Five-Year Financial Summary

-------------------------------------------------------------------------------
                              2001     2000      1999       1998        1997
-------------------------------------------------------------------------------
(In  thousands except per share
amounts)

Revenues                   $532,061  $690,454  $914,880  $1,005,007  $1,095,625

Reorganization charges
 (credit)                      (384)    8,498    15,596      15,343       1,095
Income (loss) from
 operations                   8,087   (23,641)  (67,440)   (100,998)    (38,242)
Gains on sales of assets     11,243    49,546    13,223     112,533       4,858
Income (loss) from           19,942    10,095   (78,561)     (6,728)    (53,490)
  continuing operations
Discontinued operation (1)      ---       ---     6,984     (12,906)    (16,747)
Net income (loss)            19,942    10,095   (71,577)    (19,634)    (70,237)
Net income (loss) from
  continuing operations
   per share,
    basic                       .40       .20     (1.60)       (.14)      (1.11)
    diluted                     .39       .20     (1.60)       (.14)      (1.11)
Net income (loss) per share,
    basic                       .40       .20     (1.46)       (.41)      (1.46)
    diluted                     .39       .20     (1.46)       (.41)      (1.46)
Working capital             177,638   184,051    168,307    216,520     204,534
Total assets                458,010   514,908    584,944    695,974     720,989
Total debt                    3,733    31,030     62,926     83,213     104,665
Shareholders' equity        295,213   278,000    276,700    355,332     368,783


(1)    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


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This   Annual  Report  contains  forward-looking  statements
within  the  meaning  of  the Private Securities  Litigation
Reform  Act of 1995 including, but not limited to, projected
revenue  and operating income levels, market conditions  and
their  anticipated impact on the Company  and  its  vertical
business segments, expectations regarding future results and
cash flows, information regarding the development, timing of
introduction,   and   performance  of  new   products,   and
expectations   regarding  the  Company's   various   ongoing
litigation   proceedings,   including   those   with   Intel
Corporation ("Intel").  These forward-looking statements are
subject to certain risks and uncertainties that could  cause
actual  results to differ materially from those  anticipated
in the forward-looking statements.  Factors that could cause
or  contribute  to  such differences include,  but  are  not
limited   to,   worldwide  economic  conditions,   increased
competition,   rapid  technological  change,   unanticipated
changes in customer requirements, uncertainties with respect
to  the  Company's installed customer base for  discontinued
hardware   products,  inability  to  protect  the  Company's
intellectual  property  rights,  inability  to  access   the
technology  necessary  to compete  in  the  markets  served,
inability  to  complete certain sales and lease transactions
as   planned,   risks   associated   with   doing   business
internationally,  risks  associated  with  various   ongoing
litigation  proceedings, and other  risks  detailed  in  our
annual  and  quarterly  filings  with  the  Securities   and
Exchange Commission.



RESULTS OF OPERATIONS

Summary

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, 2001.   The  complete
consolidated financial statements of the Company,  including
footnote  disclosures, are presented on pages 33  to  59  of
this Annual Report.

-------------------------------------------------------------
                                     2001     2000    1999
-------------------------------------------------------------
(In millions except per share amounts)

Revenues                             $532     $690   $  915
Cost of revenues                      299      438      625
-------------------------------------------------------------
Gross profit                          233      252      290

Operating expenses                    225      267      342
Reorganization charges                ---        9       15
-------------------------------------------------------------
Income (loss) from operations           8     (24)      (67)

Gains on sales of assets               11       50       13
Arbitration settlement                ---      ---       (8)
Interest expense                       (2)     (4)       (6)
Other income (expense), net            12      (3)       (4)
-------------------------------------------------------------
Income (loss) from continuing
  operations before income taxes
    and minority interest              29       19      (72)
Income tax expense                     (9)      (6)      (6)
-------------------------------------------------------------
Income (loss) from continuing
  operations before minority
    interest                           20       13      (78)
Minority interest                     ---       (3)      (1)
-------------------------------------------------------------
Income (loss) from continuing
   operations                          20       10      (79)
Discontinued operation (VeriBest)     ---      ---        7
-------------------------------------------------------------
Net income (loss)                    $ 20     $ 10   $  (72)
=============================================================
Income (loss) per share, basic:
  From continuing operations         $.40     $.20   $(1.60)
  Net income (loss) per share         .40      .20    (1.46)
Income (loss) per share, diluted:
  From continuing operations          .39      .20    (1.60)
  Net income (loss) per share         .39      .20    (1.46)
=============================================================


In  2001,  the  Company had net income of $19.9  million  on
revenues  of $532.1 million compared to net income of  $10.1
million on revenues of $690.5 million in 2000 and a net loss
of  $71.6  million  on revenues of $914.9 million  in  1999.
Operating  income  in  2001  was $8.1  million  compared  to
operating losses of $23.6 million and $67.4 million in  2000
and   1999,  respectively.   This  return  to  profitability
resulted from the Company's reorganization in 2000 into five
core  business  segments  and its  exit  from  the  hardware
business.   The  improvement  in operating  income  resulted
primarily  from  the  continuing decline  in  the  Company's
operating  expenses  and higher gross  margins  due  to  the
increasing software content in its product mix.

In  2000,  the  Company  focused  on  organizing  into  five
business  segments, aligned according to  markets  in  which
Intergraph   believes   it  is  a   leader.    The   Company
substantially completed the U.S. portion of this process  in
the  third quarter of 2000, and in the fourth quarter, began
efforts  to align its international operations with the  new
vertical  businesses and bring the cost of its international
operations in line with current revenue levels.  As part  of
this process, the Company converted its Singapore subsidiary
and  related territories into a distributorship via  a  sale
transaction  and began to reorganize its European  and  Asia
Pacific  operations  to  align them with  the  new  vertical
business structure (see "Reorganization Charges").  In 2001,
the Company continued to convert several other international
subsidiaries into distributorships, primarily in the  Middle
East  and  Asia.  The international portion of the Company's
verticalization process was completed in 2001,  though  some
of  the  subsidiary sales transactions are  expected  to  be
completed in 2002.

The  Company  completed its exit of the hardware development
and design business in third quarter 2000 with the sales  of
its Intense3D graphics accelerator division and its high-end
workstation  and server business (see Note 15  of  Notes  to
Consolidated  Financial Statements).  The Company  continues
to  sell  hardware products from other vendors  through  its
business segments and performs hardware maintenance services
for  its installed customer base.  The Intergraph Government
Solutions   ("IGS")   and  Z/I  Imaging  Corporation   ("Z/I
Imaging") business segments continue to develop and assemble
specialized hardware products.

Revenues  and  operating  results in  1999  were  negatively
impacted  by  increasingly  weak demand  for  the  Company's
hardware product offerings related to the dispute with Intel
(see "Litigation and Other Risks and Uncertainties").  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 segment 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  "Reorganization
Charges").

In  fourth  quarter  1999,  the Company  sold  its  VeriBest
business  segment.  Accordingly, the Company's  consolidated
statement  of  operations reflect VeriBest's business  as  a
discontinued  operation for 1999.   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 are  discussed
separately in "Discontinued Operation."


Orders

Systems  and  services orders for 2001 were $369.8  million,
down  36% from the prior year after declining by 18% in 2000
and  20%  in  1999.  The decline in orders in 2001  was  due
primarily to the Company's exit of the hardware business  in
2000  and to the sale of its Middle East operations in 2001.
In 2000, orders for the Company's hardware products declined
as  the  result  of  the Company's exit  from  this  market;
however, the hardware market decline was partially offset by
a   significant  improvement  in  orders  of  the  Company's
Intergraph  Public  Safety ("IPS") business  segment.   IPS'
orders increased by 42% from the 1999 level as the result of
several large orders received in third quarter 2000.  Orders
in  1999  included $12.3 million in orders of the  Company's
discontinued  VeriBest operation.  In  1999,  order  volumes
declined  worldwide,  primarily in  the  Company's  hardware
business as demand continued to weaken from the prior year.

U.S.   systems   and  services  orders,  including   federal
government orders, totaled $217 million for 2001,  down  27%
from  the  prior year.  Excluding the impact of the VeriBest
sale, U.S. orders declined by 9% in 2000 and by 29% in 1999.
In  2001,  U.S. orders continued to decline due to the  exit
from the hardware business.  In 2000, the negative impact of
the  hardware  exit  on  orders  was  partially  offset   by
increased  orders  in  the Company's  IPS  and  Z/I  Imaging
business  segments.   2000  was  the  first  full  year   of
operations  for  Z/I  Imaging.   In  1999,  demand  for  the
Company's hardware product offerings weakened significantly,
accounting  for the majority of the decline in  U.S.  orders
for  the year.  International orders for 2001 totaled $152.8
million, down 46% from the prior year after declines of  23%
and  9% in 2000 and 1999, respectively.  The decline in 1999
excludes   the  impact  of  the  Company's  former  VeriBest
business  segment.  The Company's most significant  declines
in  orders have occurred in its European and Asian  regions.
European orders totaled $96.5 million in 2001, down 25% from
the prior year level, after declining by 43% in 2000 and  7%
in  1999.   Strengthening  of the U.S.  dollar  resulted  in
successive  declines in reported European  order  levels  of
approximately  4%,  8%,  and 3% in  2001,  2000,  and  1999,
respectively.  The remaining decline in 2001  and  2000  for
the European region was related to the Company's exit of the
hardware   business   and   to   the   region's   focus   on
verticalization of the organization in fourth quarter  2000.
Asia Pacific orders totaled $33.2 million in 2001, down  52%
from the 2000 level after declines of 14% in 2000 and 4%  in
1999.    The  2001  and  2000  declines  can  be  attributed
primarily  to  the  hardware exit  and  to  reductions  from
currency   fluctuations  in  the  region  of  9%   and   2%,
respectively.   2001 international orders  declined  further
compared to 2000 due to strong 2000 orders in Canada and the
Middle East as a result of several large orders received  by
IPS  Canada  in  the  first quarter 2000 and  strong  fourth
quarter 2000 services orders in the Middle East region.   In
1999,  weakening  of  the  dollar against  Asian  currencies
improved   reported   order  levels  in   that   region   by
approximately  3%; however, this positive  impact  was  more
than  offset  by weakened demand for the Company's  hardware
products.


Revenues

Total  revenues  from continuing operations  for  2001  were
$532.1  million,  down 23% from the prior year  level  after
declining by 25% and 9% in 2000 and 1999, respectively,  all
due  primarily  to  the  Company's exit  from  the  hardware
business.

In  third  quarter 2000, the Company substantially completed
the  organization  of  its  operations  into  five  business
segments  which  provide software, systems integration,  and
services.   Revenues  in 2001 and 2000  for  each  of  these
segments, as well as a comparative presentation of 2000  and
1999  revenues based on the Company's previous  segmentation
policy,  are  presented in Note 12 of Notes to  Consolidated
Financial Statements.

Systems.   Systems  revenue from continuing  operations  was
$301.5  million  in  2001, down 29% from the  previous  year
after  declining  by 32% in 2000 and 13% in  1999.   Factors
cited  previously as contributing to the decline  in  orders
have adversely affected systems revenues over the three-year
period,  and  competitive conditions resulting in  declining
sales  prices  continue to adversely  affect  the  Company's
systems revenues.  The significant revenue declines in  2001
and 2000 can also be attributed to continuing order weakness
in the Company's vertical software businesses.

Systems  revenues  have declined in all  geographic  markets
served  by  the  Company due primarily to the factors  noted
above.   U.S.  systems  sales  from  continuing  operations,
including  sales to the federal government,  totaled  $183.3
million  in 2001, down 19% from the prior year level,  after
decreasing  by  31%  in 2000 and 14% in 1999.   The  revenue
declines  in  2000 and 1999 were primarily  attributable  to
declining   hardware  revenues  as  well  as  to  successive
declines  in  sales  of the Company's IGS business  segment.
IGS  revenues have been negatively impacted by the exit from
the  hardware business, and in fourth quarter 2000, revenues
were  further  reduced as the result of delayed  funding  on
several   large  government  contracts.   The  funding   was
received   on   the   contracts  in  first   quarter   2001.
International systems sales totaled $118.2 million in  2001,
down 41% from the prior year level after declines of 32%  in
2000 and 11% in 1999.  Strengthening of the U.S. dollar with
respect  to  the  currencies of the Company's  international
markets,    primarily   Europe,   reduced   the    Company's
international   systems  revenues  by  2%,   4%,   and   1%,
respectively, in 2001, 2000, and 1999.  European sales  were
down  28% in 2001, after declines of 43% and 9% in 2000  and
1999,  respectively.  Asia Pacific systems sales  were  down
62%,  after  declines  of  17% and  8%  in  2000  and  1999,
respectively.  Systems revenues for Canada and Latin America
declined  by  32%  in 2001, while systems revenues  for  the
Middle East region declined by 71% in 2001.  The decrease in
the Middle East revenues is due primarily to the exit of the
hardware  business  and the conversion of subsidiaries  into
distributorships in 2001.

Hardware  revenues  in  2001  totaled  approximately   $60.7
million, down 59% from the prior year level, after declining
by 50% and 27%, respectively, in 2000 and 1999.  The Company
exited the hardware business in third quarter 2000.

Total  revenue  from the U.S. government  was  approximately
$143 million in 2001, $132 million in 2000, and $149 million
in  1999, representing 27%, 19%, and 16% of total revenue in
2001,  2000, and 1999, respectively.  During the  three-year
period  ended December 31, 2001, U.S. government orders  and
revenues have been characterized by weakened demand for  the
Company's  hardware  product  offerings,  due  partially  to
increasing  price  competition within the industry,  and  in
2000,  to  the  Company's exit from  this  market.   Federal
government  sales  in  2000  were additionally  impacted  by
delayed  funding  on several large contracts.   The  Company
sells  to  the  U.S. government under long-term  contractual
arrangements,  primarily  indefinite  delivery,   indefinite
quantity,  and  cost-based contracts, and through  sales  of
commercial  products  not  covered by  long-term  contracts.
Approximately  69% of the Company's 2001 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.

Maintenance.  Maintenance revenue from continuing operations
declined  by 22% in 2001, after declines of 14%  and  8%  in
2000   and   1999,  respectively.   The  Company's  hardware
maintenance business has declined as a result of  the  trend
in  the  industry  toward lower-priced products  and  longer
warranty  periods,  the  Company's exit  from  the  hardware
business,  and  the  sale of certain  non-core  products  to
Bentley Systems, Inc. ("BSI").

