, the Company had a $1.2
million net receivable from BSI relating to business conducted prior
to January 1, 1999 which was written off in connection with the
settlement.

In first quarter 1999, the Company accrued a nonoperating charge to
earnings of approximately $8.6 million in connection with the
settlement, representing the portion of settlement costs not
previously accrued.  This charge is included in "Arbitration
settlements" in the 1999 consolidated statement of operations.

The $12 million payment to BSI was funded primarily from existing
cash balances.  For further discussion regarding the Company's
liquidity, see "Liquidity and Capital Resources" following.

Orders.  Systems orders for 1999 were $605 million, down 24% from the
prior year after increases of 3% and 7% in 1998 and 1997,
respectively, including $10.3 million in orders of the Company's
discontinued VeriBest operation.  Order levels in 1997 were
characterized by less than anticipated demand for the Company's
hardware product offerings, due in part to the slow customer and
market acceptance of the Windows NT/Intel strategy, and by weakened
demand for its software products.  The previously described actions
of Intel also adversely impacted hardware orders in both 1997 and
1998.  In the last half of 1997, the Company experienced a two month
delay in shipment of the Company's TDZ 2000 line of workstations as
the result of Intel's wrongful conduct and delays.  Order levels in
1998 were further reduced by the first quarter sale of the Company's
Solid Edge and Engineering Modeling System product lines.  In 1999,
order volumes declined worldwide, primarily in the Company's hardware
business as demand continued to weaken, though some weakness has been
noted in the Company's software segments as well, particularly in the
Company's international markets.

Geographic Regions.  U.S. systems orders, including federal
government orders, totaled $313 million for the year, down 30% from
the prior year after increases of 11% and 24% in 1998 and 1997,
respectively.  The increases in both 1997 and 1998 were attributable
to growth in the Company's hardware business and in orders received
from the federal government.  Federal orders were up 25% and 5%,
respectively, in 1997 and 1998. Orders growth in 1998, both federal
and commercial, was concentrated primarily in the fourth quarter as
the U.S. hardware business began to recover slightly from the effects
of the Intel dispute.  However, in 1999, demand for the Company's
hardware product offerings weakened significantly, accounting for the
majority of the decline in U.S. orders.  International orders for
1999 totaled $292 million for the year, down 15% from the prior year
after declines of 6% and 7% in 1998 and 1997, respectively. Order
levels have declined significantly in all of the Company's
international markets.  Asia Pacific orders totaled $61 million in
1999, down 6% from the 1998 level after declines of 11% in 1998 and
35% in 1997.  Orders in 1996 included several individually
significant orders for the Company's public safety products and
related consulting services which 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 throughout 1998.  This strengthening of
the dollar in Asian markets reduced 1998 orders by approximately 9%.
In 1999, weakening of the dollar against Asian currencies improved
order levels in that region by approximately 5%; however, this
positive impact was more than offset by weakened demand for the
Company's hardware products.  European orders totaled $190 million,
down 10% from the prior year level, after declining 5% in 1998 and
remaining flat in 1997.  European order levels in terms of U.S.
dollars were reduced by approximately 3% and 2% in 1999 and 1998,
respectively, due to strengthening of the U.S. dollar against the
currencies of the region.

Revenues.  Total revenues from continuing operations for 1999 were
$915 million, down 9% from the prior year level after an 8% decline
in 1998 and a 3% increase in 1997.

Systems.  Systems revenue from continuing operations was $623 million
in 1999, down 13% from the previous year after a decrease of 7% in
1998 and an increase of 9% in 1997.  Factors previously cited as
affecting systems orders in total and on a geographic basis,
including the actions of Intel in 1997 and 1998, 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 and margin.  In addition, the
Company's hardware revenues remain low as the Company has lost
momentum in this market due to the actions of Intel.

Geographic Regions.  Systems revenues have declined in all geographic
markets served by the Company.  U.S. systems sales from continuing
operations, including sales to the federal government, declined by
12% in 1999, after decreasing by 1% in 1998 and increasing by 16% in
1997.  Growth in U.S. systems sales was depressed in 1997 due to the
sale of one of the Company's unprofitable business units early in the
year.  Excluding this business unit, U.S. sales growth was 21% in
1997.  The revenue decline in 1998 was due primarily to a 7% decrease
in sales to the federal government, partially offset by growth in the
Company's public safety business.  During the second half of 1997 and
the first quarter of 1998, Intergraph Public Safety secured several
large U.S. installations, significantly increasing the subsidiary's
revenue base.  The 1999 revenue decline is primarily attributable to
weakened demand for the Company's hardware products and a 6% decline
in sales to the federal government.  International sales totaled $288
million for the year, down 14% from the prior year level after a 14%
decline in 1998 and a 3% increase in 1997.  European sales were down
11%, after a decline of 13% in 1998 and an increase of 6% in 1997.
Asia Pacific systems sales were down 9%, after declines of 25% and
11% in 1998 and 1997, respectively.

Software.  Sales of the Company's software applications declined by
10% in 1999 after a 16% decline in 1998 and a 1% decline in 1997.
Sales of MicroStation declined by 43%, 46%, and 34% in 1999, 1998 and
1997, respectively (see "MicroStation" below for further discussion).
In 1997 and 1998, sales of the Company's plant design software
applications increased by 21% and 19%, respectively (such sales
declined by 8% in 1999), partially offsetting the effect of the loss
in MicroStation sales.  However, 1998 revenues were further reduced
as a result of the sale of the Company's Solid Edge and Engineering
Modeling System product lines in early 1998 (these revenues for 1997
 were $18.7 million).  See "Nonoperating Income and Expense"
below for further discussion.  In 1999, sales declined for all
applications, with the exception of substantial increase in sales of
Geomedia and in sales of federal software applications.  Plant design
remains the Company's highest volume software offering, representing
28% of total software sales for 1999.

In terms of broad market segments, the Company's mapping/geographic
information systems and process and building applications continue to
dominate the Company's product mix at approximately 50% and 19% of
total systems sales in 1999, respectively (47% and 19%, respectively,
in 1998 and 57% and 27%, respectively, in 1997).  Due to the sale of
the Company's Solid Edge and Engineering Modeling System product
lines in March 1998, mechanical design, engineering and manufacturing
applications no longer represent a significant portion of the
Company's product mix.  These applications represented 14% of total
systems sales in 1997.

Hardware.  Total hardware revenue decreased by 27% in 1999, after
decreasing by 10% in 1998 and increasing by 22% in 1997.  Workstation
and server unit volume decreased 17% in 1999, after increases of 6%
and 67% in 1998 and 1997, respectively, while workstation and server
revenue declined by 28% and 9% in 1999 and 1998, respectively, and
increased by 6% in 1997.  Price competition continues to erode per
unit selling prices, and volumes in 1998 and 1999 were suppressed by
the aforementioned factors associated with the Intel lawsuit.  Sales
of peripheral hardware products decreased by 25% and 11% in 1999 and
1998, respectively, after increasing by 64% in 1997.  Both the 1997
increase and the 1998 decline relate to sales of graphics cards and
storage devices.  Sales of the Company's first add-in 3D graphics
cards, which began shipping during the third quarter of 1996, were
initially strong and grew throughout 1997.  However, 1998 sales were
below the Company's expectations as the products approached the end
of their life cycle.  Graphics sales increased by 9% in 1999 with the
availability of new products based upon the Company's Wildcat 3D
graphics technology; however, this increase was more than offset by
significant declines in the Company's sales of storage devices and
memory and of Intel options and upgrades.  The Company's systems are
Windows NT/Intel-based and have been since 1994.

Federal Government Sales. Total revenue from the United States
government was approximately $149 million in 1999,  $166 million in
1998, and $177 million in 1997, representing approximately 16% of
total revenues in all three years.  In 1998 and 1999, U.S. government
orders and revenues were characterized by weakened demand for the
Company's hardware product offerings, due partially to increasing
price competition within the industry.  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 52% of the Company's 1999 federal
government revenues were 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 BSI, an approximately 33%-owned affiliate of
the Company, under which the Company distributed MicroStation, a
software product developed and maintained by BSI 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.  See
"Arbitration Settlements" preceding for a description of past
arbitration proceedings between the Company and BSI.

The Company's sales of MicroStation have declined each year since the
1994 change in the license agreement, by approximately 34% in 1997,
46% in 1998, and 43% in 1999.  In 1998 and 1999, MicroStation sales
represented 8% and 5% of total software revenue, respectively.  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 from continuing operations totaled $291 million in 1999, flat
with the 1998 level after declines of 10% and 9% in 1998 and 1997,
respectively.  Maintenance revenues totaled $187 million in 1999,
down 8% after declines of 15% and 13% in 1998 and 1997, 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 11% of total revenues in 1999,
an increase of two percentage points from the previous year.  Growth
in services revenue has partially offset the decline in maintenance
revenue.  The Company is endeavoring to grow its services business
and has redirected the efforts of its hardware maintenance
organization to focus increasingly on systems integration.  Revenues
from these services, however, typically produce lower gross margins
than maintenance revenues.

Gross Margin.  The Company's total gross margin on revenues from
continuing operations was 31.7% in 1999, up .7 points after declines
of 4.3 points and 1.1 points in 1998 and 1997, respectively.

Margin on systems revenues from continuing operations improved 1.4
points in 1999 after declining 5.6 points and 1.1 points in 1998 and
1997, respectively.  Competitive pricing conditions in the industry
have acted to reduce systems margins generally.  In 1997 and 1998,
margins were also negatively impacted by an increasing hardware
content in the product mix.   Margin was further reduced in 1997 by a
decrease in the mix of international systems revenues to total
Company systems revenues, due in part to strengthening of the U.S.
dollar in international markets, primarily Europe and Asia.  In 1998,
margin was negatively impacted by unfavorable volume related
manufacturing variances and inventory revaluations incurred prior to
the outsourcing of the Company's manufacturing to SCI in fourth
quarter 1998.  In 1999, the impact of a $7 million inventory write-
off incurred in connection with the Company's decision to exit the PC
and generic server business (see "Nonrecurring Operating Charges"
preceding) was offset by an increased software content in the product
and a decline in unfavorable manufacturing variances as the result of
the outsourcing to SCI.   Systems margins continue to be negatively
impacted by strengthening of the U.S. dollar in international
markets, primarily Europe, and by the loss of volume resulting from
its dispute with Intel.

In general, the Company's systems margin may be improved by a 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.  Systems margins 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.  While the
Company is unable to predict the effects that many of these factors
may have on its systems margin, it expects continuing pressure on its
systems margin as the result of increasing industry price
competition.

Margin on maintenance and services revenues from continuing
operations declined by 1.4 points in 1999 after declines of 1.3
points in 1998 and .6 points in 1997.  The margin declines over the
past three years have resulted primarily from declining maintenance
revenues.  In 1999, declining maintenance revenues and margins were
partially offset by improved professional services margins.
Professional services revenues have increased by 17% from the 1998
level without a proportional increase in costs.  The Company
continues to monitor its maintenance and services costs closely and
has taken certain measures, including reductions in headcount, to
align these costs with current revenue levels.  The Company believes
that the trend in the industry toward lower priced products and
longer warranty periods will continue to curtail 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 purchase only inventory supported
by firm customer orders and parts as spares for the customer
contracted maintenance of systems in its installed customer base.  In
fourth quarter 1998, the Company sold substantially all of its U.S.
manufacturing assets to SCI, and SCI assumed responsibility for the
manufacturing of substantially all of the Company's hardware
products.  (See "SCI" preceding for a complete description of this
transaction).  Effective inventory and purchasing management remains
necessary in order for the Company to provide SCI with accurate and
timely information regarding its needs.  Any unanticipated change in
technology or an inability of the Company to accurately forecast its
manufacturing needs could significantly and adversely affect gross
margins and reported results of operations.

Operating Expenses (exclusive of nonrecurring operating charges).
Operating expenses for continuing operations declined by 14% in 1999,
6% in 1998, and 1% in 1997.  In response to the level of its
operating losses, the Company has reduced the total number of its
employees by 32% during the three year period ended December 31,
1999.

Product development expense declined by 18% in 1999 after declines of
15% and 4% in the two preceding years.  Employee headcount in the
development area has been significantly reduced over the last three
years through reductions in force, attrition, and sales of
unprofitable business operations.  Additionally, 1998 and 1999
expenses were reduced due to additional software development projects
whose cost qualifies for capitalization.

The Company capitalizes certain costs incurred after the
technological feasibility of new software products has been
established 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, producing adverse effects on the
Company's systems margin and results of operations.

Sales and marketing expense declined by 22% in 1999, after declining
by 6% in 1998 and 2% in 1997.  Expenses in all three years were
reduced by the strengthening of the U.S. dollar against international
currencies, primarily in Europe.  In 1997, expenses were
significantly reduced due to the sale of two unprofitable business
units, but the resulting benefits were partially offset by increased
trade show activity and advertising expenses for the Company's new
products.  The 1998 decline was primarily due to across the board
expense reductions in Europe resulting from restructuring actions
taken in the first quarter (see "Nonrecurring Operating Charges"
preceding.)   Additional headcount reductions in late 1998 and
throughout 1999 have resulted in significant across the board expense
declines worldwide.