Services.   Services  revenue  from  continuing  operations,
consisting  primarily  of  revenues   from  Company-provided
implementation services and consulting, increased by  2%  in
2001,  after  increasing by 1% and 17%  in  2000  and  1999,
respectively.   The increase in 1999 was  due  primarily  to
revenues  earned  by  the Company's  IPS  business  segment.
Services  are  becoming  increasingly  significant  to   the
Company's  business, representing 20% of total  revenue  for
2001,   compared   to  15%  and  11%  in  2000   and   1999,
respectively.   The  Company  is  endeavoring  to  grow  its
services  business;  however, revenues from  these  services
typically  fluctuate significantly from quarter  to  quarter
and  produce lower gross margins than systems or maintenance
revenues.


Gross Margin

The Company's total gross margin percentage on revenues from
continuing operations was 44% in 2001, compared  to  37%  in
2000 and 32% in 1999.

Margin  on  systems revenues from continuing operations  was
49%  in  2001, increasing from 38% in 2000 and 30% in  1999.
This  upward trend in the Company's systems gross margin  is
primarily  the result of increased software content  in  the
product  mix.  Also, the Company's systems margins  continue
to  be negatively impacted by the strengthening of the  U.S.
dollar  in its international markets, primarily Europe.   In
2000, a $4.5 million inventory write-down resulted from  the
shutdown  of  the  Company's  hardware  business.    Systems
margins  in  2000 were further reduced by costs incurred  in
fourth  quarter 2000 on IGS contracts awaiting funding  from
the  U.S.  government; however, these negative impacts  were
more  than  offset  by increasing software  content  in  the
product mix as the Company's hardware revenues continued  to
decline.  In 1999, margins were negatively impacted by a  $7
million inventory write-off incurred in connection with  the
Company's  decision  to  exit  the  PC  and  generic  server
business.  This was offset by increased software content  in
the  product  mix and a decline in unfavorable manufacturing
variances  as  the  result  of the outsourcing  of  hardware
product manufacturing to SCI.

In  general, the Company's systems margin may be improved by
higher  software content in the product mix, a weaker dollar
in  international markets, and a higher mix of international
systems  sales  to total systems sales when  the  dollar  is
weaker  in  international markets.  Systems margins  may  be
lowered  by price competition, a higher hardware content  in
the  product  mix,  a stronger U.S. dollar in  international
markets, and a higher mix of federal government sales, which
generally  produce  lower  margins  than  commercial  sales.
While  unable  to  predict the effects that  many  of  these
factors  may have on its systems margin, the Company expects
to  maintain  the improvements resulting from the  Company's
exit of the hardware business.

Margin  on  maintenance revenues from continuing  operations
was  47%  in  2001, 45% in 2000, and 46% in 1999.   Although
maintenance  revenues  have declined  over  the  past  three
years,  the  Company  has been able to maintain  maintenance
margin   levels  by  increasing  the  software  content   of
maintenance  revenue  and reducing the  associated  cost  of
revenues,  due  in  part  to improved  inventory  management
resulting in less inventory obsolescence costs.  The Company
monitors  its  maintenance  costs  closely  and  has   taken
measures, including reductions in headcount, to align  these
costs with the declining levels of revenue.

Margin  on services revenues from continuing operations  was
25%  in  2001, improving from 18% and 16% in 2000 and  1999,
respectively.  Margins in 2001 were positively impacted by a
slight  increase in revenue, coupled with a larger  decrease
in  costs.   Margins  in  2000 were positively  impacted  by
several  large high-margin consulting contracts acquired  by
IGS.   Services revenues in 1999 increased by 17%  from  the
1998   level  without  a  proportional  increase  in  costs.
Significant  fluctuations in services revenues  and  margins
from  period to period are not unusual as the costs incurred
on  certain types of service contracts may not coincide with
the  recognition of revenue.  For contracts other than those
accounted  for  under  the percentage-of-completion  method,
costs  are  expensed  as incurred, with revenues  recognized
either  at  the end of the performance period  or  based  on
milestones specified in the contract.

In  third  quarter  2000, the Company  exited  the  hardware
business  but  continues to service its  installed  hardware
base under warranty and maintenance contractual obligations.
All hardware currently sold by the Company is purchased from
third-party vendors.  Any unanticipated change in technology
or  an  inability of the Company to accurately forecast  its
inventory  needs  could significantly and  adversely  affect
gross margins and reported results of operations.


Operating Expenses (exclusive of reorganization charges)

Operating expenses for continuing operations declined by 16%
in  2001, 22% in 2000, and 14% in 1999.  In response to  the
level  of  its  previous operating losses, the Company  took
various  actions,  including employee terminations  and  the
closure  and  sale  of  certain  unprofitable  and  non-core
business  operations,  which  reduced  the  number  of   its
employees by approximately 35% during the three-year  period
ended December 31, 2001.

Product  development expense declined by 4% in  2001,  after
declines  of  10% and 18% in the two preceding  years.   The
2001  decrease  is mainly the result of the  exit  from  the
hardware  business  and  a decline in  software  development
costs.  In 2000, an increase in software development expense
due  to  net realizable value concerns partially offset  the
positive  impact  of the headcount decline.   1999  expenses
were lowered due to additional software development projects
whose  cost qualified for capitalization, primarily  related
to the Company's shipbuilding software development efforts.

The  Company  capitalizes certain costs incurred  after  the
technological feasibility of new software products has  been
established  and amortizes those costs against the  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 (see Note 1 of Notes to Consolidated Financial
Statements).

Sales  and  marketing expense declined 19%  in  2001,  after
decreasing by 30% in 2000 and 22% in 1999.  Expenses in  all
three  years were reduced by the strengthening of  the  U.S.
dollar   against   international   currencies.    Additional
headcount  reductions throughout 2001, 2000, and  1999  have
resulted  in  significant expense declines  worldwide.   The
Company's   sales  and  marketing  expenses  are  inherently
activity-based  and  can  be  expected  to  fluctuate   with
activity levels.

General  and administrative expense declined by 19% in  2001
after  decreasing  by 15% in 2000 and increasing  by  8%  in
1999.    Expenses  decreased  in  2001  due   primarily   to
reductions  in  corporate  and international  headcount  and
worldwide  bad debt expenses.  Legal expenses in  2001  were
flat  with those in 2000; however, the Company expects  that
its legal expenses will fluctuate with the level of activity
associated with the Intel litigation.  The decline  in  2000
was  due primarily to a decline in legal fees as the  result
of  reduced activity related to the Intel litigation  and  a
decline  in  compensation expenses as a  result  of  reduced
headcount.   The  expense increase  in  1999  resulted  from
increased bad debt expenses in the U.S. and continued growth
in the Company's legal fees, partially offset by across-the-
board declines in all other expense categories.


Product Development

The Company currently has many ongoing  projects relating to
development   of  new  products.   These  projects   include
software for engineering information management, intelligent
piping  and  instrumentation  diagrams,   3D  visualization,
enterprise information access and reports, and 2D  CAD;  and
new technology for the earth-imaging industry which includes
new    digital   products   for   photogrammetry,   airborne
reconnaissance, aerial mapping, and image distribution.  For
these   projects,   the   Company  incurred   research   and
development expenditures of $11.3 million, $6.1 million, and
$515,000 for the periods ended December 31, 2001, 2000,  and
1999, respectively.  These  expenses  are  included  in  the
consolidated statements  of operations  as  a  component  of
"Product development."  Capitalized research and development
expenses  totaling   approximately   $9.8 million  and  $9.7
million are included as a component of "Capitalized software
development  costs"  in  the  consolidated balance sheets at
December  31, 2001, and 2000, respectively.


Reorganization Charges

During  the three years ended December 31, 2001, the Company
implemented various reorganization actions in an  effort  to
align costs with the level of revenues generated.

In    2001,    European   severance   liabilities   totaling
approximately $400,000 were  reversed  as  the Company's new
business  segments, in response to unanticipated  attrition,
hired  or are rehiring some of the employees whose positions
had  been  eliminated by the 2000 reorganization  plan.   In
addition, a few of the terminated employees left the Company
voluntarily, which also contributed to the reduction of  the
Company's severance requirements.  This expense reversal  is
reflected in "Reorganization charges (credit)" in  the  2001
consolidated statement of operations.  Cash outlays in  2001
for   severance   that  related  to  the  2000   and   prior
reorganization plans approximated $3.6 million.  At December
31,  2001,  the Company had no accrued liability related  to
the prior years' restructuring efforts.

In  the  first  quarter of 2000, the Company  announced  its
intention  to  exit  the  hardware  business.   The  Company
completed  this exit in the third quarter of 2000  with  the
sales of its Intense3D graphics accelerator division and its
high-end  workstation and server business (see  Note  15  of
Notes   to   Consolidated   Financial   Statements).    Upon
completion  of  these transactions, the Company  incurred  a
charge   to   operations  of  approximately  $8.5   million,
including amounts reflected in "Cost of revenues -  Systems"
and "Cost of revenues - Maintenance"  of  $4.5  million  and
$200,000,  respectively.  The amounts reflected  in  cost of
revenues   represent  the  costs  of  inventory   write-offs
incurred as a result of the closure.  With the exception  of
these  costs, all expenses associated with the  closure  are
reflected in "Reorganization charges (credit)" in  the  2000
consolidated  statement  of  operations.   Severance   costs
associated  with  the  closure  totaled  approximately  $1.7
million.    Approximately  50  positions   were   eliminated
worldwide,  primarily in the sales and marketing area,  with
the majority of the related expense incurred in Europe.  The
remaining  exit costs consisted primarily of  related  fixed
asset  write-offs  of $1.5 million and  accruals  for  lease
cancellations and idle building space.

In  the fourth quarter of 2000, the Company began efforts to
align  its  international operations with its  new  vertical
business segments and bring the cost of those operations  in
line  with the current level of revenue.  As part  of  these
efforts,  the Company eliminated approximately 145 positions
worldwide   in   its  sales  and  marketing,   general   and
administrative, and customer service and support areas, with
the  majority of the related expense incurred in Europe  and
Asia.   The cost of the reorganization totaled approximately
$5.3  million,  primarily  for employee  severance  pay  and
related expenses.  The Company estimates that this reduction
in  force will result in annual savings of approximately $10
million.

Cash  outlays  in  2000 for severance that  related  to  the
Company's   restructuring   efforts   were   $7.3   million.
Additionally, during third and fourth quarter 2000, European
severance  liabilities totaling approximately $600,000  were
reversed  as  some  of the employees affected  by  the  1999
actions left the Company voluntarily.  This expense reversal
is  reflected  in "Reorganization charges (credit)"  in  the
2000 consolidated statement of operations.  At December  31,
2000,  the  total remaining accrued liability for  severance
relating  to  the 2000 reductions in force was approximately
$4 million.  In 2001, $3.6 million was paid and $400,000 was
reversed.

In  the  second  quarter of 1999, most of the Company's  ICS
subsidiaries in Europe were closed in response to  continued
operating   losses  in  its  ICS  business   segment.    The
associated  cost  of  $2.5 million, primarily  for  employee
severance  pay,  is  included  in  "Reorganization   charges
(credit)"  in the 1999 consolidated statement of operations.
Approximately 46 European positions were eliminated, all  in
the  sales  and marketing area.  The Company estimates  that
this   resizing   has   resulted  in   annual   savings   of
approximately $3 million.

In  the  third  quarter  of 1999, the Company  took  further
actions  to  reduce  expenses in its  unprofitable  business
segments and restructure the Company to support the vertical
markets  in  which  it  operates.   These  actions  included
elimination   of  approximately  400  positions   worldwide,
completion of the worldwide vertical market alignment of the
sales force, and narrowing of the focus of the Company's ICS
business   segment   to  high-end  workstations,   specialty
servers, digital video products, and 3D graphics cards.   As
a  result of these actions, the Company recorded a charge to
operations of $20.1 million, of which $7 million is included
as  a  component of "Cost of revenues - Systems" in the 1999
consolidated  statement  of  operations.   This  $7  million
charge  represents the cost of inventory write-offs incurred
as  a  result  of  ICS' exit from the PC and generic  server
business.  Severance costs associated with the third quarter
of  1999  reorganization totaled approximately $8.7 million,
of which $7.8 million is included in "Reorganization charges
(credit)"  in the 1999 consolidated statement of operations.
The   remaining   severance  costs  related   to   headcount
reductions  in the Company's VeriBest business segment  and,
accordingly,  they are reflected in "Loss from  discontinued
operation,  net  of  income taxes" in the 1999  consolidated
statement  of  operations.  The Company estimates  that  the
annual  savings  resulting  from  this  reduction  in  force
approximated  $22  million.   The  remainder  of  the  third
quarter  1999 reorganization charge consisted of  write-offs
of  capitalized business system software no longer  required
as  a  result  of verticalization of the Company's  business
segments and resulting decentralization of portions  of  the
corporate financial and administrative functions.

Cash  outlays  in  1999 for severance that  related  to  the
Company's  restructuring actions approximated $9.7  million.
At  December  31,  1999,  the Company  had  a  liability  of
approximately  $5 million related to the 1999 reductions  in
force, all of which was paid or reversed in 2000.


Non-operating Income and Expense

Interest expense for continuing operations was $1.8  million
in  2001, $4 million in 2000, and $5.7 million in 1999.  The
Company's   average  outstanding  debt  has   declined   due
primarily to repayment of borrowings utilizing existing cash
balances  and  the  proceeds from sales of various  non-core
businesses  and assets.  See Note 8 of Notes to Consolidated
Financial  Statements for details of the  Company's  current
financing arrangements.

"Other income (expense), net" in the consolidated statements
of operations consists primarily of interest income, foreign
exchange gains and losses, and other miscellaneous items  of
non-operating  income  and expense.  In  2001,  this  amount
included a $3.8 million payment received from Micrografx for
a  convertible debenture held by the Company,  $1.7  million
for  a  Mentor  Graphics warrant, interest  income  of  $7.4
million  (resulting  primarily from the  BSI  note  and  the
Company's higher level of cash), and a net foreign  exchange
loss  of $1.5 million.  See "Impact of Currency Fluctuations
and Currency Risk Management" and Notes 5 and 13 of Notes to
Consolidated Financial Statements.


Income Taxes

The Company earned pretax income before minority interest of
$28.9 million in 2001, compared to $19.2 million in 2000 and
to  a  pretax  loss  of $72.5 million in 1999.   Income  tax
expense in each of these years resulted primarily from taxes
on   individually  profitable  majority-owned  subsidiaries,
including  the  Company's  60%  ownership  interest  in  Z/I
Imaging  in  2001, 2000, and 1999.  There  was  no  material
income  tax  expense  or benefit related  to  the  Company's
discontinued VeriBest operation in 1999.

Note   9  of  Notes  to  Consolidated  Financial  Statements
contains a reconciliation of statutory income tax expense or
benefit  to actual income tax expense for each year  in  the
three-year  period  ended December 31,  2001,  and  includes
further details of the Company's tax position, including net
operating income (loss), and tax credit carryforwards.


Discontinued Operation

On  October  31,  1999, the Company sold its VeriBest,  Inc.
business  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  and in "Gains on sales of assets"  in  the  1999
consolidated statement of cash flows.

The  VeriBest business segment 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 its sale, VeriBest incurred
an   operating  loss  of  $7.3  million  on  revenues   from
unaffiliated   customers  of  $23.7   million.    VeriBest's
operating  loss for 1999 included reorganization charges  of
$900,000  incurred  for  employee  terminations as  part  of
various  company-wide  restructurings  (see  "Reorganization
Charges").

Summarized  financial information for the VeriBest  business
segment  for  1999  is  presented in  Note  4  of  Notes  to
Consolidated Financial Statements.


Results by Business Segment

The year 2000 was a transitional year for the Company during
which much effort was focused on organizing the Company into
five  business segments.  In third quarter 2000, the Company
substantially  completed the U.S. portion of  this  process,
and the international portion was completed during the first
quarter  of  2001.   The  following  discussion  provides  a
comparative analysis of results of operations based  on  the
Company's current business structure for 2001 and  2000,  as
well  as  a  discussion of the prior business structure  for
2000  and  1999.   The Company is unable to restate  current
year  data into the previous segment structure and 1999 data
into the current segment structure to provide comparability,
as  this would be impracticable, and would involve excessive
cost  and  require extensive estimations.  One segment,  Z/I
Imaging,  did  not change as a result of the new  structure.
Information reported for previous years is comparable to the
new presentation, though 1999 includes only three months  of
activity  for  Z/I Imaging as the subsidiary was  formed  on
October  1, 1999.  In the Company's new reporting structure,
its 2000 loss from operations is attributed primarily to its
ICS  business  segment, whose operations  ceased  in  fourth
quarter 2000, and to the Corporate operation, mainly due  to
general  corporate  expenses.   See  Note  12  of  Notes  to
Consolidated  Financial Statements for  further  explanation
and details of the Company's segment reporting, including  a
presentation   of  the  Company's  new  vertical   operating
structure for 2000 and beyond.

Current Segment Structure
IGS.  IGS earned operating income of $10 million on revenues
of  $134.1  million,  compared to 2000 operating  income  of
$13.8  million on revenues of $159.5 million.  IGS'  systems
revenues were adversely impacted by weakened demand for  the
Company's  hardware product offerings due to  the  Company's
exit  from  the  hardware business in the third  quarter  of
2000.   Additionally, in fourth quarter 2000,  its  revenues
declined  as the result of delayed funding on several  large
government  contracts  which were funded  in  first  quarter
2001.   In  2001, maintenance revenues declined due  to  the
sale  of  certain non-core products to BSI.   The  segment's
total gross margin decreased from 28% in 2000 to 25% in 2001
due  to  a  decline in hardware and maintenance business  as
noted above.  The decline in revenue is partially offset  by
a  13%  decline  in  cost of revenues  associated  with  the
revenue  reduction.  Operating expenses  declined  22%  from
reductions in headcount and bad debt expenses.

IMGS.   Intergraph Mapping and GIS Solutions ("IMGS") earned
operating  income  of  $5.1 million on  revenues  of  $136.8
million,  compared to 2000 operating income of $4.5  million
on  revenues of $160.9 million.  IMGS' systems revenues were
adversely  impacted  by weakened demand  for  the  Company's
hardware  product offerings due to the Company's  exit  from
the   hardware  business  in  the  third  quarter  of  2000.
Maintenance revenues declined due to the sale of certain non-
core  products  to BSI.  Services revenue increased  27%  to
partially offset these declines.  The segment's total  gross
margin   was   approximately  42%  in   2001   compared   to
approximately 36% in 2000.  The systems revenue decline  was
more than offset by a reduction in systems cost of revenues.
In addition, total gross margin increased due to an increase
in  the services margin.  Operating expenses were flat  with
the 2000 level.

PP&O.   Intergraph Process, Power & Offshore ("PP&O") earned
operating  income of $6.8 million and $9.9 million  in  2001
and  2000,  respectively, on revenues of $116.5 million  and
$123.7  million.   The 6% decline in revenue  is  due  to  a
reduction  in  hardware  sales  and  associated  maintenance
revenue due to the Company's exit from the hardware business
in   the  third  quarter  of  2000,  and  the  reduction  of
maintenance revenues resulting from the sale of certain non-
core  products  to  BSI.  The segment's total  gross  margin
improved  from 52% in 2000 to 61% in 2001 as a result  of  a
reduction  of  sales  of lower-margin  products.   Operating
expenses  for the segment increased 20%, mainly in  research
and  development.   To  better  reflect  the  industries  it
serves,  the  division  changed  its  name  from  Intergraph
Process & Building Solutions to Intergraph Process, Power  &
Offshore in January 2002.

IPS.   IPS earned operating income of $5.3 million and  $1.4
million  in  2001  and 2000, respectively,  on  revenues  of
$115.8 million and  $127.9 million.  The improvement in IPS'
2001  results of operations was due primarily to an increase
in gross margin from 38% in 2000 to 43% in 2001, largely due
to  a  higher  software  content in  revenues  and  improved
margins on maintenance.  This margin improvement was coupled
with a 4% decrease in operating expenses.  IPS' general  and
administrative expenses have decreased by 14% from the  2000
level, as 2000 included legal expenses incurred in Australia
for  an  inquiry related to a large contract award.   It  is
unknown  at  present whether this inquiry will result  in  a
legal proceeding of any significance with respect to the IPS
business segment and the Company.

Z/I  Imaging.  In 2001, Z/I Imaging earned operating  income
of  $4.5 million on revenues of $38.6 million, after earning
operating  income  of  $9.2 million  on  revenues  of  $43.4
million in 2000.  2000 was the segment's first full calendar
year of operations since its inception October 1, 1999.  The
decrease  in  revenue  in  2001 resulted  from  higher  than
expected  systems revenues in 2000 due to  strong  sales  of
photogrammetric processing systems.  Total gross margin  for
2001  and  2000  approximated 57%, reflecting  high  margins
earned   on  software  and  photogrammetric  systems.    Z/I
Imaging's operating expenses for 2001 were approximately 12%
above  the 2000 level due to increased staffing as a  result
of Z/I Imaging's continued infrastructure building.

ICS.   In  third  quarter 2000, ICS exited the  development,
design,  and  sale  of  hardware  products  and  closed  its
operations.  Before the exit, ICS incurred operating  losses
of  $17.1  million on revenues of $116.4 million.  Effective
with the shutdown of ICS, the Company's hardware maintenance
and  network services operations were combined with the  IGS
business   segment.   See  the  ICS  discussion  below   for
comparative data for 2000 and 1999.

Mid  World.   The  Company's Middle  East  operations  ("Mid
World") incurred operating losses of  $3.3 million and  $1.4
million in 2001 and 2000, respectively, on revenues of $11.8
million and $21.9 million.  Revenues declined in 2001 as Mid
World  primarily  focused on selling the  existing  business
rather  than  on developing new business.  Portions  of  Mid
World  were sold in April 2001 and July 2001.  The  sale  of
the   remaining   portion  of  the  Mid  World   operations,
Intergraph Middle East, Ltd. ("IMEL"), is expected to  close
during  the first quarter of 2002.  Upon completion of  this
sale,  the Company will no longer have subsidiaries  in  the
region  and  will  do business solely through  distributors.
For 2001 and 2000 comparative data, Mid World is included as
a  segment  on a temporary basis (see Note 15  of  Notes  to
Consolidated Financial Statements).

Corporate.   For  2001 and 2000 comparative data,  Corporate
includes  revenues  and associated costs  for  Teranetix  (a
provider  of  computing  support  and  hardware  integration
services) and international hardware maintenance.  Corporate
incurred operating losses of $20.1 million and $35.4 million
in  2001  and 2000, respectively, on revenues of $22 million
and  $46.7 million.  The operating losses are mainly due  to
general  corporate  expenses of $22.6 million  in  2001  and
$35.7   million  in  2000.   For  2001,  operating  expenses
declined by 37% as a result of the Company's ongoing efforts
to   reduce   its  corporate  overhead,  primarily   through
reductions in headcount.  Approximately $2.5 million of  the
fourth  quarter  2000  reorganization  charges  related   to
terminations  of  administrative  personnel,  primarily   in
Europe.

Previous Segment Structure
ICS.   ICS  incurred operating losses of $18.9  million  and
$44.8 million in 2000 and 1999, respectively, on revenues of
$155  million  and  $332.1 million.  ICS'  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.  (See "Litigation and  Other
Risks  and Uncertainties" for a complete discussion  of  the
Company's  dispute  with  Intel  and  its  effects  on   the
operations  of  ICS and the Company.)  In  response  to  its
continued  operating  losses, in  third  quarter  1999,  ICS
exited  the PC and generic server business and narrowed  its
focus  to  workstations,  specialty servers,  digital  video
products and 3D graphics cards.  In third quarter 2000,  ICS
exited  the development and design of hardware products  and
closed its operations.  ICS' revenue declines over the  two-
year period ended December 31, 2000, resulted primarily from
the aforementioned factors associated with the Intel dispute
and  from  its closure in 2000.  ICS' total gross margin  in
2000  was approximately 9% compared to approximately 11%  in
1999.   In  2000,  a $4.5 million inventory  write-down  was
recorded  in  connection with the shutdown of ICS'  hardware
development  business.  2000 margins  were  also  negatively
impacted  by  significant  discounting  on  sales  of   ICS'
remaining  inventory, primarily in the fourth  quarter.   In
1999,  margins improved as a result of outsourcing  to  SCI,
but were offset by a $7 million inventory write-off incurred
as  the  result  of the exit from the PC and generic  server
business.  ICS' operating loss improvement in 2000  was  due
primarily  to successive operating expense declines  of  60%
resulting from headcount reductions achieved over  the  two-
year  period prior to its shutdown in 2000.  Effective  with
the  shutdown of ICS, the Company's hardware maintenance and
network  services  operations were  combined  with  the  IGS
business segment.

IPS.   IPS earned operating income of $5.3 million and $10.8
million,  in  2000 and 1999, respectively,  on  revenues  of
$90.6 million and $96.3 million.  As a general rule, the IPS
business is characterized by large orders that are difficult
to forecast and cause orders to fluctuate significantly from
quarter  to  quarter.   In 2000, IPS' systems  and  services
orders  increased  by  42%; however, a  correlating  revenue
increase did not materialize in 2000 as most of these orders
were   received  late  in  the  third  quarter.   In   2000,
improvements  in IPS' systems and maintenance  margins  from
the  1999  level were offset by a 23% increase in  operating
expenses.    In  anticipation  of  increasing  orders,   the
Utilities  division  of  IPS  increased  its  headcount   by
approximately  7%  from  the 1999 level,  primarily  in  the
product   development   and  sales  and   marketing   areas.
Additionally, IPS' 2000 general and administrative  expenses
increased  by 29% from the 1999 level due to legal  expenses
incurred  in  Australia for an inquiry related  to  a  large
contract  award.   It  is unknown at  present  whether  this
inquiry   will   result  in  a  legal  proceeding   of   any
significance  with respect to the IPS business  segment  and
the Company.

Intergraph Software.  The Software business earned operating
income  of  $8.6 million and $7.3 million in 2000 and  1999,
respectively,  on  revenues  of $338.6  million  and  $469.4
million.   The revenue decline in 2000 was due primarily  to
declining systems revenues, partially the result of weakened
demand  for  the  Company's hardware products,  and  to  the
continued  downward  trend  in  maintenance  revenues.   The
segment's total margin increased from approximately  37%  in
1999  to  42%  in 2000, primarily due to increased  software
content  in  the  product mix.  Though  total  gross  margin
increased in 2000, the 28% decline in revenues resulted in a
significant  reduction in operating income for the  Software
segment; however, the impact of the revenue decline was more
than offset by declines in the segment's sales and marketing
and  general  and administrative expenses of  27%  and  11%,
respectively,  as the result of the Company's reorganization
efforts.    Segment   information   formerly   reported   in
Intergraph Software is now reported in IGS, IMGS, PP&O,  and
IPS   (see  Note  12  of  Notes  to  Consolidated  Financial
Statements).

IGS.   In  2000, IGS earned operating income of $3.6 million
on  revenues  of $144 million, compared to a 1999  operating
income of $12.4 million on revenues of $159.8 million.  IGS'
revenues were adversely impacted by weakened demand for  the
Company's hardware product offerings in both years,  and  in
fourth  quarter 2000, its revenues were further  reduced  as
the  result  of delayed funding on several large  government
contracts  which  were funded in first  quarter  2001.   The
segment's total gross margin stabilized at approximately 24%
for  2000  and  1999.   In  2000,  IGS'  operating  expenses
increased  by  21%,  primarily due to expenses  incurred  in
connection   with  the  verticalization  of  the   business,
including the implementation of a new accounting system  and
an increase in bad debt expenses from the 1999 level.

Z/I  Imaging.  In 2000, Z/I Imaging earned operating  income
of  $9.2 million on revenues of $43.4 million, after earning
operating income of $1.9 million on revenues of $9.8 million
in  fourth quarter 1999.  2000 was the segment's first  full
calendar  year of operations since its inception October  1,
1999.   Z/I  Imaging's systems revenues in 2000 were  higher
than   expected  due  to  strong  sales  of  photogrammetric
processing systems.  Total gross margin for 2000 and  fourth
quarter  1999  approximated  57%,  reflecting  high  margins
earned   on  software  and  photogrammetric  systems.    Z/I
Imaging's  operating  expenses  increased  approximately  6%
above  the  fourth  quarter 1999  annualized  level  due  to
additional personnel added throughout the year.