General and administrative expense increased by 8% in 1999 after
remaining basically flat for the previous two years.  In 1997 and
1998, increases in the Company's legal expenses (see "Litigation and
Other Risks and Uncertainties" preceding) were offset by
strengthening of the U.S. dollar in the Company's international
markets and, in 1998, by benefits resulting from European headcount
reductions.  The expense increase in 1999 resulted from increased bad
debt expenses in the U.S. and continuing growth in the Company's
legal fees, partially offset by across the board declines in all
other expense categories.  The Company expects its general and
administrative expense to remain high in 2000 as additional legal
expenses are incurred in preparation for the Intel trial.
Additionally, the Company is anticipating a temporary duplication of
administrative expenses in connection with its efforts to verticalize
its operating segments and decentralize portions of the corporate
finance and administrative function.  The Company expects that these
expenses will decline by the end of 2000.

Nonoperating Income and Expense.  Interest expense for continuing
operations was $5.7 million in 1999, $7.4 million in 1998, and $6.6
million in 1997.  In 1999, the Company's average outstanding debt
declined due primarily to repayment of borrowings under the Company's
revolving credit facility utilizing proceeds from sales of various
businesses and assets.  See "Liquidity and Capital Resources"
following for a discussion of the Company's current financing
arrangements.

In 1997, the Company sold a stock investment in a publicly traded
affiliate, resulting in a gain of $4.9 million.  This gain is
included in "Gains on sales of assets" in the 1997 consolidated
statement of operations.

In first quarter 1998, the Company sold its Solid Edge and
Engineering Modeling System product lines to Electronic Data Systems
Corporation and its Unigraphics Solutions, Inc. subsidiary for $105
million in cash.  The Company recorded a gain on this transaction of
$102.8 million.  This gain is included in "Gains on sales of assets"
in the 1998 consolidated statement of operations.  Full year 1997
revenues and operating loss for these product lines were $35.2
million and $4.1 million, respectively.  The Company estimates the
sale of this business has resulted in an annual improvement in its
operating results of approximately $5 million.

In second quarter 1998, the Company sold the assets of its printed
circuit board manufacturing facility for $16 million in cash.  The
Company recorded a gain on this transaction of $8.3 million.  This
gain is included in "Gains on sales of assets" in the 1998
consolidated statement of operations.  The Company is now outsourcing
its printed circuit board needs.  This operational change did not
materially impact the Company's results of operations in 1998.

In second quarter 1999, the Company sold InterCAP Graphics Systems,
Inc., a wholly-owned subsidiary, to Micrografx Inc., a global
provider of enterprise graphics software, for $12.2 million,
consisting of $3.9 million in cash received at closing, deferred
payments received in September and October 1999 totaling $2.5
million, and a $5.8 million convertible subordinated debenture due in
March, 2002.  The resulting gain on this transaction of $11.5 million
is included in "Gains on sales of assets" in the 1999 consolidated
statement of operations.  InterCAP's revenues and losses for 1998
were $4.7 million and $1.1 million, respectively ($3.6 million and
$1.9 million for 1997).  Assets of the subsidiary at December 31,
1998 totaled $1.6 million.  InterCAP did not have a material effect
on the Company's results of operations for the period in 1999 prior
to the sale.

"Other income (expense) - net" in the consolidated statements of
operations consists primarily of interest income, foreign exchange
gains (losses), equity in the earnings of investee companies, and
other miscellaneous items of nonoperating income and expense.

Impact of Currency Fluctuations and Currency Risk Management.
International markets, particularly Europe and Asia, continue in
importance to the industry and to each of the Company's operating
segments.  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 policy restrictions, currency
exchange fluctuations, and other factors.

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 1999, approximately 52% 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 into 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.  Currency fluctuations did not have a significant
impact on the Company's 1999 results of operations as strengthening
of the U.S. dollar in Europe and other international regions was
offset by weakening of the dollar in the Company's Asian markets.
The Company estimates that the net strengthening of the U.S. dollar
in its international markets adversely impacted its results of
operations by approximately $.02, $.10, and $.30 per share in 1999,
1998, and 1997, respectively.  To illustrate the sensitivity of the
Company's results of operations to changes in international currency
exchange rates, the Company estimates that the result of a uniform
10% strengthening in the value of the dollar relative to the
currencies in which the Company's sales are denominated would result
in a decrease in earnings of approximately $10 million for the year
ended December 31, 2000.  Likewise, a uniform 10% weakening in the
value of the dollar would result in increased earnings of
approximately $9 million.  This calculation assumes that each
exchange rate would change in the same direction relative to the U.S.
dollar.  In addition to the direct effects of changes in exchange
rates, exchange rate fluctuations may also affect the volume of sales
and foreign currency sales prices.  The Company's estimation of the
effects of changes in foreign currency exchange rates does not
consider potential changes in sales levels or local currency prices.
The Company's income statement exposure to currency fluctuations has
declined by approximately 18% from the prior year level as the result
of declining activity levels in its international regions, related to
the sales volume decline in 1999.  See note 12 of Notes to
Consolidated Financial Statements for a summary of the Company's
revenues by geographic area.

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.  With respect to the currency exposures in these
regions, 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 will therefore enter into forward exchange contracts related
to certain balance sheet items, primarily intercompany receivables,
payables, and formalized intercompany debt, when a specific risk has
been identified.  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, generally
less than three months in duration, are purchased with maturities
reflecting the expected settlement dates of the balance sheet items
being hedged, and only in amounts sufficient to offset possibly
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.  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.

In 1999 and 1997, the Company incurred net foreign exchange losses
from its continuing operations of $1.3 million and $2.2 million,
respectively.  (In 1998, the Company realized a net exchange gain of
$.4 million from its continuing operations.)  At December 31, 1999
and 1998, the Company had outstanding forward exchange contracts with
values of approximately $.8 million and $7.6 million, respectively.
The fair values of those contracts approximated the original contract
amounts based on the insignificant amounts the Company would have
paid or received upon transferring the contracts to a third party at
those dates.  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, 1999.  Deferred gains and losses
as of December 31, 1999 and 1998 were not significant.

At December 31, 1999 and 1998, the Company's only outstanding forward
exchange contracts related to formalized intercompany loans between
the Company's European subsidiaries and are immaterial to the
Company's present financial position. The Company is not currently
hedging any of its foreign currency risks in the Asia Pacific region
or its U.S. exposures related to foreign currency denominated
intercompany loans.  To illustrate the sensitivity of the Company's
result of operations to changes in exchange rates for international
currencies underlying its intercompany loans, the Company estimates
that a uniform 10% strengthening or weakening in the value of the
dollar relative to the currencies in which such intercompany loans
are denominated at December 31, 1999 would not result in a
significant loss or improvement in earnings.  This calculation
assumes that each exchange rate would change in the same direction
relative to the U.S. dollar.

The Company is exposed to foreign currency risks related to certain
of its financial instruments, primarily debt securities held by its
European subsidiaries, long-term mortgages on certain of its European
facilities, and an Australian term loan.  The net effect of a uniform
10% change in exchange rates relative to the currencies in which
these financial instruments are denominated would not have a material
impact on the Company's results of operations.

Euro Conversion. On January 1, 1999, eleven member countries of the
European Monetary Union (EMU) fixed the conversion rates of their
national currencies to a single common currency, the "Euro".  The
national currencies of the participating countries will continue to
exist through July 1, 2002, and Euro currency will begin to circulate
on January 1, 2002.  All of the Company's financial systems currently
accommodate the Euro, and during 1999 the Company conducted business
in Euros with its customers and vendors who chose to do so without
encountering significant problems.  While the Company continues to
evaluate the potential impacts of the common currency, it at present
has not identified significant risks related to the Euro and does not
anticipate that full Euro conversion in 2002 will have a material
impact on its results of operations or financial condition.  To date,
the conversion to one common currency has not impacted the Company's
pricing in its European markets.

See Notes 1 and 5 of Notes to Consolidated Financial Statements for
further information related to management of currency risk.

Income Taxes. The Company incurred pretax losses from continuing
operations of $73.1 million in 1999, $.7 million in 1998 and $49.5
million in 1997.  Income tax expense for these years resulted
primarily from taxes on individually profitable subsidiaries.

Note 9 of Notes to Consolidated Financial Statements contains a
reconciliation of statutory income tax benefit to actual income tax
expense for each year in the three year period ended December 31,
1999 and includes further details of the Company's tax position,
including net operating loss and tax credit carryforwards.

Results by Operating Segment: Effective January 1, 1998, the Company
divided its business into four reporting segments for operational and
management purposes:  Intergraph Computer Systems ("ICS"), Intergraph
Public Safety, Inc. ("IPS"), the Software and Federal Systems
("Federal") business (collectively, the Software and Federal
businesses form what is termed "Intergraph"), and VeriBest, Inc.
("VeriBest").  In fourth quarter 1999, the Company sold VeriBest to
Mentor Graphics Corporation.  Accordingly, VeriBest's results of
operations through the date of sale have been classified as
discontinued operations in the Company's consolidated statements of
operations for each year in the three year period ended December 31,
1999 and have been excluded from the Company's segment disclosures.
For further information regarding this sale and VeriBest's operating
results for the periods presented, see "Discontinued Operation"
preceding and Note 4 of Notes to Consolidated Financial Statements.
See Note 12 of Notes to Consolidated Financial Statements for details
of the Company's segment reporting.

ICS supplies high performance Windows NT-based graphics workstations,
3D graphic subsystems, and specialty servers.  IPS develops, markets,
and implements systems for the public safety and utilities
industries.  Intergraph supplies software and solutions, including
hardware purchased from ICS, consulting, and services to the process
and building and infrastructure industries and provides services and
specialized engineering and information technology to support Federal
government programs.

The Company evaluates performance of its operating segments based on
revenue and income from operations.  Sales among the operating
segments, the most significant of which are sales of hardware
products and maintenance from ICS to the other segments, are
accounted for under a transfer pricing policy.  Transfer prices
approximate prices that would be charged for the same or similar
property to similarly situated unrelated buyers.  In the U.S.,
intersegment sales of products and services to be used for internal
purposes are charged at cost.  For international subsidiaries,
transfer price is charged on intersegment sales of products and
services to be used for either internal purposes or sale to
customers.  Certain expenses, primarily general and administrative
expenses, not directly attributable to an operating segment are
considered corporate in nature and are not charged to any operating
segment.  In addition, gains on sales of assets and nonrecurring
charges to operations (see "Summary" section above), which were
significant in 1999 and 1998, are not credited or charged to the
operating segments.

Effective January 1, 1999, the Utilities business of Intergraph
Software was merged into IPS.  Additionally, in 1999, hardware
maintenance revenues, previously attributed exclusively to ICS, were
attributed to the selling segment entities with ICS receiving transfer
price revenue for services provided to other operating segments.  The
Company's 1998 segment information has been restated to reflect both
of these operational changes.

Prior to 1998, the Company utilized several variations of the current
model for evaluation of the performance of its operating segments,
depending on the Company's structure and its business environment
at the time.  Segment financial information for years prior to 1998 has
not been restated to conform to the current model because it is
impractical to do so.

In 1999, ICS incurred an operating loss of $44.8 million on revenues
of $332.1 million, compared to a 1998 operating loss of $71.2 million
on revenues of $447.1 million.  These operating losses exclude the
impact of certain nonrecurring income and operating expense items
associated with ICS's operations, including 1998 gains totaling $9.8
million on the sales of its printed circuit board facility and
manufacturing inventory and assets, and nonrecurring operating
charges of $.8 million and $4.5 million in 1998 and 1999,
respectively, primarily for employee termination costs.  ICS's
operating loss for 1999 included a $7 million inventory write-off
resulting from the segment's exit from the PC and generic server
business.  Excluding this charge, the 1999 operating loss was $37.8
million, reflecting a $33.4 million improvement from the prior year.
This improvement resulted primarily from a 32% decline in operating
expenses as the result of headcount reductions achieved in 1998 and
1999.  ICS's headcount was reduced by approximately 52% during the
two year period ended December 31, 1999.  ICS's 1998 and 1999 results
of operations were significantly adversely impacted by factors
associated with the Company's dispute with Intel, the effects of
which included lost momentum, lost revenue and margin, and
increased operating expenses, primarily for marketing and public
relations expenses.  (See "Litigation and Other Risks and
Uncertainties" preceding for a complete discussion of the Company's
dispute with Intel and its effects on the operations of ICS and the
Company).  ICS's 1998 margins were also severely impacted by volume
and inventory value related manufacturing variances incurred prior to
the outsourcing of its manufacturing to SCI in fourth quarter 1998.
In 1999, improvements in ICS's expense levels were more than offset
by declining sales volume as demand weakened for the segment's
hardware products.  In response to its continuing operating losses,
in third quarter 1999, ICS exited the PC and generic server businesses
and narrowed its focus to workstations, specialty servers, digital
video products and 3D graphics cards. The Company estimates that this
change in ICS's product offerings will reduce its annual systems
revenues by approximately $70 to $80 million.  The associated margins
for these products range from 15.5% to 17.5%.  The segment has
announced a new line of workstations and specialty servers and
is endeavoring to replace revenue associated with its discontinued
products with increased sales volume of its new offerings.  The
Company is also actively engaged in discussions with potential
business partners for ICS and is considering all other available
alternatives to help stem the losses in this business unit.

In 1999, IPS earned operating income of $10.8 million on revenues of
$96.3 million, compared to 1998 operating income of $6.2 million on
revenues of $93.4 million.  The improvement in 1999 resulted
primarily from a 6 point increase in gross margin, largely due to
improved margins on professional services projects.  This margin
improvement was partially offset by a 10% increase in operating
expenses, due in part to increased headcount.  Growth in IPS's
revenues and operating income was limited somewhat in 1999 due to a
slowdown in large installations resulting from customer and market
concerns about potential year 2000 computing problems generally.
Additional growth is expected in 2000 as more of these systems are
brought online.

In 1999, the Software business earned operating income of $9.2
million on revenues of $476.4 million, compared to 1998 operating
income of $13.8 million on revenues of $531.5 million.  The declines
in revenues and operating income from the 1998 level resulted
primarily from a 17% decline in systems revenue, due in part to
weakened demand for ICS hardware products, while margins earned on
systems sales remained relatively flat with the 1998 level at 39%.
The negative impact of the revenue decline was partially offset by a
16% decline in sales and marketing expenses as the operating segment
reduced and reorganized it sales force to align expenses with the
volume of revenue generated.  Current year operating income excludes
the impact of certain nonrecurring income and operating expense items
associated with Software operations, including the arbitration
settlement charge of $8.6 million, the gain on sale of InterCAP
of $11.5 million, and nonrecurring operating charges of approximately
$5.8 million, primarily for employee severance costs.   Operating
income for 1998 excludes the $102.8 million gain on sale of the
business unit's Solid Edge and Engineering Modeling System product
lines and nonrecurring operating charges of $14.6 million, primarily
for asset write-offs and employee terminations.

In 1999, Federal earned operating income of $12.4 million on revenues
of $159.8 million, compared to a 1998 operating loss of $3.0 million
on revenues of $171.5 million.  The improvement in 1999 resulted
primarily from a 30% decline in operating expenses, due in part to
headcount reductions and to an increase in shipbuilding software
development costs qualifying for capitalization.  Despite the revenue
decline, margins improved by 4 points from the 1998 level due
primarily to a 4 point increase in margins earned on systems sales.
Revenues and margins in both 1998 and 1999 were adversely impacted by
weakened demand for the Company's hardware product offerings.
Effective March 2000, the Federal business was renamed Intergraph
Government Solutions.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, cash totaled $88.5 million, down $7 million
from year-end 1998.  Cash consumed by operations totaled $9.7
million in 1999, $31.1 million in 1998, and $20.9 million in 1997,
primarily reflecting the negative cash flow effects of operating
losses.  Operating cash consumption in 1999 included the payment of
$12 million to Bentley Systems, Inc. (see "Arbitration Settlements"
preceding), payments to SCI of $10.2 million to purchase unused
inventory (see "SCI" preceding), and severance payments to employees
of approximately $9 million.  In 1997, an inventory build-up consumed
approximately $16 million as a result of an anticipated increase in
hardware unit sales volume and customer demand for faster delivery of
products.

Net cash provided by investing activities totaled $25.5 million and
$99.6 million in 1999 and 1998, respectively, compared to a net
investing consumption of cash of $30.7 million in 1997.  Investing
activities in 1999 included $54.1 million in proceeds from sales of
various businesses and assets.  Investing activities in 1998 included
$160.5 million in proceeds from sales of various businesses and assets,
including the Company's Solid Edge and Engineering Modeling System
product lines, its manufacturing inventory and assets, and its printed
circuit board manufacturing facility, and an investment of $26.3 million
for the purchase of Zydex software rights.  Other significant investing
activities in 1999 included capital expenditures of $10.2 million
($17.3 million in 1998 and $24.8 million in 1997), primarily for
Intergraph products used in hardware and software development and
sales and marketing activities, expenditures for capitalizable
software development of $20.7 million ($15.7 million in 1998 and
$10.6 million in 1997), and $11.7 million contributed by the minority
interest partner to the start-up of the Z/I Imaging business.  (See
Note 15 of Notes to Consolidated Financial Statements.)

Net cash used for financing activities totaled $21 million and $19.3
million in 1999 and 1998, respectively, compared to a net financing
generation of cash of $48.4 million in 1997.  Net debt repayments were
$23.6 million and $22.3 million in 1999 and 1998, respectively, while
1997 sources of cash included net borrowings of $44.9 million.

The Company's average collection period for accounts receivable in
1999 was approximately 84 days, representing a slight increase from
the prior year.  Approximately 68% of the Company's 1999 revenues
were derived from international customers and the U.S. government,
both of which traditionally carry longer collection periods.  The
Company continues to experience slow collections throughout the
Middle East region, particularly in Saudi Arabia. Total accounts
receivable from Middle Eastern customers was approximately $20
million at December 31, 1999 and $23 million at December 31, 1998.
Total U.S. government accounts receivable was $33 million at December
31, 1999 ($55 million at December 31, 1998).  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 $10
million to $15 million in 2000, primarily for Intergraph products
used in product development and sales and marketing activities.  The
Company's revolving credit agreement, among other restrictions,
limits the level of the Company's capital expenditures.

Under the Company's January 1997 six year fixed term loan and
revolving credit agreement, as amended, available borrowings are
determined by the amounts of eligible assets of the Company (the
"borrowing base"), as defined in the agreement, primarily accounts
receivable, with maximum availability of $100 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. and certain international
receivables. 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, 1999) plus
 .625%.  The amended agreement contains provisions which will lower the
interest rate upon achievement of sustained profitability by the
Company.  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, a letter of credit fee
at an annual rate of 1.5% of the undrawn amount of all outstanding
letters of credit, and a monthly agency fee.  At December 31, 1999,
the Company had outstanding borrowings of $27.5 million, the $25
million term loan portion of which was classified as long-term debt
in the consolidated balance sheet, and an additional $32.4 million of
the available credit line was allocated to support the Company's
letters of credit and forward exchange contracts.  As of this same
date, the borrowing base, representing the maximum available credit
under the line, was approximately $69.3 million ($68.5 at
February 29, 2000).

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,
and 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 without approval. The amended agreement has reduced
the Company's net worth covenant to $235 million at December 31,
1999, with subsequent reductions to $216 million at March 31, 2000
and $200 million at June 30, 2000.  Additionally, the amended
agreement requires the Company to retain the services of an
investment banking firm to advise the Company regarding potential
partnering arrangements and other alternatives for its computer
hardware business.

In fourth quarter 1999, the Company entered into an agreement for the
sale and leaseback of its European headquarters office building in
the Netherlands.  The lease has an initial term of ten years with an
early termination option after five years.  The lease is accounted
for as an operating lease in accordance with Statement of Financial
Accounting Standards No. 13, Accounting for Leases.  The gain realized
on the sale of approximately $4.2 million has been deferred and will
be credited to income over the ten year lease term.  Payments under
the lease, which are denominated in Dutch Guilders, approximate
$1.2 million per year.  Proceeds from the sale approximated $13.7
million, $4.2 million of which was used to pay off the mortgage on
the building.

At December 31, 1999, the Company had approximately $53 million in
debt on which interest is charged under various floating rate
arrangements, primarily its six year term loan and revolving credit
agreement, mortgages, and an Australian term loan (see Note 8 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. To illustrate the
sensitivity of the Company's results of operations to changes in
interest rates on its debt, the Company estimates that its results of
operations would not be materially affected by a two point increase
or decrease in the average interest rates related to its floating
rate debt.  This hypothetical change in rates was determined based on
the trend of the Company's actual rates over the past four years.
The Company's estimate assumes a level of debt consistent with the
December 31, 1999 level and does not consider the effects that
further operating losses, if any, will have on the balance of debt
outstanding.  The Company's interest rate exposure has not changed
significantly from the December 31, 1998 level as the decline in its
floating rate debt resulted primarily from payments on its revolving
credit facility which, due to its short term nature, does not
represent a material interest rate exposure for the Company.

Although the Company did not generate adequate cash to fund its
operations for 1999, it did begin to generate positive cash flow from
operations in fourth quarter 1999 as the result of improved accounts
receivable collections and operating expense declines.  The Company
expects continued improvement in its operating cash flows in 2000 as
a result of headcount reductions and other expense savings actions
taken during 1999.  The Company believes that the combination of
improved cash flow from operations, its existing cash balances, and
cash available under its amended revolving credit agreement will be
adequate to meet cash requirements for 2000. However, the Company
must increase sales volume and continue to align its operating
expenses with the level of revenue being generated if it is to fund
its operations and build cash reserves without reliance on funds from
external financing.  For the longer term, the Company anticipates no
significant nonoperating issues that will require the use of cash, and
correspondingly the adequacy of its cash reserves will be dependent on
improvement in its operating results.

FOURTH QUARTER 1999

Revenues from continuing operations in the fourth quarter were $222.6
million, down 20% from fourth quarter 1998.  The Company earned net
income of $3.6 million ($.07 per share) for the quarter, compared to
a fourth quarter 1998 net loss of $20.9 million ($.43 per share).
Loss from continuing operations per share improved from $.40 in
fourth quarter 1998 to $.20 in fourth quarter 1999 due to a 3.4 point
increase in gross margin and a 17% decline in operating expenses.
Fourth quarter 1998 systems margin was negatively impacted by
expenses of approximately $7 million ($.14 per share) related to the
Company's transition to outsourcing its manufacturing operations.
The operating expense decline was concentrated primarily in the sales
and marketing area and correlates directly to the 15% decline in
headcount from the prior year level.  The fourth quarter 1999 loss
from continuing operations was offset by the $14.4 million ($.29 per
share) gain on the sale of VeriBest.  Exchange rate fluctuations did
not have a significant impact on fourth quarter 1999 results of
operations.


INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

----------------------------------------------------------------------
December 31,                                         1999       1998
----------------------------------------------------------------------
(In thousands except share and per share amounts)

Assets
  Cash and cash equivalents                      $ 88,513   $ 95,473
  Accounts receivable, net                        258,768    312,123
  Inventories                                      35,918     38,001
  Other current assets                             28,744     48,928
----------------------------------------------------------------------
     Total current assets                         411,943    494,525
  Investments in affiliates                         9,940     12,841
  Other assets                                     68,154     61,240
  Property, plant, and equipment, net              94,907    127,368
----------------------------------------------------------------------
     Total Assets                                $584,944   $695,974
======================================================================

Liabilities and Shareholders' Equity
  Trade accounts payable                         $ 50,963   $ 64,545
  Accrued compensation                             35,848     42,445
  Other accrued expenses                           71,052     75,038
  Billings in excess of sales                      66,051     68,137
  Income taxes payable                              8,175      4,122
  Short-term debt and current maturities
   of long-term debt                               11,547     23,718
----------------------------------------------------------------------
     Total current liabilities                    243,636    278,005
  Deferred income taxes                             2,620      3,142
  Long-term debt                                   51,379     59,495
  Other noncurrent liabilities                     10,609        ---
----------------------------------------------------------------------
     Total liabilities                            308,244    340,642
----------------------------------------------------------------------
  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                   216,943    222,705
     Retained earnings                            178,231    249,808
     Accumulated other comprehensive income
      (loss) - cumulative translation adjustment   (5,506)     4,161
----------------------------------------------------------------------
                                                  395,404    482,410
     Less -- cost of 8,145,149 treasury shares
      at December 31, 1999, and 8,719,612
      treasury shares at December 31, 1998       (118,704)  (127,078)
----------------------------------------------------------------------
     Total shareholders' equity                   276,700    355,332
----------------------------------------------------------------------
     Total Liabilities and Shareholders' Equity  $584,944   $695,974
======================================================================

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

INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

-----------------------------------------------------------------------------
Year Ended December 31,                         1999        1998        1997
-----------------------------------------------------------------------------
(In thousands except per share amounts)

Revenues
  Systems                                   $623,451  $  712,916  $  770,384
  Maintenance and services                   291,429     292,091     325,241
-----------------------------------------------------------------------------
     Total revenues                          914,880   1,005,007   1,095,625
-----------------------------------------------------------------------------
Cost of revenues
  Systems                                    436,254     508,836     506,752
  Maintenance and services                   188,691     185,028     201,655
-----------------------------------------------------------------------------
     Total cost of revenues                  624,945     693,864     708,407
-----------------------------------------------------------------------------
     Gross profit                            289,935     311,143     387,218

Product development                           62,638      76,818      90,298
Sales and marketing                          169,805     219,044     233,041
General and administrative                   109,336     100,936     101,026
Nonrecurring operating charges                15,596      15,343       1,095
-----------------------------------------------------------------------------
     Loss from operations                    (67,440)   (100,998)    (38,242)

Gains on sales of assets                      11,505     112,533       4,858
Arbitration settlements                      ( 8,562)        ---     ( 6,126)
Interest  expense                            ( 5,663)   (  7,441)    ( 6,579)
Other income (expense) -- net                ( 2,901)   (  4,822)    ( 3,401)
-----------------------------------------------------------------------------
     Loss from continuing operations
       before income taxes                   (73,061)   (    728)    (49,490)