Corporate Expenses.  General corporate expenses declined  by
41%  in  2000  from  the 1999 level.   These  variances  are
attributed primarily to fluctuations in the Company's  legal
fees.   Expenses  in 2000 were positively  impacted  by  the
Company's  ongoing efforts to reduce its corporate overhead,
primarily  through  reductions in headcount.   Approximately
$2.5  million  of  the  fourth quarter  2000  reorganization
charges related to terminations of administrative personnel,
primarily in Europe.


Outlook for 2002

The  Company  expects that the markets in which it  competes
will  continue  to be characterized by intense  competition,
rapidly  changing technologies, and shorter product  cycles.
Further improvement in the Company's operating results  will
depend   on   further  market  penetration   by   accurately
anticipating customer requirements and technological trends,
and  rapidly and continuously developing and delivering  new
products  that  are  competitively  priced,  offer  enhanced
performance,   and   meet   customers'   requirements    for
standardization  and  interoperability.   Better   operating
results  will also depend on worldwide economic  improvement
and  the  Company's  ability to successfully  implement  its
strategic direction, which includes the operation and growth
of  independent  business segments.   See  "Cautionary  Note
Regarding Forward-Looking Statements."

The Company continues to pursue additional real estate sales
and  facilities  consolidation.  If  completed  as  planned,
these  sales may provide substantial cash to the Company  in
2002.

To  increase profitability, the Company must achieve revenue
growth  and  successfully  complete  its  efforts  to  align
operating expenses with the projected level of revenue.   In
addition,  the Company continues to face legal  expenses  of
unknown duration and amount due to its dispute with Intel.


Litigation and Other Risks and Uncertainties

The  Company  continues its litigation with Intel,  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 for the  Northern
District  of  Alabama, Northeastern Division  (the  "Alabama
Court"),   charging  Intel  with  unlawful  anti-competitive
business practices.  Intergraph alleges that Intel attempted
to  coerce  the Company into relinquishing certain  computer
hardware patents to Intel 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,  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 infringed upon  the
Company's  patents.   The Company's  patents  (the  "Clipper
Patents")  define the architecture of the  cache  memory  of
Intergraph's  Clipper microprocessor.  The Company  believes
this architecture is at the core of Intel's Pentium line  of
microprocessors  and systems.  Intel's Pentium  4  processor
was not commercially available at the time of the filing  of
the lawsuit; however, the Company has reason to believe that
Intel's  Pentium 4 processor infringes the Company's Clipper
patents.   On  December  3, 1997, the  Company  amended  its
complaint to include a count alleging violations of  federal
antitrust laws.  Intergraph asserted 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 enjoined
Intel  from 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.   On  April  16, 1998, Intel  appealed  to  the
United States Court of Appeals for the Federal Circuit  (the
"Appeals Court"), and 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 did not
impact  the  Company's operations due to  an  Agreement  and
Consent  Order  which Intel entered into  with  the  Federal
Trade  Commission ("FTC") on March 17, 1999, not to restrict
sales or take coercive actions such as those alleged by  the
Company in its lawsuit against Intel.

On  June  17,  1998, Intel filed its answer in  the  Alabama
case,   which  included  counterclaims  against  Intergraph,
including claims that Intergraph had 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 patents asserted by Intel.  On  January
11,  2002, Intel stipulated to the dismissal of one  of  the
alleged  counterclaim  patents.  The  Company  continues  to
vigorously defend the remaining counterclaims.  The  Company
does  not  believe  that  Intel's  remaining  counterclaims,
including  Intel  patent counterclaims,  will  result  in  a
material adverse consequence for the Company.

On  June  17, 1998, Intel filed a motion before the  Alabama
Court  requesting a determination that Intel is licensed  to
use  the Clipper Patents.  This "license defense" was  based
on  Intel's  interpretation of the Company's acquisition  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 of the "license defense" 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  December  6,  1999,  in  order  to  obtain
protection  under the aforementioned FTC Consent Order,  the
Company withdrew its request for a patent injunction against
Intel's P5 and P6 families of microprocessors.  (Intel's  P5
and  P6 processor families include the Pentium, Pentium Pro,
Pentium   II,   and   Pentium   III   microprocessors,   but
specifically exclude Intel's Pentium 4, Pentium 4 Xeon,  and
Itanium families of microprocessors.)  On June 4, 1999,  the
Alabama  Court  granted the Company's  September  15,  1998,
motion  and  ruled  that Intel had no  license  to  use  the
Company's Clipper Patents; however, on October 12, 1999, the
Alabama Court reversed its June 4, 1999, order and dismissed
the Company's patent claims against Intel based upon Intel's
"license defense."  The Company appealed the Alabama Court's
October  12,  1999,  order to the  United  States  Court  of
Appeals  for  the Federal Circuit.  On March  1,  2001,  the
Appeals Court reversed the October 12, 1999, decision of the
Alabama  Court,  specifically holding that Intel  was  never
licensed under the Company's Clipper patents.  On March  15,
2001,  Intel filed a petition for rehearing with the Appeals
Court,  requesting  that it reconsider its  March  1,  2001,
decision.   The  Appeals Court subsequently  denied  Intel's
motion  for reconsideration on April 9, 2001.  Intel has  no
further  recourse  with  regard  to  the  assertion  of  the
"license  defense."  The Company believes that  the  Federal
Circuit's  March  1, 2001, patent license decision  is  well
supported by law and fact, and the Company will continue  to
aggressively  pursue  its patent case  for  the  payment  of
royalties  by  Intel for their use of the Company's  Clipper
technology in Intel's Pentium line of products.

On  March  10,  2000,  the Alabama Court  entered  an  order
dismissing  the  antitrust  claims  of  the  Company.   This
dismissal  was  based  in part upon  a  February  17,  2000,
decision  by  the  Appeals Court in  another  case  (CSU  v.
Xerox).   On  April  26,  2000, the  Company  appealed  this
dismissal  to  the United States Court of  Appeals  for  the
Federal  Circuit.   The oral argument for  this  appeal  was
heard  on  March  5,  2001.  The Appeals Court  subsequently
denied  the  Company's appeal on June 8, 2001.  The  Company
does  not believe that the dismissal of the antitrust appeal
will materially affect the Company's remaining claims or the
value of the overall lawsuit.

On  March 17, 2000, Intel filed a series of motions  in  the
Alabama Court to dismiss certain Alabama state law claims of
the  Company.   The Company filed its responses  to  Intel's
motions  on July 17, 2000, together with its own motions  to
dismiss certain Intel counterclaims.  Intel's responses were
filed on November 3, 2000.  The Alabama Court has taken  the
motions  under  submission.   No  oral  argument  has   been
scheduled,  and no decision has been entered by the  Alabama
Court.

The  trial date for this case, previously scheduled for June
2000,  has been continued until on or after January 1, 2003.
Even  though  the  parties have not  been  required  by  the
Alabama  Court  to participate in any court-ordered  dispute
resolution  procedures, the parties have agreed  to  include
the  Alabama  claims in the court-ordered mediation  in  the
Texas case (see the discussion on court-ordered mediation in
the following section on the Texas litigation).

On  July  30,  2001, the Company filed a patent infringement
lawsuit  against Intel in the United States District  Court,
in  the Eastern District of Texas.  The Company has asserted
allegations   that   two   patents  relating   to   parallel
instruction computing ("PIC") are infringed by Intel's IA-64
EPIC (explicitly parallel instruction computing) processors,
including  but not limited to Intel's Itanium  and  McKinley
processors.  The Company is seeking to prohibit Intel's  use
of   the  Company's  patented  PIC  technology  through  the
enforcement  of a patent injunction.  The case  is  set  for
trial  on July 1, 2002.  Pursuant to local court rules,  and
the scheduling order of the Texas Court, the case is set for
court-ordered mediation, with a court-appointed mediator  on
April  3,  2002.  The parties have agreed that the mediation
will  address  all  pending litigation matters  between  the
parties,  which  currently  include  the  Company's  Alabama
Clipper  claims and Alabama state law claims, the Texas  PIC
claims  and  a patent inference action pending in  the  U.S.
Patent & Trademark Office.

Effects.   The Company ceased further design of its  Clipper
microprocessor  at the end of 1993, and made  a  substantial
investment  in  the  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
was  technologically and economically bound to  the  use  of
Intel's  microprocessors.  Successful participation  in  the
high-end  workstation market required involvement  in  Intel
product    development   programs   that   provide   advance
information for the development of new products  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 product  information  and
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, and its interference with the Company's ability
to  work around its withholding of such information, delayed
the  Company's  new product releases by one to  six  months,
resulting in lost sales and reduced margins for the Company,
which   severely   impacted  the  Company's   revenues   and
profitability.  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 1999  and  into
2000.   While  Intel was supplying the Company with  advance
product  samples  and  technical  information,  the  Company
believes that their responsiveness was not at the same level
as  prior to the dispute.  In 1999 and 2000, 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 segment to workstations, specialty servers, digital
video  products,  and 3D graphics cards.  In  third  quarter
2000,  due  to  an  inability to stem hardware  losses,  the
Company sold its Intense3D graphics accelerator division and
its  high-end workstation and server business and closed the
remainder of its hardware development operation.

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  supplemental damage estimates  were  provided  to
Intel  in  August  2001  in  due course  of  the  litigation
process:  estimated  damages for injury covered  under  non-
patent claims of $194 million in lost profits, and estimated
additional  damages  for  injury  covered  under  non-patent
claims for the loss of the Company's hardware operations  of
$160  million, and/or approximately $150 million  in  direct
out-of-pocket   expenses.    Patent   claims   damages   are
calculated  on  a  percentage of infringing sales,  together
with a possible multiplier for willful infringement damages.
The  Company's  supplemental patent royalty  damage  reports
provided  to  Intel  in August 2001 in  due  course  of  the
litigation  process estimate that a reasonable royalty  rate
for  infringed  patents  could range  between  .5  and  4.75
percent.   Intel disputes the Company's damage  conclusions,
and  in the September/October 2001 time frame submitted  its
own damage reports in the due course of the litigation which
differ  from  the Company's damage reports.   The  Company's
damage  reports  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 than 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,  and   the
settlement  by  the Company of the Intel  litigation  in  an
amount  inconsistent  with these  estimates.   Factors  that
could  lead to recovery of 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
patent and/or non-patent claims.   The Company believes that
current  and  potential legal proceedings  relating  to  the
Company's  Clipper  and PIC patents may have  a  significant
impact  on  current  litigants as  well  as  others  in  the
computer industry.  As a result, the Company is mindful that
Intel  or  other  potential litigants of  the  Company  may,
without intending to obtain control of the corporation,  use
the threat of an unfriendly takeover bid as a means to force
the Company to settle to avert the threat of a takeover.

The  Company believes it was necessary to take legal  action
against  Intel  in  order to defend its  former  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  it  will  continue  to  incur  substantial  legal  and
administrative expenses in connection with the lawsuit.

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.

Arbitration  Settlement.  The Company  maintains  an  equity
ownership  position  in  BSI, the  developer  and  owner  of
MicroStation,  a  software product  for  which  the  Company
serves  as  a nonexclusive distributor.  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 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 certain litigation between the companies that was
the  subject of a separate settlement agreement and  payment
for products and services obtained or provided in the normal
course  of business since January 1, 1999.  Both the Company
and BSI expressly denied any fault, liability, or wrongdoing
concerning  the claims that were the subject matter  of  the
arbitration   and   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 3,000,000 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.   As a result of the settlement, the Company's equity
ownership  in  BSI  was  reduced from approximately  50%  to
approximately  31%.  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 as
part of the settlement.

In  first  quarter 1999, the Company accrued a non-operating
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
shown  as  "Arbitration settlement" 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.

Other  Risks  and  Uncertainties.   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
products.   Similarly, trademark rights held by the  Company
are  used  to  preserve and protect the  reputation  of  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  was  used  in  the Company's workstation  and  server
products, is widely available, and many companies, including
Intergraph,  have developed and continue to  develop  patent
positions  concerning technological improvements related  to
personal computers, workstations, and servers.  It does  not
appear  that  the Company will be prevented from  using  the
technology  necessary  to support existing  products,  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.

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
various  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 require an unacceptably high cost
via royalty arrangements.  Patented software techniques that
become de facto industry standards are among those that  may
raise  costs  or  may  prevent the  Company  from  competing
successfully in particular markets.

An   inability   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  markets  in  which  the  Company  competes,  could
significantly  reduce the Company's revenues  and  adversely
affect its results of operations.


LIQUIDITY AND CAPITAL RESOURCES

At  December  31,  2001,  cash  and  short-term  investments
totaled  $110.8 million, down $9 million from  December  31,
2000.   Cash generated from operations totaled $24.5 million
in 2001 and $41.2 million in 2000, compared to a use of cash
of  $9.7 million in 1999.  Cash generation in 2001 and  2000
reflects the Company's improved results of operations.   The
use  of  cash in 1999 included a $12 million payment to  BSI
(see  "Arbitration Settlement") and payments to SCI of $10.2
million to purchase unused inventory (see Notes 13 and 15 of
Notes  to  Consolidated  Financial  Statements).   Severance
payments in 2001, 2000, and 1999 totaled $3.6 million,  $7.3
million, and $9.7 million, respectively.

Net cash provided by (used for) investing activities totaled
($17.5  million), $15.9 million, and $25.5 million in  2001,
2000,  and  1999, respectively.  Cash provided by  investing
activities  in 2001 included $12.7 million in  net  proceeds
from  sales  of assets (primarily receipts of  $5.1  million
from  the additional earn-out provision of the 2000 sale  of
the  Company's civil, plotting, and raster product lines  to
BSI,  $3.8  million  from the settlement of  the  Micrografx
convertible subordinated debenture, $2 million from the sale
of  the  Mentor Graphics warrant, and $1.1 million from  the
sale  of  Saudi Arabia).  Cash used in investing  activities
during  2001 included $11 million for the purchase of short-
term investments.  Cash provided by investing activities  in
2000  included $38.4 million in net proceeds from  sales  of
assets, primarily receipts of $13.6 million from the sale of
the  Company's civil, plotting, and raster product lines  to
BSI, $12.9 million from sales of land and an office building
in the Netherlands, $10.3 million from sales of buildings on
the  Company's Huntsville, Alabama, campus, $2 million  from
the  sale  of a non-core software product, and $1.5  million
from  the  sale  of  an investment in  an  affiliate.   Cash
provided  by  investing activities in  1999  included  $11.7
million contributed by the minority interest partner to  the
start-up  of the Z/I Imaging business and $54.1  million  in
net  proceeds from sales of assets, including $19.9  million
from   the   fourth  quarter  1998  sale  of  the  Company's
manufacturing assets to SCI, $13.7 million from the sale  of
an  office building in the Netherlands, $11 million from the
sale  of  VeriBest, $6.4 million from the sale of  InterCAP,
and  $2.5  million from the sale of land.  Other significant
investing  activities  in  2001  included  expenditures  for
capitalizable  software development of $4.8  million  ($10.8
million  in  2000  and $20.7 million in  1999)  and  capital
expenditures of $9.7 million ($7.2 million in 2000 and $10.2
million  in 1999), primarily for computer equipment used  in
product development and sales and marketing activities.