Income tax expense                           ( 5,500)   (  6,000)    ( 4,000)
-----------------------------------------------------------------------------
      Loss from continuing operations        (78,561)   (  6,728)    (53,490)

Gain on sale of discontinued operation, net
  of income taxes                             14,384         ---         ---
Loss from discontinued operation, net of
  income taxes                               ( 7,400)   ( 12,906)    (16,747)
-----------------------------------------------------------------------------
      Net loss                              $(71,577) $ ( 19,634) $  (70,237)
=============================================================================
      Income (loss) per share-basic and diluted:
        Continuing operations               $(  1.60) $ (    .14) $  (  1.11)
        Discontinued operations                  .14    (    .27)    (   .35)
-----------------------------------------------------------------------------
         Net loss                           $(  1.46) $ (    .41) $  (  1.46)
=============================================================================
Weighted average shares outstanding-basic
  and diluted                                 48,906      48,376      47,945
=============================================================================
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,                         1999         1998       1997
-----------------------------------------------------------------------------
(In thousands)

Cash Provided By (Used For):
Operating Activities:
  Net loss                                  $(71,577)   $( 19,634)  $(70,237)
  Adjustments to reconcile net loss to net
  cash used for operating activities:
    Depreciation                              21,228       29,446     37,283
    Amortization                              26,878       25,274     23,049
    Noncash portion of arbitration
     settlements                               3,530          ---      5,835
    Noncash portion of nonrecurring
     operating charges                         9,614       11,506        ---
    Deferred income tax expense                   45           95      1,555
    Gains on sales of assets                 (25,889)    (112,533)   ( 4,858)
    Net changes in current assets and
     liabilities                              26,490       34,738    (13,573)
-----------------------------------------------------------------------------
    Net cash used for operating activities   ( 9,681)    ( 31,108)   (20,946)
-----------------------------------------------------------------------------

Investing Activities:
  Net proceeds from sales of assets           54,056      160,487      5,749
  Contributions from minority interest
   partner                                    11,732          ---        ---
  Purchases of property, plant, and
   equipment                                 (10,221)    ( 17,264)   (24,785)
  Capitalized software development costs     (20,656)    ( 15,738)   (10,592)
  Capitalized internal use software costs    ( 5,875)    (    802)   (   644)
  Purchase of software rights                    ---     ( 26,292)       ---
  Other                                      ( 3,579)    (    757)   (   394)
-----------------------------------------------------------------------------
    Net cash provided by (used for)
     investing activities                     25,457       99,634    (30,666)
-----------------------------------------------------------------------------

Financing Activities:
  Gross borrowings                               ---       10,689     75,896
  Debt repayment                             (23,605)    ( 32,949)   (30,950)
  Proceeds of employee stock purchases and
   exercises of stock options                  2,612        2,940      3,483
-----------------------------------------------------------------------------
    Net cash provided by (used for)
     financing activities                    (20,993)    ( 19,320)    48,429
-----------------------------------------------------------------------------
Effect of exchange rate changes on cash      ( 1,743)    (    378)   (   846)
-----------------------------------------------------------------------------
Net increase (decrease) in cash and
 cash equivalents                            ( 6,960)      48,828    ( 4,029)
Cash and cash equivalents at beginning
 of year                                      95,473       46,645     50,674
-----------------------------------------------------------------------------
Cash and cash equivalents at end of year    $ 88,513    $  95,473   $ 46,645
=============================================================================
The accompanying notes are an integral part of these consolidated
financial statements.

<TABLE>
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Accumulated              Total
                                                                               Additional              Other                Share-
                                                                        Common   Paid-in  Retained Comprehensive Treasury  holders'
                                                                         Stock   Capital  Earnings Income (Loss)  Stock     Equity
-----------------------------------------------------------------------------------------------------------------------------------
(In thousands except share amounts)

<S>                                                                      <C>     <C>       <C>       <C>      <C>         <C>

   Balance at January 1, 1997                                            $5,736  $229,675  $339,679  $12,907  $(140,734)  $447,263

Comprehensive loss:
   Net loss                                                                 ---       ---   (70,237)     ---        ---    (70,237)
   Other comprehensive loss:
     Net unrealized holding loss on securities of affiliate                 ---       ---       ---   (6,858)       ---    ( 6,858)
     Foreign currency translation adjustments                               ---       ---       ---   (4,959)       ---    ( 4,959)
                                                                                                                           --------
Comprehensive loss                                                          ---       ---       ---      ---        ---    (82,054)
                                                                                                                           ========

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
Other                                                                       ---        91       ---      ---        ---         91
-----------------------------------------------------------------------------------------------------------------------------------
   Balance at December 31, 1997                                           5,736   226,362   269,442    1,090   (133,847)   368,783

Comprehensive income (loss):
   Net loss                                                                 ---       ---   (19,634)     ---        ---    (19,634)
   Other comprehensive income - foreign currency translation adjustments    ---       ---       ---    3,071        ---      3,071
                                                                                                                           --------
Comprehensive loss                                                          ---       ---       ---      ---        ---    (16,563)
                                                                                                                           ========

Issuance of 464,230 shares under employee stock purchase plan               ---    (3,829)      ---      ---      6,769      2,940
Other                                                                       ---       172       ---      ---        ---        172
-----------------------------------------------------------------------------------------------------------------------------------
   Balance at December 31, 1998                                           5,736   222,705   249,808    4,161   (127,078)   355,332

Comprehensive loss:
   Net loss                                                                 ---       ---   (71,577)     ---        ---    (71,577)
   Other comprehensive loss:
     Foreign currency translation adjustments                               ---       ---       ---   (9,340)       ---        ---
     Less: Net translation gain realized upon sales of subsidiaries         ---       ---       ---   (  327)       ---        ---
                                                                                                      -------
   Net foreign currency translation adjustments                             ---       ---       ---   (9,667)       ---    ( 9,667)
                                                                                                      -------              --------
Comprehensive loss                                                          ---       ---       ---      ---        ---    (81,244)
                                                                                                                           ========

Issuance of 557,713 shares under employee stock purchase plan               ---    (5,539)      ---      ---      8,130      2,591
Issuance of 16,750 shares upon exercise of stock options                    ---    (  223)      ---      ---        244         21
-----------------------------------------------------------------------------------------------------------------------------------
  Balance at December 31, 1999                                           $5,736  $216,943  $178,231  $(5,506) $(118,704)  $276,700
===================================================================================================================================
</TABLE>

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

INTERGRAPH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999


NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES.
Basis  of  Presentation:   The  consolidated  financial  statements
include   the   accounts   of  Intergraph   Corporation   and   its
subsidiaries.    All   significant   intercompany   accounts    and
transactions  have been eliminated in consolidation.  As  discussed
in Note 4, the Company sold its VeriBest, Inc. operating segment on
October 31, 1999 and, accordingly, its operating results have  been
removed from continuing operations and are reported as discontinued
operations for all years presented.

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 continuing operations are divided into three separate
business units for operational and management purposes:  Intergraph
Computer  Systems ("ICS"), Intergraph Public Safety, Inc.  ("IPS"),
and   the   Software  and  Federal  Systems  ("Federal")   business
(collectively,  the Software and Federal businesses  form  what  is
termed  "Intergraph").  Effective March 2000, the Federal business
was renamed Intergraph Government Solutions.  ICS supplies high
performance  Windows  NT-based  graphics workstations, 3D graphics
subsystems, and specialty servers.  IPS develops, markets, and
implements systems for the public safety and utilities  industries.
Intergraph supplies software and solutions, including  hardware,
consulting, and services, to the federal government and to the
process and building and infrastructure industries.  The Company's
products are sold worldwide, with United States and European revenues
representing approximately 79% of total revenues for 1999.  See Note
12 for further information regarding the Company's operating segments
and the geographic markets it serves.

The  Company's hardware products and software applications are used
for  computer-aided design and engineering, mapping and  geographic
information  services,  and  technical  information  management  in
industries  such as process plant design, shipbuilding,  utilities,
communications,  transportation,  public  safety,  and  local   and
federal government.

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.    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,
1999  and  1998,  the Company held various debt  securities  within
three months of maturity at those dates, with fair market values of
approximately  $33,000,000  and $54,000,000,  respectively.   Gross
realized gains and losses on debt securities sold during the  years
ended  December 31, 1999 and 1998 were not significant,  and  there
were  no  unrealized holding gains or losses on debt securities  at
December 31, 1999 or 1998.

The  Company's December 31, 1999 consolidated cash balance includes
approximately   $13,000,000  held  by  a   60%-owned   consolidated
subsidiary.

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

----------------------------------------------------------
December 31,                        1999        1998
----------------------------------------------------------
(In thousands)

Raw materials                    $ 4,982     $ 2,739
Work-in-process                   13,645       3,594
Finished goods                     5,895      15,597
Service spares                    11,396      16,071
----------------------------------------------------------
Totals                           $35,918     $38,001
==========================================================

On  November 13, 1998, the Company sold substantially  all  of  its
U.S.  manufacturing assets (including inventories with a book value
of  approximately $60,000,000) to SCI Technology  Inc.  ("SCI"),  a
wholly-owned  subsidiary  of SCI Systems,  Inc.,  and  SCI  assumed
responsibility  for  manufacturing  of  substantially  all  of  the
Company's  hardware  products.   On  June  30,  1999,  the  Company
repurchased  inventory  from SCI having a  value  of  approximately
$10,200,000,  the majority of which is classified as raw  materials
and   work-in-process.   For  a  complete  description   of   these
transactions,  see  "SCI" included in Management's  Discussion  and
Analysis of Financial Condition and Results of Operations on  page
19 of this annual report.

In  third quarter 1999, as a result of the Company's exit from  the
personal  computer ("PC") and generic server business, the  Company
recorded  an  inventory  write-down  of  approximately  $7,000,000,
primarily   related   to   its  finished  goods   inventory.    See
"Nonrecurring   Operating   Charges"   included   in   Management's
Discussion  and  Analysis  of Financial Condition  and  Results  of
Operations  on  pages 17 to 19 of this annual  report  for  further
discussion.

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  results
of  operations.   In  addition,  an inability  by  the  Company  to
accurately  forecast its manufacturing requirements  of  SCI  could
adversely affect gross margin and results of operations.

Investments in Affiliates:  Investments in companies in  which  the
Company  believes  it  has the ability to influence  operations  or
finances  are  accounted for by the equity method.  Investments  in
companies  in  which the Company does not exert such influence  are
accounted   for   at  fair  value  if  such  values   are   readily
determinable,  and  at  cost  if  such  values  are   not   readily
determinable.   Effective  January  1,  1998,  the  Company  ceased
accounting  for  its  investment in Bentley Systems,  Inc.  ("BSI")
under the equity method due to a lack of significant influence.  On
April 1, 1999, as the result of an arbitration settlement with BSI,
the   Company's   equity  ownership  in  BSI   was   reduced   from
approximately  50%  to  33%, and the book value  of  the  Company's
investment  in  BSI  was  reduced accordingly.   See  Note  13  and
"Arbitration  Settlements" included in Management's Discussion  and
Analysis of Financial Condition and Results of Operations on  pages
22 to 23 of  this  annual report for further discussion  of  the
Company's  arbitration proceedings and business  relationship  with
BSI.   The  book  value  of the Company's  investment  in  BSI  was
approximately  $9,190,000 at December 31,  1999.   The  Company  is
unable to determine the fair value of this investment.

During  1997, the Company sold its stock investment in  a  publicly
traded affiliate at a gain of $4,858,000.  At January 1, 1997,  the
unrealized gain on this investment resulting from periodic mark-to-
market  adjustments  totaled $6,858,000.  This unrealized  gain  is
included in "Accumulated Other Comprehensive Income (Loss)" in  the
consolidated statements of shareholder's equity as of that date.

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,                                      1999       1998
-------------------------------------------------------------------
(In thousands)

Land and improvements (15-30 years)           $ 11,278   $ 13,948
Buildings and improvements (30 years)          113,455    132,759
Equipment, furniture, and fixtures (3-8 years) 184,393    239,735
-------------------------------------------------------------------
                                               309,126    386,442
Allowances for depreciation                   (214,219)  (259,074)
-------------------------------------------------------------------
Totals                                        $ 94,907   $127,368
===================================================================

Significant dispositions of property, plant, and equipment in 1999
include the sale-leaseback of a European office building having  a
net  book  value of approximately $9,000,000 at the date  of  sale
(see  Note  8). The remaining decline in net property,  plant, and
equipment  is due primarily to depreciation expense and write-offs
of  internal systems no longer in use as the result of  reductions
in force and other actions taken to downsize the Company.

Other  Noncurrent  Liabilities:  Other noncurrent  liabilities  of
$10,609,000   reflected  in  the  Company's  December   31,   1999
consolidated  balance  sheet consist of  liabilities  incurred  in
connection with a business acquisition in January 1999  (see  Note
15),  deferred  gain on the sale-leaseback of  a  European  office
building  (see Note 8), and minority interest in the equity  of  a
60%-owned subsidiary of the Company (see Note 15).

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, 1999, the  Company  had
purchased  approximately 18,800,000 shares for the  treasury  with
the  last purchase occurring in 1994.  Further purchases of  stock
for  the  treasury are restricted by terms of the  Company's  term
loan  and revolving credit agreement.  See Note 8.  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, including the production,  modification,  or
customization  of  software, 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  contracts
accounted  for by the percentage-of-completion method are 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 these contracts,  which  could  delay
revenue recognition and decrease the gross margin to be earned. 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.