Net  cash used for financing activities totaled $25 million,
$21.7  million,  and $21 million in 2001,  2000,  and  1999,
respectively, due primarily to net debt repayments of  $28.5
million, $23.4 million, and $23.6 million, respectively.  In
2001,  the Company used approximately $17.8 million  to  pay
down  the term loan with its primary lender and $6.7 million
to  pay  down a long-term mortgage on an office building  in
the United Kingdom.  In 2000, the Company used approximately
$7  million  to  repay its Australian  term  loan  and  $7.1
million  to pay down the term loan with its primary  lender.
Additionally,   in   2000  and  1999,   the   Company   used
approximately  $3.8 million and $4.2 million,  respectively,
to  pay off mortgages on disposed European office buildings.
The  remaining  debt  repayment  activity  in  1999  related
primarily  to  the Company's term loan and revolving  credit
agreement.   An additional reduction in the Company's  long-
term  debt  was achieved through termination of a  long-term
lease  on  one of the Company's facilities in first  quarter
2000.   The  Company accounted for this lease as a financing
and,  upon  termination, long-term debt of $8.3 million  and
property, plant, and equipment of $6.5 million were  removed
from   the  Company's  books.   See  Note  8  of  Notes   to
Consolidated  Financial Statements for  further  details  of
these   transactions  and  a  summary   of   the   Company's
outstanding debt at December 31, 2001.

The   Company's  average  collection  period  for   accounts
receivable in 2001 was approximately 88 days, representing a
slight  decrease from the prior year.  Approximately 74%  of
the  Company's 2001 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   East   customers   was
approximately $13.3 million at December 31, 2001, and  $17.9
million   at  December  31,  2000.   Total  U.S.  government
accounts  receivable was $27.7 million at December 31,  2001
($28.4 million at December 31, 2000).  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
$9  million  to $12 million in 2002, primarily for  computer
equipment   used  in  product  development  and  sales   and
marketing activities.  The Company's term loan and revolving
credit agreement, among other restrictions, limits the level
of the Company's capital expenditures.

Under the Company's January 1997 seven-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  $50 million.  At December  31,  2001,  the
borrowing  base,  representing the maximum available  credit
under  the  line,  was approximately $39 million,  of  which
$10.9 million was allocated to support the Company's letters
of  credit.  In 2001, the Company paid $17.8 million of  the
term  loan with existing cash balances and proceeds received
from  the  sales of assets.  In September 2000, the  Company
paid  $7.1  million of the term loan with proceeds  received
from the sale of several idle office buildings.  At December
31, 2001, the Company had outstanding borrowings of $424,000
under  this  agreement, the $100,000 term  loan  portion  of
which  was  classified as long-term debt in the consolidated
balance  sheet.  The term loan is due at expiration  of  the
agreement.

Borrowings are secured by a pledge of substantially  all  of
the   Company's   U.S.  assets  and  certain   international
receivables.   The rate of interest on all borrowings  under
the agreement is the greater of 6.5% or the Wells Fargo base
rate  of  interest (4.75% at December 31, 2001) plus  .125%.
There  are  provisions  in  the agreement  which  lower  the
interest rate upon achievement of sustained profitability by
the  Company, but only to the minimum interest rate of 6.5%.
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
..20%  of the average unused portion of the revolving  credit
line,  a  letter of credit fee at an annual rate of .75%  of
the undrawn amount of all outstanding letters of credit, and
a  monthly agency fee.  An amendment was executed on  August
1,  2001,  that extends the current agreement until  January
2004  with  no  cancellation penalty to  the  Company  after
January  2003, allows pay-down of the term loan  portion  of
the line, and lowers the facility to $50 million, which will
provide for annual savings of approximately $650,000 to  the
Company.

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
purchases   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 Company's  net
worth  covenant  was  increased to $250  million,  effective
August 1, 2001.

At  December  31,  2001, the Company had approximately  $3.7
million  in debt on which interest is charged under  various
floating   rate  arrangements  (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.   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 and  represents  the
maximum fluctuation experienced in any of those years.   The
Company's  estimate assumes a level of debt consistent  with
the December 31, 2001, level.

The  Company's general financial condition improved in 2001,
and it generated positive operating cash flow for the second
consecutive  year.  The Company is managing  its  cash  very
closely  and believes that the combination of improved  cash
flow  from  operations,  existing cash  balances,  and  cash
available  under  the  revolving credit  agreement  will  be
adequate  to meet cash requirements for 2002.  For the  near
term,  the  Company also anticipates that its cash  position
may  benefit  from further sales of excess real  estate  and
facilities.  However, for the longer term, the Company  must
continue to align its operating expenses with the levels  of
revenue  being  generated if it is to fund  business  growth
without  reliance on funds from sales of assets and external
financing.   The  Company anticipates  no  significant  non-
operating events that will require the use of cash, with the
possible exception of its stock purchase program (see Note 1
of Notes to Consolidated Financial Statements).


Gains on Sales of Assets

"Gains on sales of assets" in the consolidated statements of
operations  and  cash flows consists of the  net  gains  and
losses  recognized by the Company on sales of  various  non-
core  subsidiaries, divisions, and product lines, and  gains
recorded on real estate sales.

In  2001,  the Company reported an additional gain from  the
BSI  transaction of approximately $10.1 million as  part  of
the   initial  consideration  for  the  sale,  as  well   as
consideration for transferred maintenance revenues  for  the
products  sold to BSI, as provided for in the original  sale
agreement.   Also in 2001, the Company reported  a  $600,000
additional gain from the 3Dlabs transaction.  This gain  was
the  result of the final calculation and settlement  of  the
earn-out  provisions with 3Dlabs.  In the third  quarter  of
2001,   the   Company  sold  its  Saudi  Arabian  operation,
reporting  a  $680,000  gain.  This gain  is  offset  by  an
impairment reserve of $150,000 for the expected loss on  the
completion of the sale of IMEL.

In  2000, the Company recorded a gain of $23 million on  the
sale of its civil, plotting, and raster product lines to BSI
and  a  gain  of $15.7 million on the sale of its  Intense3D
graphics accelerator division to 3Dlabs.  Also in 2000,  the
Company sold several real estate holdings including some  of
the  buildings  on  its Huntsville, Alabama,  campus  at  an
aggregate  gain of $1.9 million, and land and a building  in
the Netherlands at an aggregate gain of $5.2 million.  Other
significant transactions for 2000 include a $2 million  gain
recognized on the sale of a non-core software product  line,
a  $1.5  million  gain on the sale of an  investment  in  an
affiliate, a $1.5 million gain on the termination of a long-
term  capital lease, and a loss of $1.3 million on the  sale
of the Company's Singapore subsidiary.

In  1999, the Company sold its InterCAP subsidiary at a gain
of  $11.5 million. 1999 also includes a $1.4 million gain on
the   sale   of   land.   See  the  preceding   section   on
"Discontinued  Operation" for a discussion of the  Company's
October  1999  sale  of its VeriBest business  segment,  for
which a resulting gain of $14.4 million was recorded.   This
gain   is   reflected  as  "Gain  on  sale  of  discontinued
operation,  net  of  income taxes" in the 1999  consolidated
statement of operations and in "Gains on sales of assets" in
the 1999 consolidated statement of cash flows.

See  Notes  13  and  15  of Notes to Consolidated  Financial
Statements   for   complete   details   of   the   Company's
acquisitions  and divestitures during the three-year  period
ended December 31, 2001.


Impact of Currency Fluctuations and Currency Risk Management

International   markets,  particularly  Europe   and   Asia,
continue  in importance to the industry and to the  Company.
The Company's operations are subject to and may be adversely
affected  by  a variety of risks inherent in doing  business
internationally,  such  as government  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 2001,  approximately
47%  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 currencies.  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.   The strengthening of the  U.S.  dollar  with
respect  to  the  currencies in Europe has  had  a  negative
impact on the Company's reported results of operation in all
years  in  the  three-year period ended December  31,  2001;
however,  in  1999,  the  associated  negative  impact   was
partially  mitigated  by weakening  of  the  dollar  in  the
Company's  Asian  markets.  The Company estimates  that  the
strengthening  of  the  U.S.  dollar  in  its  international
markets  adversely  impacted its results  of  operations  by
approximately  $.03,  $.08, and $.02 per  share  (basic  and
diluted) in 2001, 2000, and 1999, respectively.  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 $3 million  for  the
year  ended  December  31, 2001.  Likewise,  a  uniform  10%
weakening  in  the  value  of the  dollar  would  result  in
increased  earnings  of  approximately  $3  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 successively  over  the
past  three years as the result of declining hardware  sales
in  its  international regions.  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  United  States,  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; however, the Company's  Canadian
subsidiary  changed its functional currency  from  the  U.S.
dollar to its local currency in January 2002.  See Note 1 of
Notes to Consolidated Financial Statements for a description
of  the  Company's  policy for managing the  currency  risks
associated with its international operations.

In  2001,  2000, and 1999, the Company incurred net  foreign
exchange  losses  from  its continuing  operations  of  $1.5
million, $3.9 million, and $1.3 million, respectively.   The
Company's  exchange  losses for the past  three  years  have
primarily resulted from the strengthening of the U.S. dollar
against  the  Euro,  particularly  with  respect  to   Euro-
denominated  intercompany receivables  of  the  U.S.  parent
company.  The 2001 exchange loss also included approximately
$715,000  in  loss  incurred as  the  result  of  subsidiary
recapitalization.  At December 31, 1999, the Company's  only
outstanding forward exchange contracts related to formalized
intercompany   loans   between   the   Company's    European
subsidiaries that were immaterial to the Company's financial
position.  Effective first quarter 2000, the Company  ceased
hedging any of its foreign currency risks.  At December  31,
2001,   the   Company  had  no  forward  exchange  contracts
outstanding.

The  Company  estimates that a uniform 10% strengthening  or
weakening  in  the  value  of the  dollar  relative  to  the
currencies in which such intercompany receivables and  loans
are denominated at December 31, 2001, 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's  intercompany receivables  have  declined  as  the
result  of  declining sales volumes, reducing the  Company's
currency exposure with respect to these items.

The Company is exposed to foreign currency risks related  to
certain  financial instruments, primarily  foreign  currency
denominated   debt   securities   held   by   its   European
subsidiaries and a long-term mortgage on one of its European
facilities.   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."  In September 2000,  and  with
effect  from  January  1, 2001, Greece  became  the  twelfth
member of the EMU to adopt the Euro.  Euro currency began to
circulate  on  January 1, 2002, and the individual  national
currencies of the participating countries were withdrawn  by
February  28, 2002.  All of the Company's financial  systems
currently  accommodate the Euro and, during 2001, 2000,  and
1999,  the  Company  conducted business in  Euros  with  its
customers   and   vendors  who  chose  to  do   so   without
encountering significant administrative problems.  While the
Company continues to evaluate the potential impacts  of  the
common   currency,   at  present  it  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 European markets.

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


FOURTH QUARTER 2001

Revenues in fourth quarter were $133.1 million, down 8% from
fourth quarter 2000.  The Company earned net income of $11.9
million  ($.23 per share diluted) for the quarter,  compared
to  net  income of $18 million ($.36 per share  diluted)  in
fourth  quarter 2000.  The revenue decline from  the  prior-
year  period was due primarily to a decline in international
maintenance  revenue and U.S. and international professional
services  revenue.   Despite the decline  in  revenues,  the
Company    reported    income   from    operations    before
reorganization  charges of $.03 per share diluted,  compared
to  a  loss  from operations of $.06 per share  diluted  for
fourth quarter 2000.  The impact of the revenue decline  was
offset by an increase of approximately $4.2 million in gross
margin  (from 39% of total revenues in 2000 to 46% in  2001)
primarily from increased software content in the product mix
and  a  17% decline in cost of revenues.  Operating expenses
were  basically  flat  with the fourth quarter  2000  level.
Fourth  quarter  2001 operating results  were  increased  by
gains  on  sales of assets of $5.9 million ($.11  per  share
diluted),  primarily  related to additional  purchase  price
consideration on the sale of the Company's civil,  plotting,
and  raster  product  lines to BSI, and other  non-operating
income  of  $3.9  million for settlement of  the  Micrografx
convertible debenture and $1.7 million for the sale  of  the
Mentor  Graphics  warrant.  Fourth  quarter  2000  operating
results  were  reduced  by reorganization  charges  of  $5.1
million  ($.10 per share diluted) and increased by gains  on
sales  of  assets of $30.4 million ($.61 per share diluted),
primarily  related  to  the sale  of  the  Company's  civil,
plotting,  and  raster product lines to BSI  and  additional
purchase  price consideration earned in connection with  the
third   quarter   2000   sale  of  the  Company's   graphics
accelerator division to 3Dlabs.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In  June  2001,  the  Financial Accounting  Standards  Board
("FASB")  issued Statement of Financial Accounting Standards
("SFAS")   No.   141,  "Business  Combinations,"   requiring
companies to account for all business combinations using the
purchase  method.  This statement became effective  for  the
Company  in  the  third quarter of 2001 and relates  to  all
business  combinations initiated after  June  30,  2001,  or
acquisitions  dated July 1, 2001, or later.  This  statement
did  not  have  an  impact  on  the  Company's  consolidated
operating  results or financial position  for  2001  as  the
Company  did  not  engage  in any business  combinations  or
acquisitions after its effective date.