Effective  January 1, 1998, the Company adopted American  Institute
of   Certified  Public  Accountants  Statement  of  Position  97-2,
Software Revenue Recognition.  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  the  functionality  of
delivered  elements.  Adoption of this new accounting standard  did
not  significantly affect the Company's results of  operations  for
1998  and  1999 as 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 on a straight line basis over a period of  two
to  five  years.  Amortization of these capitalized costs, included
in  "Cost of revenues - Systems" in the consolidated statements  of
operations, amounted to $14,600,000 in 1999, $12,700,000  in  1998,
and  $10,500,000  in 1997.  Amortization included  in  discontinued
operations amounted to $2,400,000 in 1999, $2,900,000 in 1998,  and
$3,100,000  in 1997.  The unamortized balance of these  capitalized
costs,  included  in  "Other assets" in  the  consolidated  balance
sheets,  totaled $23,500,000 and $23,000,000 at December  31,  1999
and 1998, respectively.

Although  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 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  gains  (losses)   from
continuing  operations totaled ($1,300,000) in  1999,  $400,000  in
1998,  and  ($2,200,000)  in 1997.  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 "Accumulated other comprehensive income
(loss) - 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  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.  With respect to  the
currency  exposures in these regions, 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 will therefore  enter
into  forward  exchange contracts related to certain balance  sheet
items, primarily intercompany receivables, payables, and formalized
intercompany  debt,  when a significant risk has  been  identified.
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 the  balance
sheet  items  being  hedged, which are generally  less  than  three
months,   and  only  in  amounts  sufficient  to  offset   possibly
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, 1999 or
1998.

In  June  1998,  the Financial Accounting Standards Board  ("FASB")
issued  Statement  of  Financial  Accounting  Standards  No.   133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"),  requiring companies to recognize all derivatives as  either
assets  or  liabilities on the balance sheet  and  to  measure  the
instruments  at  fair value.  In July 1999, the  FASB  delayed  the
implementation  of  this new accounting standard  to  fiscal  years
beginning after June 15, 2000 (calendar year 2001 for the Company).
The Company is evaluating the effects of adopting SFAS 133 but does
not  anticipate a significant impact on its consolidated  operating
results or financial position.

See  Note  5  for  further  details  of  the  Company's  derivative
financial instruments.

Stock-Based  Compensation  Plans:  The Company  maintains  a  stock
purchase  plan and two fixed stock option plans for the benefit  of
its employees.

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.

Under the fixed stock option plans, stock options may be granted to
directors  and other 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.

In  accordance  with  the  disclosure provisions  of  Statement  of
Financial  Accounting Standards No. 123, Accounting for Stock-Based
Compensation, the Company has provided pro forma basis  information
to  reflect  results  of  operations and  earnings  per  share  had
compensation  expense been recognized for employee stock  purchases
and  for  stock options granted at market value at date  of  grant.
See Note 10.

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 9.

Net  Loss  Per Share:  Basic loss per share is computed  using  the
weighted average number of common shares outstanding.  Diluted loss
per  share is computed using the weighted average number of  common
and  equivalent common shares outstanding.  Employee stock  options
are the Company's only common stock equivalent and are included  in
the calculation only if dilutive (see Note 10).

Comprehensive  Income:   Effective January  1,  1998,  the  Company
adopted  Statement  of  Financial  Accounting  Standards  No.  130,
Reporting Comprehensive Income.  Under this Statement, all nonowner
changes  in  equity during a period are reported as a component  of
comprehensive  income (loss).  With respect to  the  Company,  such
nonowner   equity   items  include  foreign  currency   translation
adjustments  and unrealized gains and losses on certain investments
in  debt and equity securities.  The Company's comprehensive losses
for  each year in the three year period ended December 31, 1999 are
displayed  in the Consolidated Statements of Shareholders'  Equity.
Accumulated other comprehensive income (loss) at the end of each of
these   three  years  consisted  of  foreign  currency  translation
adjustments.  There was no income tax effect related to any of  the
items included in other comprehensive income (loss) for any year in
the  three  year period ended December 31, 1999.  See  Note  9  for
details of the Company's tax position, including net operating loss
carryforwards,  and  its  policy  for  reinvestment  of  subsidiary
earnings.

Reclassifications:  Certain reclassifications have been made to the
previously reported consolidated statements of operations and  cash
flows  for  the years ended December 31, 1998 and 1997  to  provide
comparability with the current year presentation.

NOTE 2 -- LITIGATION AND OTHER RISKS AND UNCERTAINTIES.
In  addition  to those described in Notes 1, 5, 7, 8, and  12,  the
Company  has  certain  risks related to its business  and  economic
environment  and  has  extensive  ongoing  litigation  with   Intel
Corporation,  as further described in "Litigation and  Other  Risks
and Uncertainties" included in Management's Discussion and Analysis
of  Financial Condition and Results of Operations on pages 19 to 22
of this annual report.

NOTE 3 -- NONRECURRING OPERATING CHARGES.
The Company recorded nonrecurring operating charges from continuing
operations  totaling $22,596,000 (including a $7,000,000  inventory
write-down recorded as a component of "Cost of revenues - Systems")
in  1999,  $15,343,000  in 1998, and $1,095,000  in  1997.   For  a
complete  description of these charges, see "Nonrecurring Operating
Charges"  included  in  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations on pages 17 to 19 of
this annual report.

NOTE 4: -- DISCONTINUED OPERATIONS.
On  October 31, 1999, the Company sold its VeriBest, Inc. operating
segment  to  Mentor  Graphics Corporation,  a  global  provider  of
electronic  hardware and software design solutions  and  consulting
services, for approximately $11,000,000, primarily in the  form  of
cash  received at closing.  The resulting gain on this  transaction
of  $14,384,000  is  reflected in "Gain  on  sale  of  discontinued
operation,  net of income taxes" in the consolidated  statement  of
operations for the year ended December 31, 1999.

The  Company's consolidated statements of operations for each  year
in the three year period ended December 31, 1999 have been restated
to   reflect  VeriBest's  business  as  a  discontinued  operation.
Discontinued operations have not been presented separately  in  the
consolidated  balance  sheet  for  December  31,  1998  or  in  the
consolidated statements of cash flows.  Other than their  operating
losses  for the periods presented, the discontinued operations  did
not  have  a significant impact on the Company's consolidated  cash
flow or financial position.

Summarized  financial information for VeriBest is presented  below.
For this presentation, VeriBest's operating and net losses for each
year  in  the three year period ended December 31, 1999  have  been
adjusted to exclude the impact of intercompany revenue and  expense
items.

------------------------------------------------------------------------
Year Ended December 31,                       1999      1998      1997
------------------------------------------------------------------------
(In thousands)

Revenues from unaffiliated customers       $23,704   $27,783   $28,680
Operating loss before nonrecurring charges  (6,460)  (12,708)  (16,674)
Nonrecurring operating charges                 871       500       ---
Net loss                                   $(7,400) $(12,906) $(16,747)
========================================================================

VeriBest's  assets  and liabilities at December  31,  1998  totaled
$15,274,000 and $11,064,000, respectively.

NOTE 5 -- FINANCIAL INSTRUMENTS.
Information  related to the Company's financial instruments,  other
than  cash equivalents and stock investments in less than 50%-owned
companies, is summarized below.

Short-  and Long-Term Debt:  The balance sheet carrying amounts  of
the  Company's  floating  rate debt (approximately  $53,000,000  at
December 31, 1999), consisting primarily of loans under a revolving
credit  agreement,  mortgages,  and  a  term  loan  (see  Note  8),
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  8),  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.

Convertible debenture:  As part of the proceeds of the  April  1999
sale of its InterCAP subsidiary (see Note 15), the Company received
a  $5,797,000  convertible subordinated debenture from  Micrografx,
Inc.  due   on March 31, 2002.  The conversion feature  allows  the
Company  to convert the debenture into shares of Micrografx  common
stock in multiples of $500,000 at a conversion price of $10.   This
conversion price may be adjusted, at Micrografx's option, based  on
the  twenty day average closing price of Micrografx stock on  three
reset  dates  specified in the agreement.  Micrografx also  has  an
option  to convert the debenture into shares of their common  stock
if  the  twenty day average closing price is at least 120%  of  the
applicable conversion price. The Company is unable to estimate  the
fair  value  of  the  conversion option, but  does  not  anticipate
conversion  of  the  debenture by either party in  the  near  term.
Accordingly, at December 31, 1999, the debenture is recorded at its
face  value  of  $5,797,000 and included in "Other assets"  in  the
Company's consolidated balance sheet as of that date.

Stock warrant: As part of the proceeds of the October 1999 sale  of
its VeriBest operating segment (see Note 4), the Company received a
warrant  to purchase 500,000 shares of the common stock  of  Mentor
Graphics,  Inc.  at a price of $15 per share.  The warrant  becomes
exercisable  on October 31, 2001 and expires on October  31,  2002.
The  Company's  estimated  value of  the  warrant  is  included  in
"Investments  in  affiliates" in the Company's  December  31,  1999
consolidated  balance sheet.  This value was determined  using  the
Black-Scholes option pricing model as of the date of the  sale  and
as such, does not represent the actual value, if any,  that will be
realized upon exercise of the warrant.

Forward exchange contracts:  Outstanding notional amounts of  the
Company's forward exchange contracts were $808,000 and $7,586,000
at  December  31, 1999 and 1998, respectively, both reflecting  a
net  commitment  to purchase currencies.  These notional  amounts
were  determined by translating the foreign currency  amounts  to
dollars at the rates in effect at each balance sheet date.   They
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/payables to counterparties related  to  forward
exchange contracts were not significant at December 31,  1999  or
1998.   The  carrying amounts approximated fair  value  at  those
dates  due to the short duration (generally three months or less)
of the contracts.

Forward  exchange contracts outstanding at December  31,  1999  and
1998  relate  solely to formalized intercompany loans  between  the
Company's  European subsidiaries.  As of first  quarter  1998,  the
Company  is no longer hedging its U.S. exposures related to foreign
currency denominated intercompany loans.

Based  on  the terms of outstanding forward exchange contracts  and
the  amount of the related balance sheet exposures at December  31,
1999,  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, 1999.

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  $8,100,000   at
December 31, 1999).  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 9.18% 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,
1999  and 1998 was 5.84% and 6.54%, respectively.  The fair  market
value of this interest rate swap agreement at December 31, 1999 was
approximately  $300,000  ($600,000 at  December  31,  1998).   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 6 -- SUPPLEMENTARY CASH FLOW INFORMATION.
Changes  in  current assets and liabilities, net of the effects  of
business  acquisitions and divestitures and nonrecurring  operating
charges,  in  reconciling net loss to net cash used for  operations
are as follows:

------------------------------------------------------------------------------
                                      Cash Provided By (Used For) Operations
Year Ended December 31,                           1999     1998      1997
------------------------------------------------------------------------------
(In thousands)

(Increase) decrease in:
  Accounts receivable                          $47,418  $16,939  $(25,624)
  Inventories                                    3,994    7,580   (21,296)
  Other current assets                           5,426    8,706     9,905
Increase (decrease) in:
  Trade accounts payable                       (17,194)   2,600    11,449
  Accrued compensation and other
    accrued expenses                           (11,433)  (2,527)    5,258
  Income taxes payable                           1,876      878   ( 1,135)
  Billings in excess of sales                  ( 3,597)     562     7,870
------------------------------------------------------------------------------
Net changes in current assets and liabilities  $26,490  $34,738  $(13,573)
==============================================================================

Cash payments for income taxes totaled $9,300,000, $5,200,000,  and
$6,100,000  in  1999, 1998, and 1997, respectively.  Cash  payments
for  interest  in  those years totaled $5,700,000, $7,700,000,  and
$6,400,000, respectively.

Significant  noncash investing and financing transactions  in  1999
included  the  acquisition  of  a  business  in  part  for   future
obligations  totaling approximately $3,300,000 and the  sale  of  a
subsidiary  of  the Company in part for a convertible  subordinated
debenture with a value of $5,797,000.  See Note 15.  Investing  and
financing  transactions in 1998 that did not require cash  included
the  sale  of assets in part for a deferred installment payment  of
approximately  $20,000,000 (see Note 15).  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.

NOTE 7 -- 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 $20,100,000 at December  31,  1999,
and $22,900,000 at December 31, 1998.

Revenues  from  the  U.S.  government were  $149,300,000  in  1999,
$166,100,000  in  1998,  and  $177,100,000  in  1997,  representing
approximately  16% of total revenue in all three  years.   Accounts
receivable  from the U.S. government was approximately  $33,300,000
and  $55,200,000 at December 31, 1999 and 1998, 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 52%  of
the  Company's 1999 federal government revenues were  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  $64,400,000  and
$77,400,000  at  December 31, 1999 and 1998,  respectively.   These
amounts   include   amounts  due  under  long-term   contracts   of
approximately $16,400,000 and $25,000,000 at December 31, 1999  and
1998, respectively.

The   Company  maintained  reserves  for  uncollectible   accounts,
included  in  "Accounts  receivable" in  the  consolidated  balance
sheets   at  December  31,  1999  and  1998,  of  $16,100,000   and
$13,800,000, respectively.

NOTE 8 -- DEBT AND LEASES.
Short- and long-term debt is summarized as follows:

--------------------------------------------------------------------
December 31,                                     1999      1998
--------------------------------------------------------------------
(In thousands)

Revolving  credit agreement and term  loan    $27,470   $39,461
Australian term loan                            8,141     9,963
Long-term mortgages                            13,402    20,712
Other secured debt                              9,800     9,210
Short-term credit facilities                    3,690     3,312
Other                                             423       555
--------------------------------------------------------------------
Total debt                                     62,926    83,213
Less amounts payable within one year           11,547    23,718
--------------------------------------------------------------------
Total long-term debt                          $51,379   $59,495
====================================================================

Under  the  Company's  January 1997 six year fixed  term  loan  and
revolving  credit agreement, as amended, available  borrowings  are
determined  by the amounts of eligible assets of the  Company  (the
"borrowing base"), as defined in the agreement, primarily  accounts
receivable,   with  maximum  availability  of  $100,000,000.    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.  and  certain
international  receivables. 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, 1999) plus .625%.  The amended agreement contains provisions
which  will  lower the interest rate upon achievement of  sustained
profitability  by  the  Company.  The  average  effective  rate  of
interest  for the period of time in 1999 during which  the  Company
had  outstanding borrowings under this agreement was 8.7% (9.1%  in
1998).  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, a  letter  of
credit  fee at an annual rate of 1.5% of the undrawn amount of  all
outstanding  letters  of  credit, and a  monthly  agency  fee.   At
December  31,  1999,  the  Company had  outstanding  borrowings  of
$27,470,000,  the  $25,000,000  term  loan  portion  of  which  was
classified as long-term debt in the consolidated balance sheet, and
an   additional  $32,400,000  of  the  available  credit  line  was
allocated  to support the Company's letters of credit and forward
exchange contracts.  As of this  same  date, the borrowing base,
representing the maximum available credit under the  line,  was
approximately $69,300,000 ($68,500,000 at  February 29, 2000).

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,
and  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  without  approval.  The  amended  agreement  has
reduced  the  Company's  net  worth  covenant  to  $235,000,000  at
December  31,  1999, with subsequent reductions to $216,000,000  at
March  31,  2000 and $200,000,000 at June 30, 2000.   Additionally,
the  amended agreement requires the Company to retain the  services
of  an  investment  banking firm to advise  the  Company  regarding
potential partnering arrangements and other alternatives  for  its
computer hardware business.

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% to 5.15%  in
1999   (4.9%  to  5.36%  in  1998).   Letters  of  credit  totaling
approximately  $8,100,000 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%.
In 1998, the fixed pay rate was lowered to 9.18%.

The  Company has two long-term mortgages on certain of its European
facilities, payable in varying installments through the year  2010.
One  of the mortgages bears interest at the floating Euro Interbank
Offered  Rate  ("Euribor")  plus 1%.  Prior  to  January  1,  1999,
interest  on  this  mortgage was based on the  Amsterdam  Interbank
Offering  Rate ("AIBOR").  Rates paid on this mortgage ranged  from
3.9%  to 4.6% in 1999 (4.3% to 4.6% in 1998).  The second mortgage,
which  was  entered into in December 1998, bears  interest  at  the
United  Kingdom  base rate plus 1%.  Rates paid  on  this  mortgage
ranged from 6% to 7.25% in 1999.

In  November  1999, the Company entered into an agreement  for  the
sale and leaseback of its European headquarters office building  in
the  Netherlands.  The lease has an initial term of ten years  with
an  early  termination  option after  five  years.   The  lease  is
accounted for as an operating lease in accordance with Statement of
Financial Accounting Standards No. 13, Accounting for Leases.   The
net book value of the building of approximately $9,000,000 has been
removed from the Company's books, and the gain realized on the sale
of  approximately $4,200,000 has been deferred and will be credited
to  income over the ten year lease term.  Payments under the lease,
which are denominated in Dutch Guilders, approximate $1,200,000 per
year  and  are  included  in  the  future  minimum  lease  payments
presented  below for the first five years of the lease.  A  portion
of  the proceeds from the sale was used to pay off the mortgage  on
the building.  At the date of payment, the outstanding principal on
the mortgage was approximately $4,200,000.  Interest rates paid  on
this  mortgage, which were based on Euribor in 1999  and  AIBOR  in
1998,  ranged from 3.7% to 4.3% for the period in 1999 during which
the mortgage was outstanding and from 4.3% to 4.8% in 1998.

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 software and 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
$8,300,000 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 10.5% for  1999
and  11%  for 1998.  In February 2000, the Company entered  into  a
lease  termination  agreement with the owner of this  facility  and
vacated the premises.

See  Note 5 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  $25,100,000 in 1999, $26,600,000 in 1998, and  $30,400,000  in
1997.   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)

2000                                    $18,800
2001                                     12,800
2002                                      9,100
2003                                      6,100
2004                                      4,100
Thereafter                               21,700
--------------------------------------------------------
Total future minimum lease payments     $72,600
========================================================

NOTE 9 -- INCOME TAXES.
The  components  of loss from continuing operations  before  income
taxes are as follows:

-----------------------------------------------------------------------
Year Ended December 31,              1999         1998        1997
-----------------------------------------------------------------------
(In thousands)

U.S.                             $(68,150)    $  6,301    $(43,035)
International                     ( 4,911)     ( 7,029)    ( 6,455)
-----------------------------------------------------------------------
Loss from continuing operations
     before income taxes         $(73,061)    $(   728)   $(49,490)
=======================================================================

Income tax expense consists of the following:

-----------------------------------------------------------------------
Year Ended December 31,              1999         1998        1997
-----------------------------------------------------------------------
(In thousands)

Current benefit (expense):
  Federal                         $(1,327)     $(3,353)    $ 1,400
  International                    (4,128)      (2,552)     (3,845)
-----------------------------------------------------------------------
    Total current                  (5,455)      (5,905)     (2,445)
-----------------------------------------------------------------------
Deferred benefit (expense):
  Federal                             ---          ---      (1,726)
  International                    (   45)      (   95)        171
-----------------------------------------------------------------------
    Total deferred                 (   45)      (   95)     (1,555)
-----------------------------------------------------------------------
Total income tax expense          $(5,500)     $(6,000)    $(4,000)
=======================================================================

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,                                           1999      1998
--------------------------------------------------------------------------
(In thousands)

Current Deferred Tax Assets (Liabilities):
 Inventory reserves                               $  13,066  $ 13,348
 Vacation pay and other employee benefit accruals     5,841     5,705
 Other financial statement reserves, primarily
   allowances for doubtful accounts and warranty      9,142    10,333
 Profit on uncompleted sales contracts             (    806)    3,074
 Other current tax assets and liabilities, net        3,435   ( 1,298)
--------------------------------------------------------------------------
                                                     30,678    31,162
 Less asset valuation allowance                    ( 28,445)  (28,344)
--------------------------------------------------------------------------
 Total net current asset   (1)                        2,233     2,818
--------------------------------------------------------------------------

Noncurrent Deferred Tax Assets (Liabilities):
 Net operating loss and tax credit carryforwards:
   U.S. federal and state                            69,895    56,636
   International operations                          39,446    43,555
 Depreciation                                      (  1,495)  ( 8,116)
 Capitalized software development costs            (  7,704)  ( 7,281)
 Other noncurrent tax assets and liabilities, net     3,639     3,194
--------------------------------------------------------------------------
                                                    103,781    87,988
 Less asset valuation allowance                    (106,401)  (91,130)
--------------------------------------------------------------------------
 Total net noncurrent liability                    (  2,620)  ( 3,142)
--------------------------------------------------------------------------
Net deferred tax liability                        $(    387) $(   324)
==========================================================================
(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 $15,372,000 in 1999 due to increases in
deferred   tax  assets  of  $6,159,000  arising  from  changes   in
deductible  temporary differences and an increase of $9,150,000  in
the  benefit  from net operating loss carryforwards.  If  realized,
these  reserved 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,
1999,   the   Company  had  a  U.S.  federal  net  operating   loss
carryforward  of  approximately  $159,000,000  expiring  from  2009
through 2020.  International net operating loss carryforwards total
approximately $107,000,000 and expire as follows:

-------------------------------------------------------
                                  International
                                Net Operating Loss
December 31, 1999                 Carryforwards
-------------------------------------------------------
(In thousands)

Expiration:
3 years or less                     $ 21,000
4 to 5 years                          16,000
6 to 10 years                          3,000
Unlimited carryforward                67,000
-------------------------------------------------------
Total                               $107,000
=======================================================

Additionally,  the  Company  has  $3,500,000  of  U.S.  alternative
minimum tax credit carryforward which has no expiration date.  U.S.
research and development tax credit carryforwards of $7,800,000 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  for
continuing  operations is presented below.  There was  no  material
income tax benefit or expense related to the Company's discontinued
operation.

------------------------------------------------------------------------------
Year Ended December 31,                           1999      1998      1997
------------------------------------------------------------------------------
(In thousands)

Income tax benefit at federal statutory rate  $ 25,571   $   255  $ 17,322
Alternative minimum tax                            453    (  453)      ---
Tax effects of international operations, net   (10,417)   (6,760)  ( 4,828)
Tax effect of U.S. tax loss carried forward    (20,607)    5,107   (18,019)
Prior year taxes                               (   762)   (2,482)    1,165
Other - net                                        262    (1,667)      360
------------------------------------------------------------------------------
Income tax expense                            $( 5,500)  $(6,000) $( 4,000)
==============================================================================

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, 1999, the Company had  not  provided
federal  income  taxes  on  earnings  of  individual  international
subsidiaries  of approximately $22,000,000.  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  taxes  of  approximately
$600,000 would be payable if all previously unremitted earnings  as
of December 31, 1999 were remitted to the U.S. company.

NOTE 10 -- STOCK-BASED COMPENSATION PLANS.
The  Intergraph Corporation 1997 Stock Option Plan was approved  by
shareholders in May 1997.  Under this plan, the Company reserved  a
total  of  3,000,000 shares of common stock to grant as options  to
key  employees.  In May 1999, the plan was amended to increase  the
number of shares of common stock that may be issued pursuant to the
plan  by  2,000,000 shares.  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, 1999, 2,654,937 shares were available  for
future grants.

The  Intergraph Corporation Nonemployee Director Stock Option  Plan
was approved by shareholders in May 1998.  The Company has reserved
a total of 250,000 shares of common stock to grant as options under
this  plan.  The exercise price of each option granted is the  fair
market  value  on  the date of grant.  Options are not  exercisable
prior  to  one year from the date of grant or later than ten  years
after  the  date of grant.  Upon approval of this plan, members  of
the Company's Board of Directors who were not otherwise employed by
the  Company were granted options to purchase 3,000 shares  of  the
Company's   common  stock.   Any  new  nonemployee  director   will
similarly  be granted an option to purchase 3,000 shares of  common
stock  upon his or her first election to the Board.  At each annual
meeting  of  shareholders, each nonemployee director re-elected  to
the  Board  is  granted an option to purchase 1,500 shares  of  the
Company's  common  stock.   Options to purchase  4,500  and  12,000
shares of the Company's common stock were granted in 1999 and 1998,
respectively,  under  this  plan.  At December  31,  1999,  233,500
shares were available for future grants.

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 557,713,
464,230,  and  432,263 shares of stock in 1999,  1998,  and  1997,
respectively, under the 1995 plan.  At December 31, 1999, 1,201,521
shares were available for future purchases.  The Company's Board of
Directors has approved a successor plan with substantially the same
terms  as  the  1995 plan which will be voted upon  at  the  Annual
Meeting of Shareholders in May 2000.

As   allowed  under  the  provisions  of  Statement  of   Financial
Accounting   Standards   No.   123,  Accounting   for   Stock-Based
Compensation  ("SFAS  123"),  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
the  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 for the three  year  period
ended December 31, 1999 are not likely to be representative of  the
effects on reported pro forma net income (loss) for future years as
options  vest  over  several years and as it  is  anticipated  that
additional grants will be made in future years.

------------------------------------------------------------------------
Year Ended December 31,                 1999        1998        1997
------------------------------------------------------------------------
(In thousands except per share amounts)

Net loss             As reported    $(71,577)   $(19,634)   $(70,237)
                     Pro forma      $(74,018)   $(21,496)   $(72,497)

Basic and diluted
  loss per share     As reported    $(  1.46)   $(   .41)   $(  1.46)
                     Pro forma      $(  1.51)   $(   .44)   $(  1.51)
========================================================================

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 all three years and 48% expected volatility  for
the  market price of the Company's stock in 1999 (45% in  1998  and
43%  in  1997).   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 the grants in  each  year  and  are  as
follows:

----------------------------------------------
                 Risk Free Interest Rates
Expected Life    ------------------------
 (in years)      1999      1998      1997
----------------------------------------------

   2.38         5.64%     4.13%      ---
   3.38         5.73%     4.19%     6.28%
   4.38         5.87%     4.28%     6.38%
   5.38         6.00%     4.40%     6.34%
   6.38         6.07%     4.53%     6.46%
==============================================

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 1999, 1998, and 1997 were $2.49, $2.37, and $3.66,
respectively, under the 1997 and Nonemployee Director stock  option
plans  and  $.82, $1.12, and $1.29, respectively,  under  the  1995
stock purchase plan.