In  June 2001, FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets," requiring companies to test goodwill and
intangible  assets  with indefinite useful  lives  at  least
annually  for  impairment, and to continue  amortization  of
intangible  assets with finite useful lives over the  useful
lives,  but  without the restraint of an arbitrary  ceiling.
The statement also requires disclosure of carrying values of
goodwill  (by  aggregate and reportable  segment),  carrying
amounts of intangible assets by major intangible asset class
for  those subject to amortization and those not subject  to
amortization,    and   the   estimated   intangible    asset
amortization  expense  for  the  next  five   years.    This
statement  will  become effective for the Company  in  first
quarter  2002,  and  will be applied  to  all  goodwill  and
intangible assets recognized in the financial statements  at
that date.  Any impairment losses arising due to the initial
application of this statement will be reported as  resulting
from   a   change  in  accounting  principle.   The  Company
currently  reviews all goodwill and intangible assets  on  a
monthly  basis  and  does not expect the  adoption  of  this
statement  to  have a significant impact  on  the  Company's
consolidated operating results or financial position.

In  August  2001, FASB issued SFAS No. 144, "Accounting  for
the  Impairment  or  Disposal of Long-Lived  Assets,"  which
supersedes  SFAS No. 121, "Accounting for the Impairment  of
Long-Lived  Assets and for Long-Lived Assets to Be  Disposed
Of."  This statement provides guidance on the accounting for
long-lived  assets  to be held and used,  and  those  to  be
disposed  of  by sale and other than by sale.  Goodwill  has
been  removed from the scope of this statement  and  is  now
addressed  in  SFAS 142 (discussed above).   This  statement
will  become effective for the Company in the first  quarter
of 2002.  The provisions of this statement are to be applied
prospectively.  At December 31, 2001, and 2000, the  Company
had  no  goodwill  recorded.  The Company currently  reviews
long-lived assets on a monthly basis and does not expect the
adoption  of this statement to have a significant impact  on
the  Company's consolidated operating results  or  financial
position.


CRITICAL ACCOUNTING POLICIES

The  Company's significant accounting policies are disclosed
in  Note  1  of Notes to Consolidated Financial  Statements.
The  preparation of financial statements in conformity  with
generally  accepted  accounting  principles  requires   that
management  use judgments to make estimates and  assumptions
that   affect   the  amounts  reported  in   the   financial
statements.   As a result, there is some risk that  reported
financial  results could have been materially different  had
different methods, assumptions, and estimates been used.

The  Company  believes  that of its  significant  accounting
policies,  the  following may involve  a  higher  degree  of
judgment  and complexity as used in the preparation  of  its
consolidated financial statements.


Revenue Recognition

IGS,  IMGS,  and IPS derive a significant portion  of  their
revenue  from  contracts accounted for by the percentage-of-
completion  method with contractual terms  generally  fixed.
The   Company  regularly  reviews  its  progress  on   these
contracts and reviews the estimated costs of fulfilling  its
obligations.   If  the Company does not accurately  estimate
the  resources  required or the scope  of  the  work  to  be
performed,  or  does  not  manage these  contracts  properly
within   the   planned  periods  of  time  or  satisfy   its
obligations  under  the contracts, then future  revenue  and
margins  may  be significantly and negatively  affected,  or
losses on existing contracts may need to be recognized.  Any
resulting reductions in revenues, margins or contract losses
could be material to the Company's results of operations.


Capitalized Software

The  Company  capitalizes certain costs incurred  after  the
technological feasibility of new software products has  been
established  and amortizes those costs against the  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.  During 2001 and 2000, the Company  assessed
projects in process and associated costs capitalized for any
net  realizable  value concerns.  Based on this  assessment,
the  Company  decided  to cease further  capitalization  and
increase  product  development expense by $8.6  million  and
$3.9  million  in  2001 and 2000, respectively,  related  to
these projects such that current capitalized costs would  be
at net realizable value.


Deferred Taxes

The  Company  records a valuation allowance  to  reduce  its
deferred  tax assets to the amount that is more likely  than
not to be realized.  While the Company has considered future
taxable income and ongoing prudent and feasible tax planning
strategies   in   assessing  the  need  for  the   valuation
allowance,  in the event the Company were to determine  that
it  would be able to realize its deferred tax assets in  the
future  in  excess of its net recorded amount, an adjustment
to  the  deferred  tax asset would increase  income  in  the
period  such determination was made.  Likewise,  should  the
Company  determine that it would not be able to realize  all
or  part  of  its net deferred tax asset in the  future,  an
adjustment  to  the deferred tax asset would be  charged  to
income in the period such determination was made.


Investment in Debt and Equity Securities

The  Company  holds minority interests in  companies  having
operations  or  technology  in areas  within  its  strategic
focus,  some  of which are publicly traded and  have  highly
volatile share prices, and some of which are in non-publicly
traded companies whose value is difficult to determine.  The
Company  records  an investment impairment  charge  when  it
believes  an investment has experienced a decline  in  value
that  is  other than temporary.  Future adverse  changes  in
market  conditions or poor operating results  of  underlying
investments  could  result  in losses  or  an  inability  to
recover  the carrying value of the investments that may  not
be  reflected  in  an investment's current  carrying  value,
thereby  possibly  requiring an  impairment  charge  in  the
future.


Bad Debt Reserves

The  Company maintains allowances for doubtful accounts  for
estimated  losses  resulting  from  the  inability  of   its
customers  to  make  required payments.   If  the  financial
condition  of  the Company's customers were to  deteriorate,
resulting  in  an  impairment  of  their  ability  to   make
payments, additional allowances may be required.


Inventory

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 of the  Company  to
accurately  forecast  its inventory  needs  related  to  its
warranty and maintenance obligations could adversely  affect
gross margin and results of operations.



INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

-------------------------------------------------------------------
December 31,                                  2001        2000
-------------------------------------------------------------------

(In  thousands  except share  and  per
share amounts)

Assets
    Cash and cash equivalents              $ 99,773     $119,848
    Short-term investments                   11,035          ---
-------------------------------------------------------------------
       Total cash and short-term
        investments                         110,808      119,848
    Accounts receivable, net                158,873      178,862
    Inventories, net                         24,125       25,290
    Other current assets                     32,687       53,475
-------------------------------------------------------------------
       Total current assets                 326,493      377,475
    Investments in affiliates                20,654       14,262
    Capitalized software development
     costs                                   24,209       23,871
    Other assets                             34,680       42,971
    Property, plant, and equipment, net      51,974       56,329
-------------------------------------------------------------------
       Total Assets                        $458,010     $514,908
===================================================================

Liabilities and Shareholders' Equity
    Trade accounts payable                 $ 22,897     $ 35,224
    Accrued compensation                     31,693       33,257
    Other accrued expenses                   43,765       61,591
    Billings in excess of sales              37,968       46,603
    Income taxes payable                      9,913       10,984
    Short-term  debt and  current
     maturities of long-term debt             2,619        5,765
-------------------------------------------------------------------
       Total current liabilities            148,855      193,424
-------------------------------------------------------------------
    Deferred income taxes                     2,573        6,604
    Long-term debt                            1,114       25,265
    Other noncurrent liabilities              2,729        4,612
-------------------------------------------------------------------
       Total noncurrent liabilities           6,416       36,481
-------------------------------------------------------------------
    Minority interest in consolidated
     subsidiaries                             7,526        7,003
-------------------------------------------------------------------
    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             210,748      214,079
     Retained earnings                      208,268      188,326
     Accumulated other
      comprehensive loss                    (20,603)     (15,931)
-------------------------------------------------------------------
                                            404,149      392,210

     Less - cost of 7,539,419
      treasury shares at December 31, 2001,
      and 7,836,452 treasury shares at
      December 31, 2000                    (108,936)    (114,210)
-------------------------------------------------------------------
       Total shareholders' equity           295,213      278,000
-------------------------------------------------------------------
       Total   Liabilities and
        Shareholders' Equity               $458,010     $514,908
===================================================================

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




INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

-------------------------------------------------------------------------------
Year Ended December 31,                       2001        2000        1999
-------------------------------------------------------------------------------
(In   thousands  except  per   share
amounts)

Revenues
  Systems                                  $301,483     $426,791   $623,451
  Maintenance                               125,305      160,456    186,766
  Services                                  105,273      103,207    104,663
-------------------------------------------------------------------------------
    Total revenues                          532,061      690,454    914,880
-------------------------------------------------------------------------------
Cost of revenues
  Systems                                   153,790      266,147    436,254
  Maintenance                                66,367       87,793    100,823
  Services                                   78,578       84,237     87,868
-------------------------------------------------------------------------------
    Total cost of revenues                  298,735      438,177    624,945
-------------------------------------------------------------------------------
    Gross profit                            233,326      252,277    289,935

Product development                          53,892       56,319     62,638
Sales and marketing                          96,258      118,402    169,805
General and administrative                   75,473       92,699    109,336
Reorganization charges (credit)                (384)       8,498     15,596
-------------------------------------------------------------------------------
    Income (loss) from operations             8,087      (23,641)   (67,440)

Gains on sales of assets                     11,243       49,546     13,223
Arbitration settlement                          ---          ---     (8,562)
Interest expense                             (1,793)      (4,031)    (5,663)
Other income (expense),  net                 11,381       (2,648)    (4,016)
-------------------------------------------------------------------------------
    Income (loss) from  continuing
     operations before income  taxes
     and  minority interest                  28,918       19,226    (72,458)

Income tax expense                           (8,500)      (6,600)    (5,500)
-------------------------------------------------------------------------------
    Income (loss) from continuing
     operations before minority interest     20,418       12,626    (77,958)

Minority interest in earnings of
 consolidated subsidiaries                     (476)      (2,531)      (603)
-------------------------------------------------------------------------------
    Income (loss) from continuing
     operations                              19,942       10,095    (78,561)

Gain on sale of discontinued
 operation, net of income taxes                 ---          ---     14,384
Loss  from  discontinued  operation,
 net of income taxes                            ---          ---     (7,400)
-------------------------------------------------------------------------------
    Net income (loss)                     $ 19,942      $ 10,095   $(71,577)
===============================================================================

    Income (loss) per share - basic

      Continuing operations               $    .40      $    .20   $  (1.60)
      Discontinued operation                   ---           ---        .14
-------------------------------------------------------------------------------
        Net income (loss) per share       $    .40      $    .20   $  (1.46)
-------------------------------------------------------------------------------
    Income (loss) per share - diluted

      Continuing operations               $    .39      $    .20   $  (1.60)
      Discontinued operation                   ---           ---        .14
-------------------------------------------------------------------------------
        Net income (loss) per share       $    .39      $    .20   $  (1.46)
===============================================================================
Weighted average shares
  outstanding - basic                       49,578        49,368     48,906
              - diluted
                                            51,620        49,855     48,906
===============================================================================

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,                      2001          2000       1999
-------------------------------------------------------------------------------
(In thousands)

Cash Provided By (Used For):
Operating Activities
  Net income (loss)                       $ 19,942      $ 10,095   $(71,577)
  Adjustments to reconcile net
   income (loss) to net cash
   provided by (used for) operating
   activities:
    Depreciation                            11,917        14,980     21,228
    Amortization                            14,307        18,906     26,878
    Non-cash portion of arbitration
     settlement                                ---           ---      3,530
    Non-cash portion of reorganization
     charges                                   ---         5,696      9,614
    Write-down of convertible debenture        ---         5,000        ---
    Gains on sales of assets               (11,243)      (49,546)   (27,607)
    Net changes in current assets and
     liabilities                           (10,454)       36,115     28,253
-------------------------------------------------------------------------------
    Net cash provided by (used for)
     operating activities                   24,469        41,246     (9,681)
-------------------------------------------------------------------------------

Investing Activities
  Net proceeds from sales of assets         12,734        38,362     54,056
  Contributions from minority interest
   partner                                     ---           ---     11,732
  Purchases of property, plant,
   and equipment                            (9,675)       (7,244)   (10,221)
  Purchases of short-term investments      (11,035)          ---        ---
  Capitalized software development costs    (4,827)      (10,829)   (20,656)
  Capitalized internal use software costs   (1,973)       (1,057)    (5,875)
  Business acquisition, net of cash
   acquired                                 (2,904)          ---        ---
  Other                                        148        (3,349)    (3,579)
-------------------------------------------------------------------------------
    Net cash provided by (used for)
     investing activities                  (17,532)       15,883     25,457
-------------------------------------------------------------------------------

Financing Activities
  Gross borrowings                           1,653           ---        ---
  Debt repayment                           (28,518)      (23,368)   (23,605)
  Treasury stock repurchase                 (1,875)          ---        ---
  Proceeds of employee stock purchases
   and exercises of stock options            3,818         1,630      2,612
-------------------------------------------------------------------------------
    Net cash used for financing
     activities                            (24,922)      (21,738)   (20,993)
-------------------------------------------------------------------------------
Effect of exchange rate changes on cash     (2,090)       (4,056)    (1,743)
-------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
 equivalents                               (20,075)       31,335     (6,960)
Cash and cash equivalents at beginning
 of year                                   119,848        88,513     95,473
-------------------------------------------------------------------------------
Cash and cash equivalents at end of year  $ 99,773      $119,848   $ 88,513
===============================================================================

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

<TABLE>

INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

                                               <c>      <c>        <c>          <c>         <c>         <c>

  Balance at January 1, 1999                    $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

Comprehensive income (loss):
  Net income                                       ---        ---     10,095        ---          ---      10,095
  Other comprehensive loss:
     Foreign currency translation adjustments      ---        ---        ---     (2,738)         ---         ---
     Less: Net translation loss realized upon
      liquidation of subsidiary                    ---        ---        ---        252          ---         ---
                                                                                   -----
     Net foreign currency translation
      adjustments                                  ---        ---        ---     (2,486)         ---      (2,486)
     Net unrealized holding losses on
      investments                                  ---        ---        ---     (7,939)         ---      (7,939)
                                                                                                          -------
Comprehensive loss                                 ---        ---        ---        ---          ---        (330)
                                                                                                            =====
Issuance of 305,447 shares under employee stock
 purchase plan                                     ---     (2,839)       ---        ---        4,452       1,613
Issuance of 3,250 shares upon exercise of stock
 options                                           ---        (25)       ---        ---           42          17
----------------------------------------------------------------------------------------------------------------------
  Balance at December 31, 2000                   5,736    214,079    188,326    (15,931)    (114,210)    278,000

Comprehensive income (loss):
  Net income                                       ---        ---     19,942        ---          ---      19,942
  Other comprehensive loss:
     Foreign currency translation
      adjustments                                  ---        ---        ---     (1,385)         ---      (1,385)
     Net unrealized holding losses on
      investments                                  ---        ---        ---     (3,287)         ---      (3,287)
                                                                                                          -------
Comprehensive income                               ---        ---        ---        ---          ---      15,270
                                                                                                          ======
Repurchase of 195,000 shares of treasury stock     ---        ---        ---        ---       (1,875)     (1,875)
Issuance of 147,478 shares under employee stock
 purchase plan                                     ---       (746)       ---        ---        2,143       1,397
Issuance of 344,555 shares upon exercise of stock
 options                                           ---     (2,585)       ---        ---        5,006       2,421
----------------------------------------------------------------------------------------------------------------------
  Balance at December 31, 2001                  $5,736   $210,748   $208,268   $(20,603)   $(108,936)   $295,213
======================================================================================================================
</TABLE>

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


INTERGRAPH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Basis   of   Presentation:    The   consolidated   financial
statements  include  the accounts of Intergraph  Corporation
and   its   majority-owned  subsidiaries.   All  significant
intercompany accounts and transactions have been  eliminated
in  consolidation.  As discussed in Note 4, the Company sold
its VeriBest, Inc. business segment on October 31, 1999, and
accordingly  its  operating results have been  removed  from
continuing   operations   and   reported   as   discontinued
operations  for all periods presented through  the  date  of
sale.

The  preparation of financial statements in conformity  with
accounting  principles  generally  accepted  in  the  United
States   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  five
separate  business segments for operational  and  management
purposes:    Intergraph   Government   Solutions    ("IGS"),
Intergraph  Mapping  and GIS Solutions ("IMGS"),  Intergraph
Process,  Power  &  Offshore  ("PP&O"),  Intergraph   Public
Safety,  Inc.  ("IPS"),  and Z/I Imaging  Corporation  ("Z/I
Imaging").  See Note 12 for a description of these  business
segments.

The  Company's  products  are sold  worldwide,  with  United
States and European revenues representing approximately  81%
of total revenues for 2001.

Cash  Equivalents and Short-Term Investments:  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 generally limits the amount of credit  exposure
from any single issuer of securities.  Cash equivalents  and
short-term investments are stated at fair market value based
on   quoted   market  prices.   For  purposes  of  financial
statement presentation, investments with original maturities
of   three  months  or  less  are  considered  to  be   cash
equivalents,  and  investments with original  maturities  of
greater  than  three  months  but  less  than  a  year   are
considered to be short-term investments.

The  Company's investments in debt securities are valued  at
fair  market  value  with any unrealized holding  gains  and
losses  reported  as  a  component  of  "Accumulated   other
comprehensive loss" in the consolidated balance sheets.   At
December  31, 2001, and 2000, the Company held various  debt
securities  maturing within three months or less  with  fair
market  values of approximately $37,300,000 and $63,000,000,
respectively.   Gross  realized gains  and  losses  on  debt
securities sold during the three-year period ended  December
31, 2001, were not significant, and there were no unrealized
holding  gains or losses on debt securities at December  31,
2001, or 2000.

The  Company's December 31, 2001, consolidated cash  balance
includes  approximately $10,638,000 held by Z/I  Imaging,  a
60%-owned consolidated subsidiary.

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

------------------------------------------------------------
December 31,                          2001        2000
------------------------------------------------------------
(In thousands)

Raw materials                      $ 7,076     $ 6,124
Work-in-process                      1,952       3,850
Finished goods                       9,245       6,077
Service spares                       5,852       9,239
------------------------------------------------------------
Totals                             $24,125     $25,290
============================================================

Inventories  on hand at December 31, 2001, and 2000,  relate
primarily   to  continuing  specialized  hardware   assembly
activity  in  the  Company's IGS and  Z/I  Imaging  business
segments,  and  to  the  Company's continuing  warranty  and
maintenance  obligations  on  computer  hardware  previously
sold.

The Company's December 31, 2001, and 2000, raw materials and
work-in-process balances have been reclassified  to  reflect
certain  parts as raw materials rather than work-in-process.
Amounts   currently  reflected  as  work-in-process   relate
primarily  to  sales  contracts  accounted  for  under   the
percentage-of-completion method.

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 of the  Company  to
accurately  forecast  its inventory  needs  related  to  its
warranty and maintenance obligations could adversely  affect
gross margin and results of operations.

Other  Current Assets:  Other current assets  reflected  in
the Company's consolidated balance sheets consist primarily
of  prepaid  expenses, non-trade receivables,  the  current
portion  of notes receivable from sales of various non-core
businesses  and  assets, refundable income taxes,  and  the
Company's net current deferred tax asset.  See Notes 9, 13,
and   15  for  a  discussion  of  significant  transactions
affecting these components in 2001.

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.

On April 1, 1999, as the result of an arbitration settlement
with  Bentley  Systems, Inc. ("BSI"), the  Company's  equity
ownership  in  BSI  was  reduced from approximately  50%  to
approximately  31%.  The Company does not  account  for  its
investment in BSI under the equity method due to a  lack  of
significant   influence.   See  Note  13  and   "Arbitration
Settlement" included in Management's Discussion and Analysis
of  Financial  Condition and Results of Operations  ("MD&A")
for   further   discussion  of  the  Company's   arbitration
proceeding  and business relationship with  BSI.   The  book
value  of  the Company's investment in BSI was approximately
$9,190,000  at December 31, 2001, and 2000.  The Company  is
unable to determine the fair value of this investment.

On  July 21, 2000, as initial proceeds from the sale of  its
Intense3D   graphics  accelerator  division,   the   Company
received  approximately 3,600,000 of the  common  shares  of
3Dlabs,   constituting  an  equity  ownership  interest   of
approximately 19.7%.  Approximately fifteen percent of these
shares  have  been placed in escrow to cover  any  potential
claims  against the Company by 3Dlabs.  On March  29,  2001,
the  Company received approximately 7,591,000 shares  valued
at  $10  million, increasing its ownership to  approximately
37%.   These shares have a three-year irrevocable proxy that
prevents   the  Company  from  having  any  voting   rights;
therefore,  this investment is not accounted for  using  the
equity  method.   The Company maintains  its  investment  in
3Dlabs at market value, with any unrealized holding gains or
losses  recorded  as  a  component  of  "Accumulated   other
comprehensive loss" in the consolidated balance sheets.  The
market   value  of  the  Company's  investment  in   3Dlabs,
excluding  the  shares  held  in escrow,  was  approximately
$10,641,000 at December 31, 2001.  The Company has  recorded
an  unrealized holding loss of approximately $10,607,000 for
the decline in market value of this investment from the date
of  acquisition through December 31, 2001.  See Notes 13 and
15 for further information regarding the 3Dlabs transaction.

Capitalized Software Development Costs:  Product development
costs are charged to expense as incurred; however, the costs
incurred for the development of computer software that  will
be  sold, leased, or otherwise marketed are capitalized when
technological   feasibility  of   the   product   has   been
established.   Such  capitalized costs are  amortized  on  a
straight-line  basis over a period of two  to  three  years.
Amortization of these capitalized costs, included  in  "Cost
of  revenues  -  Systems" in the consolidated statements  of
operations,  amounted to $4,200,000 in 2001,  $9,200,000  in
2000,  and  $14,600,000 in 1999.  Amortization  included  in
discontinued operations amounted to $2,400,000 in 1999.

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.   The   Company
increased  product  development expenses by  $8,646,000  and
$3,911,000  in  2001  and  2000,  respectively,  for   costs
normally  eligible for capitalization due to net  realizable
value  concerns.   Accumulated amortization  (net  of  fully
amortized  projects) in the consolidated balance  sheets  at
December 31, 2001, and 2000, was $8,800,000 and $10,300,000,
respectively.

In  October  2000,  the  Company  entered  into  a  research
services  agreement to develop an advanced,  next-generation
shipbuilding  software product for the design of  commercial
and military vessels.  The agreement allows for two years of
cost  funding  by  the  customer to bring  the  software  to
commercial  release.   The terms include  a  15%  escrow  of
consulting  work until release of product to  the  customer,
sliding  scale  royalty payable to the  customer  on  future
sales of software by the Company, and customer commitment to
purchase and pay maintenance on a minimum number of software
seats.   The  Company will retain the intellectual  property
rights of the software.  Services revenues and costs related
to   the  agreement  totaled  approximately  $2,848,000  and
$1,906,000,  respectively,  for  2001,  and  $2,002,000  and
$1,600,000,   respectively,   for   2000.    Research    and
development   expenses  incurred  prior  to  the   agreement
totaling approximately $9,726,000 were capitalized  and  are
included as a component of "Capitalized software development
costs"  in  the consolidated balance sheets at December  31,
2001, and 2000.

Other  Assets:   Other assets reflected  in  the  Company's
consolidated balance sheets consist primarily of  purchased
software  and  the  noncurrent portion of notes  receivable
from  sales of various non-core businesses and assets  (see
Note 15).

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

-----------------------------------------------------------
December 31,                            2001         2000
-----------------------------------------------------------
(In thousands)

Land and improvements (15-30 years)   $7,565       $7,464
Buildings and improvements (30 years) 76,010       77,548
Equipment, furniture, and
 fixtures (3-8 years)                 98,870      136,754
-----------------------------------------------------------
                                     182,445      221,766
Allowances for depreciation         (130,471)    (165,437)
-----------------------------------------------------------
Totals                              $51,974      $56,329
===========================================================

Other Noncurrent Liabilities:  Other noncurrent liabilities
reflected  in  the  Company's consolidated  balance  sheets
consist  primarily  of  a deferred gain  on  the  sale  and
leaseback of a European office building.

Minority Interest:  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, 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.
("Zeiss")  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.  During 2001, Zeiss made an additional
contribution  of approximately $119,000 in accordance  with
the   formation  agreement  relating  to  Z/I  GmbH.    Z/I
Imaging's  assets, liabilities, and results  of  operations
are   included  in  the  Company's  consolidated  financial
statements.  Zeiss' minority  interest in the earnings  and
equity  of  this  subsidiary  are  reflected  as  "Minority
interest  in  earnings  of consolidated  subsidiaries"  and
"Minority    interest   in   consolidated    subsidiaries,"
respectively,  in the Company's consolidated statements  of
operations and balance sheets for the periods subsequent to
formation of Z/I Imaging.  See Note 13 for a discussion  of
transactions  between Z/I Imaging and  Zeiss  during  2001,
2000, and fourth quarter 1999.

Treasury Stock:  Treasury stock is accounted for by the cost
method.   Treasury stock activity for the three-year  period
ended   December  31,  2001,  (consisting  of  stock  option
exercises,  purchases  of  stock  by  employees  under   the
Company's  stock purchase plan, and the purchase  of  shares
for   the   treasury)  is  presented  in  the   consolidated
statements of shareholders' equity.

On  October 30, 2000, the Company's Board of Directors  (the
"Board") approved the purchase of up to $30,000,000  of  its
outstanding common stock in the open market.  The  Plan  may
be  suspended  at any time after its commencement  and  will
terminate  on  December  31,  2002.   The  Company  has   no
obligation  to purchase any specific number of shares  under
the  Plan.   As  of  December  31,  2001,  the  Company  had
purchased approximately $1,875,000 of its outstanding common
stock  under  this  authorization, with  the  last  purchase
occurring in 2001.

Treasury  stock  purchases are restricted by  the  Company's
term loan and revolving credit agreement (see Note 8).   The
Company has received written consent from its primary lender
for   purchases  of  stock  under  the  October  2000  Board
authorization.

Revenue  Recognition:  In December 1999, the Securities  and
Exchange Commission ("SEC") issued Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"),  providing guidance on the recognition, presentation,
and  disclosure of revenue in financial statements.  SAB 101
outlines  basic  criteria that must  be  met  prior  to  the
recognition of revenue, including persuasive evidence  of  a
sales  arrangement, delivery of products and performance  of
services,   a  fixed  and  determinable  sales  price,   and
reasonable assurance of collection.  For revenue recognition
purposes,  the  Company considers persuasive evidence  of  a
sales  arrangement  to be receipt of a  signed  contract  or
purchase order.

SAB  101  became effective in fourth quarter  2000  for  the
Company.   Upon  implementation  of  SAB  101,  the  Company
changed its method of revenue recognition for certain of its
product  sales,  specifically those for  which  transfer  of
title  occurs  upon delivery to the customer.  Historically,
the  Company  has recognized revenues for its systems  sales
with  no significant post-shipment obligations upon shipment
to  the  customer, with any post shipment costs  accrued  at
that  time.  To comply with the provisions of SAB  101,  the
Company  now  recognizes revenues on such sales  based  upon
estimated  delivery  times, generally less  than  five  days
after  shipment, for the equipment and/or software  shipped.
This  accounting  change  did  not  materially  impact   the
Company's  reported revenues and results of  operations  for
the full year 2000.

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 labor 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.

Multiple  element software sale arrangements are  identified
by the Company's contracts personnel and accounted for based
upon  the  relative fair value of each element.  Revenue  is
not  recognized  on  any element of a  sale  arrangement  if
undelivered  elements are essential to the functionality  of
delivered elements.

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.

Amounts billed to customers for shipping and handling  costs
are classified as revenues in the consolidated statements of
operations with the associated costs included as a component
of cost of revenues.

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.

Foreign Currency Exchange and Translation:  Local currencies
are  the  functional  currencies for the Company's  European
subsidiaries.   The U.S. dollar was the functional  currency
for  all  other international subsidiaries in 2001; however,
the  Company's  Canadian subsidiary changed  its  functional
currency  from  the  U.S. dollar to its  local  currency  in
January 2002.  The Company's exit from the hardware business
significantly changed the economic environment in which  its
Canadian subsidiary operates as most of its cost of sales is
no  longer  primarily in U.S. dollars.  The Company  expects
the  effect  of  the change in functional  currency  on  its
financial statements to be insignificant.  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 forward exchange contracts,
are  included  in  "Other income (expense),    net"  in  the
consolidated statements of operations.  Net exchange  losses
from  continuing  operations  totaled  $1,500,000  in  2001,
$3,900,000  in  2000, and $1,300,000 in  1999.   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  as a component of "Accumulated other comprehensive
loss" in the consolidated balance sheets.