Activity in the Company's fixed stock option plans for each year in
the  three  year  period ended December 31, 1999 is  summarized  as
follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                        1999                      1998                       1997
                              -----------------------   ----------------------     -----------------------
                                         Weighted                  Weighted                   Weighted
                                          Average                   Average                    Average
                              Shares   Exercise Price   Shares   Exercise Price    Shares   Exercise Price
----------------------------------------------------------------------------------------------------------

<S>                         <C>           <C>         <C>           <C>          <C>           <C>
Outstanding at beginning
  of year                   3,587,173     $ 7.63      2,259,923     $ 9.61       1,831,417     $10.38
Granted at fair value         220,500       5.17      1,733,000       5.41         672,250       7.99
Exercised                    ( 16,750)      1.27            ---        ---        ( 40,187)      8.23
Expired                           ---        ---            ---        ---        ( 30,000)     16.00
Forfeited                    (240,627)      8.34       (405,750)      9.21        (173,557)     10.65
----------------------------------------------------------------------------------------------------------
Outstanding at end of year  3,550,296     $ 7.46      3,587,173     $ 7.63       2,259,923     $ 9.61
==========================================================================================================

Exercisable at end of year  1,044,111     $10.22        728,171     $10.22         540,922     $ 9.62
==========================================================================================================
</TABLE>

Further  information  relating  to  stock  options  outstanding  at
December 31, 1999 is as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                      Options Outstanding                Options Exercisable
                           ------------------------------------------ ------------------------
                                     Weighted Average    Weighted                 Weighted
                                         Remaining        Average                  Average
Range of Exercise Prices    Number   Contractual Life  Exercise Price   Number  Exercise Price
----------------------------------------------------------------------------------------------
 <S>                       <C>            <C>              <C>          <C>           <C>
 $ 5.063 to $ 6.969        1,878,500      8.87 years       $ 5.36           ---          ---
 $ 7.00  to $ 9.50           841,786      6.37 years         8.52       422,976       $ 8.87
 $10.125 to $12.25           830,010      5.60 years        11.12       621,135        11.15
----------------------------------------------------------------------------------------------
                           3,550,296      7.51 years       $ 7.46     1,044,111       $10.22
==============================================================================================
</TABLE>

Options  exercised  during  1999 with a weighted  average  exercise
price  of $1.27 per share 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.   As of December 31, 1999, all of the options assumed  as  a
result  of this business acquisition have either been exercised  or
cancelled.   All option grants during the three year  period  ended
December  31,  1999 were at the fair market value of the  Company's
stock on the date of grant.

NOTE 11 -- 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  made
contributions  to the Plan in amounts determined at the  discretion
of  the Board of Directors, and the contributions were funded  with
Company   stock.   Amounts  were  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.
Cash  contributions  by  the Company to the Plan  were  $4,143,000,
$5,082,000, and $5,148,000, in 1999, 1998, and 1997, 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  $2,873,000,  $3,110,000, and $3,244,000 in 1999,  1998,
and 1997, respectively.

NOTE 12 -- SEGMENT INFORMATION.
The  Company's  operating segments are Intergraph Computer  Systems
("ICS"),  Intergraph Public Safety, Inc. ("IPS"), and the  Software
and   Federal  Systems  ("Federal")  business  (collectively,   the
Software  and Federal businesses form what is termed "Intergraph").
On  October  31,  1999,  the Company sold  its  VeriBest  operating
segment  and,  accordingly, its operating results are reflected  in
"Loss from discontinued operation, net of income taxes" in the Company's
consolidated statements  of operations for each year in the three
year period ended   December  31,  1999.   A  complete  description
of this transaction and its impact on the Company's results of operations
and  financial position, including summarized financial information
for each year in the three year period ended December 31, 1999,  is
included in Note 4.

The  Company's  reportable  segments are strategic  business  units
which  are organized by the types of products sold and the specific
markets  served.   They  are  managed  separately  due  to   unique
technology and marketing strategy resident in each of the Company's
markets.

ICS   supplies   high   performance   Windows   NT-based   graphics
workstations, 3D graphics subsystems, and specialty  servers.   IPS
develops, markets, and implements systems for the public safety and
utilities  industries.  Intergraph supplies software and solutions,
including hardware purchased from ICS, consulting, and services  to
the process and building and infrastructure industries and provides
services and specialized engineering and information technology  to
support Federal government programs.

The  Company evaluates performance of the operating segments  based
on  revenue and income from operations.  The accounting policies of
the reportable segments are the same as those described in Note  1.
Sales  among the operating segments, the most significant of  which
are  sales  of hardware products and maintenance from  ICS  to  the
other  segments, are accounted for under a transfer pricing policy.
Transfer  prices approximate prices that would be charged  for  the
same  or  similar property to similarly situated unrelated  buyers.
In the U.S., intersegment sales of products and services to be used
for  internal  purposes  are charged at  cost.   For  international
subsidiaries,  transfer price is charged on intersegment  sales  of
products  and services to be used for either internal  purposes  or
sale to customers.

The following table sets forth revenues and operating income (loss)
by  operating  segment for the years ended December  31,  1999  and
1998,   together   with   supplementary  information   related   to
depreciation and amortization expense attributable to the operating
segments.

--------------------------------------------------------------
Year Ended December 31,               1999           1998
--------------------------------------------------------------
(In thousands)

Revenues:
ICS:
   Unaffiliated customers       $  214,476     $  229,005
   Intersegment revenues           117,631        218,103
--------------------------------------------------------------
                                   332,107        447,108
--------------------------------------------------------------
IPS:
   Unaffiliated customers           84,932         87,881
   Intersegment revenues            11,333          5,537
--------------------------------------------------------------
                                    96,265         93,418
--------------------------------------------------------------
Intergraph Software:
   Unaffiliated customers          462,492        520,714
   Intersegment revenues            13,860         10,819
--------------------------------------------------------------
                                   476,352        531,533
--------------------------------------------------------------
Intergraph Federal:
   Unaffiliated customers          152,980        167,407
   Intersegment revenues             6,817          4,081
--------------------------------------------------------------
                                   159,797        171,488
--------------------------------------------------------------
                                 1,064,521      1,243,547
--------------------------------------------------------------
Eliminations                      (149,641)      (238,540)
--------------------------------------------------------------
Total revenues                  $  914,880     $1,005,007
==============================================================

--------------------------------------------------------------
Year Ended December 31,               1999           1998
--------------------------------------------------------------
(In thousands)

Operating income (loss) before nonrecurring charges:

ICS (1)                           $(44,808)      $(71,166)
IPS                                 10,759          6,236
Intergraph Software                  9,157         13,792
Intergraph Federal                  12,371        ( 2,953)
Corporate                          (39,323)       (31,564)
--------------------------------------------------------------
Total                             $(51,844)      $(85,655)
==============================================================
(1)  ICS's  1999 operating loss includes a $7,000,000 nonrecurring
     charge for an inventory write-down which is included as a
     component of "Cost of revenues - systems" in the consolidated
     statement of operations.

--------------------------------------------------------------
Depreciation and amortization expense:

ICS                                $ 5,239        $10,314
IPS                                  5,915          5,099
Intergraph Software                 28,873         30,171
Intergraph Federal                   2,886          3,003
Corporate                            2,180          2,294
--------------------------------------------------------------
Total depreciation and amortization
  expense from continuing
  operations                       $45,093        $50,881
==============================================================

Amounts  included  in the "Corporate" category consist  of  general
corporate  expenses, primarily general and administrative  expenses
remaining after charges to the operating segments based on  segment
usage of those services.  Included in these amounts are legal  fees
of $18,470,000 and $10,650,000, respectively, for 1999 and 1998.

Significant profit and loss items for 1999 that were not  allocated
to  the segments and not included in the analysis above include  an
$8,562,000  charge  for  an  arbitration  settlement  with  Bentley
Systems, Inc. (see Note 13), an $11,505,000 gain on the sale  of  a
subsidiary  (see  Note 15), and nonrecurring operating  charges  of
$15,596,000  (see  Note 3).  Such items for 1998 include  gains  on
sales  of  assets  of $112,533,000 (see Note 15)  and  nonrecurring
operating charges of $15,343,000 (see Note 3).

The  Company  does  not evaluate performance or allocate  resources
based  on  assets and, as such, it does not prepare balance  sheets
for  its  operating segments, other than those of its  wholly-owned
subsidiaries.

Effective  January  1, 1999, the Utilities business  of  Intergraph
Software  was  merged into IPS.  Additionally,  in  1999,  hardware
maintenance  revenues, previously attributed  exclusively  to  ICS,
were attributed to the selling segment entities with ICS  receiving
transfer price revenue for services provided to other operating
segments.  The Company's 1998 segment information has been restated
to reflect  both  of  these operational changes.

The  operating  segment information model used for  1998  and  1999
differs   significantly  from  those  utilized  in   prior   years,
specifically  in  the institution of a transfer pricing  system  in
1998  and  in  the attribution of revenues to its ICS and  Software
operating  segments in sales transactions where both  hardware  and
software,  and  perhaps attendant services, are sold  to  a  single
customer.  The Company has found it impractical to restate  segment
information  for  years  prior  to  1998  to  reflect  the  current
reporting   model,  since  such  a  restatement  would  involve   a
transaction-by-transaction analysis.

Revenues  from  the  U.S.  government were  $149,300,000  in  1999,
$166,100,000  in  1998,  and  $177,100,000  in  1997,  representing
approximately  16%  of  total revenue  in  all  three  years.   The
majority  of these revenues are attributed to the Federal  unit  of
the Intergraph operating segment.  The U.S. government was the only
customer  accounting for more than 10% of consolidated  revenue  in
each year in the three year period ended December 31, 1999.

International  markets, particularly Europe and Asia,  continue  in
importance  to the industry and to each of the Company's  operating
segments.   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.  Following is  a
summary  of  external revenues and long-lived assets  by  principal
geographic  area.  For purposes of this presentation, revenues  are
attributed  to geographic areas based on customer location.   Long-
lived assets include property, plant, and equipment, investments  in
affiliates, and other noncurrent assets.  Assets have been allocated
to geographic areas based on their physical location.

------------------------------------------------------------------------------
                                 Revenues                  Long-lived Assets
------------------------------------------------------------------------------
                        1999       1998       1997      1999     1998     1997
------------------------------------------------------------------------------
(In thousands)

United States       $438,649 $  488,908 $  512,429  $130,762 $139,128 $152,184
Europe               285,548    308,118    345,167    24,194   40,878   41,467
Asia Pacific          98,773    105,860    131,178    14,167   17,975   21,304
Other International   91,910    102,121    106,851     3,878    3,468    4,010
------------------------------------------------------------------------------
Total               $914,880 $1,005,007 $1,095,625  $173,001 $201,449 $218,965
==============================================================================

NOTE 13 -- RELATED PARTY TRANSACTIONS.
Bentley  Systems, Inc.:  The Company maintains an equity  ownership
position in  Bentley Systems, Inc. ("BSI"), 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 BSI, the Company purchases MicroStation products for
resale  to third parties.  The Company's purchases from BSI totaled
$2,978,000  in  1999, $1,339,000 in 1998, and $5,656,000  in  1997.
Net  receivables from or payables to BSI at December 31,  1999  and
1998 were insignificant.

In  second quarter 1997, the Company received notice of the adverse
determination   of  an  arbitration  proceeding  with   BSI.    The
arbitrator's  award  against  the Company  was  in  the  amount  of
$6,126,000  and  is  included in "Arbitration settlements"  in  the
consolidated  statement of operations for the year  ended  December
31,  1997.   Approximately $5,835,000 in fees  otherwise  owed  the
Company by BSI were offset against the amount awarded to BSI.

In  first  quarter  1999, the Company entered into  an  arbitration
settlement agreement with BSI under which the Company made  payment
of $12,000,000 and transferred to BSI ownership of three million of
the shares of BSI's Class A common stock owned by the Company.  The
transferred shares were valued at approximately $3,500,000  on  the
Company's books, and the Company's investment in BSI (reflected  in
"Investments  in affiliates" in the Company's consolidated  balance
sheets)  was  reduced accordingly.  As a result of the  settlement,
Intergraph's equity ownership in BSI was reduced from approximately
50%  to  33%.   Additionally,  the Company  had  a  $1,200,000  net
receivable from BSI relating to business conducted prior to January
1,  1999  which was written off in connection with the  settlement.
The   Company  recorded  a  nonoperating  charge  to  earnings   of
$8,562,000  in  connection with this settlement,  representing  the
portion of settlement costs not previously accrued.  This charge is
included in "Arbitration settlements" in the consolidated statement
of operations for the year ended December 31, 1999.

See  "Arbitration Settlements" included in Management's  Discussion
and  Analysis  of Financial Condition and Results of Operations  on
pages 22 to 23 of this annual report for further discussion of  the
Company's  arbitration proceedings and business  relationship  with
BSI.

Carl Zeiss B.V:  Carl Zeiss B.V.  ("Carl Zeiss"), a manufacturer of
aerial  cameras  and photogrammetric scanning systems,  has  a  40%
ownership  interest in Z/I Imaging Corporation ("Z/I  Imaging"),  a
60%-owned  and  consolidated subsidiary of the  Company  which  was
formed  on  October 1, 1999.  See Note 15 for a discussion  of  the
formation of Z/I Imaging.  Z/I Imaging and Carl Zeiss are party  to
various  license, supply, and reseller agreements, under which  the
two companies sell products and services to each other.  During the
three month period ended December 31, 1999, Z/I Imaging's inventory
purchases from Carl Zeiss totaled $1,770,000.  Sales to Carl  Zeiss
during this period were not material.  Z/I Imaging's net payable to
Carl Zeiss at December 31, 1999 was $2,946,000.

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 could borrow from the Company, on an  unsecured
basis,  an amount not exceeding (1) the market value of the  common
stock  of  the Company owned by any such executive officer,  and/or
(2) the net value (market price less exercise price) of exercisable
stock  options owned by any such executive officer.   Interest  was
charged on these loans at the prevailing prime rate.  Prior to  the
April  30,  1998 expiration of the loan program, James W. Meadlock,
Chairman  of  the Board and former Chief Executive Officer  of  the
Company,  was  indebted  to the Company in the  maximum  amount  of
$6,129,000 under the program.  Mr. Meadlock repaid his loan in full
on November 21, 1997.

NOTE 14 -- 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 15 -- ACQUISITIONS AND DIVESTITURES.
In January 1999, the Company acquired the assets of PID, an Israeli
software  development  company, for $5,655,000.   At  closing,  the
Company  paid $2,180,000 in cash, with the remainder due in varying
installments  through February 2002.  The accounts and  results  of
operations  of  PID have been combined with those  of  the  Company
since  the  date  of  acquisition  using  the  purchase  method  of
accounting.   This  acquisition  did  not  materially  affect   the
Company's results of operations for 1999.

In April 1999, the Company sold InterCAP Graphics Systems, Inc.,  a
wholly-owned subsidiary, to Micrografx Inc., a global  provider  of
enterprise  graphics  software,  for  $12,150,000,  consisting   of
$3,853,000 in cash received at closing, deferred payments  received
in September and October 1999 totaling $2,500,000, and a $5,797,000
convertible  subordinated debenture due  March  2002  (included  in
"Other  assets"  in  the  December 31,  1999  consolidated  balance
sheet).  The  resulting gain on this transaction of $11,505,000  is
included  in  "Gains  on  sales  of  assets"  in  the  consolidated
statement  of  operations  for the year ended  December  31,  1999.
InterCAP's  revenues  and  losses  for  1998  were  $4,660,000  and
$1,144,000,  respectively, ($3,600,000 and  $1,853,000  for  1997).
Assets  of  the subsidiary at December 31, 1998 totaled $1,550,000.
The  subsidiary  did not have a material effect  on  the  Company's
results of operations for the period in 1999 prior to its sale.

Effective  October 1, 1999, the Company contributed  operating  and
financial  assets  with  a total net book  value  of  approximately
$5,000,000   (including  cash  of  $1,800,000)   to   Z/I   Imaging
Corporation,  a newly formed corporation which supplies  end-to-end
photogrammetry solutions for front-end data collection  to  mapping
related  and  engineering markets, in exchange for a 60%  ownership
interest  in  the  new  company.   Additionally,  Carl  Zeiss  B.V.
contributed  assets  and  liabilities with  a  net  book  value  of
approximately $4,000,000 (including cash of $11,732,000) to the new
company  in  exchange for a 40% ownership interest.  Z/I  Imaging's
assets, liabilities and results of operations are included  in  the
Company's consolidated financial statements.  Carl Zeiss's minority
interest  in earnings and equity of this subsidiary are  immaterial
to  the  Company's  consolidated operating  results  and  financial
position.  See Note 13 for a discussion of transactions between Z/I
Imaging and Carl Zeiss during the fourth quarter of 1999.

See  Note 4 for a discussion of the Company's October 1999 sale  of
VeriBest, Inc.

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
$26,300,000, with $16,000,000 paid at closing of the agreement and
the  remaining  amount  payable in 15 equal monthly  installments,
including  interest.  In March 1998, the Company prepaid  in  full
the  remaining amount payable to Zydex.  The former owner of Zydex
retains  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, the Company
was required to pay additional royalties to Zydex in the amount of
$1,000,000  at  closing of the agreement.   These  royalties  were
included  in the Company's 1997 results of operations.  The  first
quarter  1998 cash payments to Zydex were funded by the  Company's
primary  lender  and by proceeds from the sale  of  the  Company's
Solid  Edge  and Engineering Modeling System product  lines.   The
Company  accounted  for the acquisition as the  purchase  of   PDS
software  rights and is amortizing those rights over an  estimated
useful   life   of   seven   years.   The   unamortized   balance,
approximately  $18,800,000 at December 31, 1999,  is  included  in
"Other  assets"  in  the  consolidated  balance  sheet.   PDS   is
currently   the   Company's  highest  volume  software   offering,
representing approximately 28% of total software sales for 1999.

In  March  1998,  the Company sold its Solid Edge  and  Engineering
Modeling   System   product  lines  to  Electronic   Data   Systems
Corporation  and  its  Unigraphics Solutions, Inc.  subsidiary  for
$105,000,000  in cash.  The Company's gain on this  transaction  of
$102,767,000 is included in "Gains on sales of assets" in the  1998
consolidated statement of operations.  Full year 1997 revenues  and
operating  losses  for  these product lines  were  $35,200,000  and
$4,100,000,  respectively.  Based on 1997 performance, the  Company
estimates that the sale of this business resulted in an improvement
in   its   1998  operating  results  of  approximately  $5,000,000,
excluding the impact of the gain on the sale.

In   April  1998,  the  Company  sold  its  printed  circuit  board
manufacturing facility for $16,002,000 in cash.  The Company's gain
on this transaction of $8,275,000 is included in "Gains on sales of
assets"  in  the  1998 consolidated statement of  operations.   The
Company  is now outsourcing its printed circuit board needs.   This
operational change did not materially impact the Company's  results
of operations in 1998.

In  November 1998, the Company sold substantially all of  its  U.S.
manufacturing inventory and assets to SCI Technology Inc.  ("SCI"),
a  wholly-owned  subsidiary of SCI Systems, Inc., and  SCI  assumed
responsibility  for  manufacturing  of  substantially  all  of  the
Company's   hardware  products.   The  total  purchase  price   was
$62,404,000,  $42,485,000 of which was received during  the  fourth
quarter   of  1998.   The  final  purchase  price  installment   of
$19,919,000 (included in "Other current assets" in the December 31,
1998  consolidated balance sheet) was received on January 12, 1999.
The Company's gain on this transaction of $1,491,000 is included in
"Gains  on  sales of assets" in the 1998 consolidated statement  of
operations.  As part of this transaction, SCI retained  the  option
to  sell  to  the  Company any inventory included  in  the  initial
purchase which had not been utilized in the manufacture and sale of
finished  goods  within six months of the date  of  the  sale  (the
"unused  inventory").  On June 30, 1999, SCI exercised this  option
and  sold  to  the  Company  unused inventory  having  a  value  of
approximately  $10,200,000  in  exchange  for  a  cash  payment  of
$2,000,000  and  a  short-term  installment  note  payable  in  the
principal  amount  of  $8,200,000.  This note  was  paid  in  three
monthly  installments concluding October 1, 1999 and bore  interest
at  a  rate  of  9%.   The Company's payments to  SCI  were  funded
primarily  with existing cash balances. For a complete  description
of the SCI transaction and its impact on operating results and cash
flows,  see "SCI" included in Management's Discussion and  Analysis
of  Financial Condition and Results of Operations on page 19 of this
annual report.


NOTE 16 - 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, 1999:
Revenues                        $244,610   $227,076   $220,548   $222,646
Gross profit                      78,926     75,420     57,585     78,004
Loss from continuing operations  (15,475)   ( 9,648)   (43,534)   ( 9,904)
Net income (loss)                (17,558)   (12,092)   (45,501)     3,574
Loss from continuing operations
  per share - basic and diluted  (   .32)   (   .20)   (   .89)   (   .20)
Net income (loss) per share -
  basic and diluted              (   .36)   (   .25)   (   .93)       .07
Weighted average shares
  outstanding - basic and
  diluted                         48,697     48,831     48,971     49,121

Year ended December 31, 1998:
Revenues                        $238,913   $240,567   $247,089   $278,438
Gross profit                      75,108     73,351     74,700     87,984
Income (loss) from continuing
  operations                      54,324    (17,305)   (24,379)   (19,368)
Net income (loss)                 49,442    (20,988)   (27,173)   (20,915)
Income (loss) from continuing
  operations per share -
  basic and diluted                 1.13    (   .36)   (   .50)   (   .40)
Net income (loss) per share -
  basic and diluted                 1.03    (   .43)   (   .56)   (   .43)
Weighted average shares
  outstanding - basic and
  diluted                         48,219     48,311     48,416     48,547
==========================================================================

On October 31, 1999, the Company sold its VeriBest, Inc.  operating
segment.  Accordingly, the gain on the sale as well as  the results
of operations for this operating segment have  been excluded from
continuing operations for all periods presented.

First  quarter  1999 losses included an $.18 per share  charge  for
settlement  of the Company's arbitration proceedings  with  Bentley
Systems,  Inc.   Second quarter 1999 results included  a  $.24  per
share gain on the sale of a subsidiary company and a $.05 per share
nonrecurring  operating charge for the resizing  of  the  Company's
European computer hardware sales organization.  Third quarter  1999
losses  included nonrecurring operating charges of $.43  per  share
for the cost of actions taken during the quarter to reduce expenses
in  the  Company's unprofitable business units and restructure  the
Company  to fully support the vertical markets in which the Company
operates.  These  actions  included eliminating  approximately  400
positions   worldwide,   consolidating  offices,   completing   the
worldwide  vertical  market  alignment  of  the  sales  force,  and
narrowing the focus of the Company's ICS business unit to  high-end
workstations,  specialty servers, digital  video  products  and  3D
graphics  cards.   The  fourth quarter 1999  loss  from  continuing
operations  was offset by the $.29 per share gain on  the  sale  of
VeriBest.

First quarter 1998 earnings included a $2.13 per share gain on  the
sale  of  the Company's Solid Edge and Engineering Modeling  System
product  lines  and  a  $.31  per  share  charge  for  nonrecurring
operating  expenses, primarily for employee termination  costs  and
write-off of certain intangible assets.  Second quarter 1998 losses
were  reduced by a $.17 per share gain on the sale of the Company's
printed circuit board manufacturing facility.  Fourth quarter  1998
losses  included expenses of approximately $.14 per share  relating
to  the  Company's  transition to outsourcing of its  manufacturing
operation  and  a $.04 per share charge for nonrecurring  operating
expenses, primarily for employee terminations.

              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, 1999 and 1998, and the related consolidated statements
of operations, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States.  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, 1999 and 1998, and the consolidated results
of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.

                                         /s/ Ernst & Young LLP
Birmingham, Alabama
January 27, 2000


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, 2000, there
were  49,252,406 shares of common stock outstanding, held by  4,427
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.

----------------------------------------------------------------
                          1999                   1998
Period               High      Low         High        Low
----------------------------------------------------------------
First Quarter     $ 7 1/4     $4 29/32    $10 3/16   $8 1/4
Second Quarter     10 1/4      6           10 9/16    7 3/16
Third Quarter       7 15/16    4 3/8        8 5/8     5 1/2
Fourth Quarter      5 13/16    3 3/16       7         4 11/16
================================================================

TRANSFER AGENT AND REGISTRAR

Harris Trust and Savings Bank
Shareholder Services Division
311 W. Monroe Street, 11th Floor
P. O. Box A3504
Chicago, IL 60690-3504
(312) 360-5116

CORPORATE COUNSEL

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

INDEPENDENT AUDITORS

Ernst & Young LLP
1900 AmSouth/Harbert Plaza
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 18,
2000, at the Corporate offices in Huntsville, Alabama.


BOARD MEMBERS AND OFFICERS
---------------------------------------------------------------------------

Board of Directors        Executive Vice Presidents     Vice Presidents


James W. Meadlock         Graeme J. Farrell             Theron E. Anders
Chairman of the Board
                          Penman R. Gilliam             Henry J. Dipietro
James F. Taylor Jr.
Chief Executive Officer   Lewis N. Graham Jr.           Thomas J. Doran

Robert E. Thurber         Stephen J. Phillips           Aggie L. Frizzell
Executive Vice President
                          Preetha R. Pulusani           Rune Kahlbom
Larry J. Laster
                          William E. Salter             Robert L. Kuehlthau
Thomas J. Lee
                          K. David Stinson Jr.          Robert Patience
Sidney L. McDonald
                          John W. Wilhoite              Gerhard Sallinger
                          Chief Financial Officer
                                                        James H. Slate
                          Edward A. Wilkinson
                                                        Richard L. Watson
                          Manfred Wittler
                                                        Eugene H. Wrobel
                                                        Treasurer

                                                        SECRETARY

                                                        John R. Wynn