Derivative  Financial  Instruments:   In  June   1998,   the
Financial   Accounting  Standards  Board   ("FASB")   issued
Statement  of  Financial Accounting Standards  ("SFAS")  No.
133, "Accounting  for  Derivative  Instruments  and  Hedging
Activities" (as amended), requiring companies  to  recognize
all  derivatives  as  either assets or  liabilities  on  the
balance sheet and to measure the instruments at fair  value.
This statement became effective for the Company in 2001.

The accounting for changes in the fair value of a derivative
instrument  depends  on whether it has been  designated  and
qualifies as part of a hedging relationship, and on the type
of hedging relationship involved.  The designations for such
derivative instruments, based on the exposure being  hedged,
are  fair value hedge, cash flow hedge, or a hedge of a  net
investment  in  a  foreign operation.  Any  net  results  of
effective hedging relationships are presented in the  income
statement line item associated with the hedged item.

At   December  31,  2001,  and  2000,  the  Company  had  no
freestanding  derivatives,  and  these  amounts   were   not
significant  at December 31, 1999.  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  and  directors.   The  Company
accounts  for these plans in accordance with the  provisions
of  Accounting  Principles Board  ("APB")  Opinion  No.  25,
"Accounting for Stock Issued to 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 employees and directors at exercise prices  which
are  equal  to, less than, or greater than the  fair  market
value   of  the  Company's  stock  on  the  date  of  grant.
Compensation  expense, equal to the difference  in  exercise
price  and  fair  market  value on the  date  of  grant,  is
recognized  over the vesting period for options  granted  at
less than fair market value.

In  accordance with the disclosure provisions  of  SFAS  No.
123,  "Accounting  for  Stock-Based   Compensation"   ("SFAS
123"), the   Company  has  provided  pro  forma  information
reflecting results  of  operations and earnings  (loss)  per
share had compensation expense been recognized forx employee
stock purchases  and for stock  options granted at  or above
market value on the 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  Income (Loss) Per Share:  Basic income (loss) per share
is  computed  using the weighted average  number  of  common
shares  outstanding.   Diluted income (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.  For  the
years  ended  December  31, 2001, and 2000,  these  dilutive
shares  were 2,042,000 and 487,000, respectively  (see  Note
10).

Comprehensive  Income (Loss):  Comprehensive  income  (loss)
includes  net  income (loss) as well as all other  non-owner
changes  in equity.  With respect to the Company, such  non-
owner  equity  items  include foreign  currency  translation
adjustments  and  unrealized gains  and  losses  on  certain
investments  in debt and equity securities.   The  Company's
comprehensive income or loss for each year in the three-year
period  ended  December  31,  2001,  is  displayed  in   the
consolidated    statements    of    shareholders'    equity.
Accumulated other comprehensive loss at the end of  each  of
these  three years consisted of foreign currency translation
adjustments,  and for December 31, 2001, and 2000,  included
unrealized  holding  losses  of $3,287,000  and  $7,939,000,
respectively, on investments primarily related to its common
stock  holdings of 3Dlabs (see Notes 13 and 15).  There  was
no  income tax effect related to the items included in other
comprehensive income or loss for any year in the  three-year
period  ended December 31, 2001.  See Note 9 for details  of
the Company's tax position, including its net operating loss
carryforwards  and  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,
2000,  and  1999 to provide comparability with  the  current
year presentation.

NOTE 2 - LITIGATION AND OTHER RISKS AND UNCERTAINTIES

In  addition to the items described in Notes 1, 5, 7, 8, 12,
and  15, the Company has certain other risks related to  its
business and economic environment and continues its  ongoing
litigation  with Intel Corporation, as further described  in
"Litigation  and Other Risks and Uncertainties" included  in
MD&A.

NOTE 3 - REORGANIZATION CHARGES

In  2001,  the  Company  reversed severance  liabilities  of
$384,000  for  the  2000 reorganization plan.   The  Company
recorded  reorganization charges to  continuing  results  of
operations totaling $13,239,000 in 2000 (including inventory
write-downs  reflected in "Cost of revenues -  Systems"  and
"Cost of revenues - Maintenance" of $4,531,000 and $210,000,
respectively)   and   $22,596,000  in  1999   (including   a
$7,000,000  inventory write-down recorded as a component  of
"Cost  of  revenues - Systems").  For a complete description
of  these charges, see "Reorganization Charges" included  in
MD&A.

NOTE 4 - DISCONTINUED OPERATION

On  October  31,  1999, the Company sold its VeriBest,  Inc.
business  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,  and in "Gains on sales of assets" in the consolidated
statement of cash flows for the same period.

The  Company's consolidated statement of operations reflects
VeriBest's  business  as a discontinued  operation  for  the
period   in  1999  prior  to  its  sale.   The  discontinued
operation   has  not  been  presented  separately   in   the
consolidated  statement  of  cash  flows.   Other  than  its
operating  loss  for the period presented, the  discontinued
operation did not have a significant impact on the Company's
consolidated cash flow or financial position.

Summarized VeriBest financial information for 1999 prior  to
its   sale  is  presented  below.   For  this  presentation,
VeriBest's  operating and net losses have been  adjusted  to
exclude  the  impact  of intercompany  revenue  and  expense
items.

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

Revenues from unaffiliated customers           $23,704
Operating loss before reorganization charges    (6,460)
Reorganization charges                            (871)
Net loss                                        (7,400)
============================================================

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
$3,668,000  at December 31, 2001), primarily its  seven-year
term  loan  and revolving credit agreement, and  a  European
mortgage (see Note 8), approximate fair market values  since
interest  rates on the debt adjust periodically  to  reflect
changes in market rates of interest.  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 to Micrografx,  Inc.
(see Note 15), the Company received a $5,797,000 convertible
subordinated debenture due on March 31, 2002.  In the fourth
quarter  of  2000, the Company recorded a $5,000,000  write-
down  of  the  value of this debenture due to financial  and
operational  difficulties being experienced  by  Micrografx.
The   Company  wrote  off  the  remaining  $797,000  of  the
debenture  in  the  first quarter of 2001,  to  reflect  the
continuing  financial  and  operational  difficulties  being
experienced by Micrografx.  The 2001 and 2000 write-offs are
included  in "Other income (expense),  net" in the 2001  and
2000 consolidated statements of operations, respectively.

On October 31, 2001, Corel Corporation ("Corel"), an Ottawa,
Canada-based  software  company, purchased  Micrografx.   In
order  to  facilitate this purchase, the Company  agreed  to
accept  $3,797,000, plus accrued interest of  $485,000,  for
complete   settlement   of   its  convertible   subordinated
debenture.   The  $3,797,000,  plus  accrued  interest,   is
recorded as a component of "Other income (expense),  net" in
the 2001 consolidated statement of operations.

Stock Warrant:  As part of the proceeds of the October  1999
sale  of  its  VeriBest business segment (see Note  4),  the
Company received a warrant to purchase 500,000 shares of the
common stock of Mentor Graphics at a price of $15 per share.
The   Company  sold  the  warrant  to  Mentor  Graphics  for
$2,000,000  in  October  2001.  A  gain  of  $1,700,000  was
recognized  on  the sale and is recorded as a  component  of
"Other  income  (expense),  net" in  the  2001  consolidated
statement   of  operations.   At  December  31,  2000,   the
Company's  $300,000  estimated  value  of  the  warrant  was
included  in "Investments in affiliates" in the consolidated
balance  sheet.  This value was determined using the  Black-
Scholes  option  pricing model as of the  date  of  sale  of
VeriBest.

Forward  Exchange Contracts:  At December  31,  2001,  and
2000,  the  Company  had  no  forward  exchange  contracts
outstanding. The Company currently is not hedging  any  of
its foreign currency risks.

Interest Rate Swap Agreement:  In 1996, the Company  entered
into an interest rate swap agreement in the principal amount
of  its  Australian term loan agreement.  In June 2000,  the
Company  repaid  substantially  the  entire  amount  of  its
Australian  term  loan and terminated the  related  interest
rate  swap  agreement.  The agreement was for  a  period  of
approximately  six years, and its expiration date  coincided
with  that  of  the  term loan.  Under  the  agreement,  the
Company  paid  a 9.18% fixed rate of interest  and  received
payment  based on a variable rate of interest.  The weighted
average receive rate of the interest rate swap agreement  at
December  31, 1999, was 5.84% and the fair market  value  of
the agreement on that date was approximately $300,000.  This
value  was  determined  by  obtaining  a  bank  quote,   and
represented the amount the Company would have paid if it had
transferred its obligation under the instrument to  a  third
party on that date. The actual cost to terminate the swap in
June 2000 was approximately $160,000.  Cash requirements  of
the  agreement were limited to the differential between  the
fixed rate of interest 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,   divestitures,   and
reorganization charges, in reconciling net income (loss)  to
net cash provided by (used for) operations are as follows:


---------------------------------------------------------------
                         Cash Provided By (Used For) Operations
Year Ended December 31,          2001      2000      1999
---------------------------------------------------------------
(In thousands)

(Increase) decrease in:
 Accounts receivable          $ 16,757   $67,134   $47,418
 Inventories                       352     9,837     3,994
 Other current assets            8,287   (2,239)     7,189
Increase (decrease) in:
 Trade accounts payable        (11,690)  (14,470)  (17,194)
 Accrued compensation and
  other accrued expenses       (18,940)  (10,770)  (11,433)
 Income taxes payable            2,425     3,015     1,876
 Billings in excess of
  sales                         (7,645)  (16,392)   (3,597)
---------------------------------------------------------------
Net changes in current
 assets and liabilities       $(10,454)  $36,115   $28,253
===============================================================

Cash   payments   for  income  taxes  totaled  approximately
$8,300,000,  $8,800,000, and $9,300,000 in 2001,  2000,  and
1999,  respectively.  Cash payments for  interest  in  those
years  totaled  approximately  $2,000,000,  $4,100,000,  and
$5,700,000, respectively.

Significant non-cash investing and financing transactions in
2001  included the receipt of common stock with a  value  of
approximately  $10,000,000 as additional consideration  (and
in  satisfaction of the receivable included in the  December
31,  2000, consolidated balance sheet) for the third quarter
2000  sale  of the Company's Intense3D graphics  accelerator
division,  offset by a $2,695,000 unfavorable mark-to-market
adjustment.   The mark-to-market adjustment is  included  in
"Accumulated  other comprehensive loss" in the December  31,
2001, consolidated balance sheet. Also included in 2001 is a
$10,100,000  increase  to  a note receivable  as  additional
consideration for the fourth quarter 2000 sale of its civil,
plotting, and raster product lines.

Significant non-cash investing and financing transactions in
2000 included the termination of a long-term lease on one of
the  Company's facilities.  The Company accounted  for  this
lease  as a financing lease and, upon termination, long-term
debt  of  $8,300,000 and property, plant, and  equipment  of
$6,500,000  were  removed from the  Company's  books.   Also
during  2000,  the Company's Intense3D graphics  accelerator
division  was sold for initial consideration of  $11,248,000
paid  in  common stock of the acquirer and a  receivable  of
$8,550,000  (included  in  "Other  current  assets"  in  the
December   31,   2000,  consolidated  balance   sheet)   for
additional  consideration earned through the  end  of  2000.
During  the  second  half of 2000, a $7,911,000  unfavorable
mark-to-market adjustment was recorded on the stock received
in  this  transaction and is included in "Accumulated  other
comprehensive  loss" in the December 31, 2000,  consolidated
balance  sheet.   Other significant non-cash  investing  and
financing transactions in 2000 included the sales of product
lines   and  a  subsidiary  in  part  for  long-term   notes
receivable totaling approximately $13,700,000.

Investing  and financing transactions in 1999 that  did  not
require cash included the acquisition of a business in  part
for future obligations totaling approximately $3,300,000 and
the  sale  of a subsidiary company in part for a convertible
subordinated debenture with an original value of $5,797,000.

See  Notes  13  and  15  for further details  regarding  the
Company's  acquisitions and divestitures during  the  three-
year period ended December 31, 2001.


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.  During  the  three
years  ended  December 31, 2001, the Company experienced  no
significant   losses  related  to  trade  receivables   from
individual  customers or from groups  of  customers  in  any
geographic area.

Revenues   from   the  U.S.  government  were  approximately
$143,000,000, $132,400,000, and $149,300,000 in 2001,  2000,
and  1999, respectively, representing approximately  27%  of
total  revenue in 2001, and 19% and 16% of total revenue  in
2000  and 1999, respectively.  Accounts receivable from  the
U.S.   government  totaled  approximately  $27,700,000   and
$28,400,000  at  December 31, 2001, and 2000,  respectively.
The  Company  sells to the U.S. government  under  long-term
contractual  arrangements,  primarily  indefinite  delivery,
indefinite  quantity, and cost-based contracts, and  through
sales  of  commercial  products  not  covered  by  long-term
contracts.  Approximately 69% of the Company's 2001  federal
government  revenues  was 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 include unbilled amounts of $50,700,000
and   $48,300,000   at   December  31,   2001,   and   2000,
respectively.  These amounts include amounts due under long-
term  contracts of approximately $33,400,000 and $24,700,000
at  December  31,  2001,  and 2000, respectively.   Accounts
receivable   also   include  retainages   of   approximately
$5,075,000  and $4,861,000 at December 31, 2001,  and  2000,
respectively.

The  Company maintained reserves for uncollectible accounts,
included   in  "Accounts  receivable"  in  the  consolidated
balance   sheets  at  December  31,  2001,  and   2000,   of
$13,000,000 and $18,200,000, respectively.


NOTE 8 - DEBT AND LEASES

Short- and long-term debt is summarized as follows:

------------------------------------------------------------
December 31,                               2001      2000
------------------------------------------------------------
(In thousands)

Revolving credit agreement
 and term loan                           $  424    $19,344
Australian term loan                        255        278
Long-term mortgages                         826      7,800
Other secured debt                           65      1,417
Short-term credit facilities              2,163      2,191
------------------------------------------------------------
Total debt                                3,733     31,030
Less amounts payable within one year      2,619      5,765
------------------------------------------------------------
Total long-term debt                     $1,114    $25,265
============================================================

In  2001,  the Company reduced total debt by $27.3  million.
Term  debt  outstanding at December  31,  2001,  matures  as
follows:   approximately $2,619,000  in  2002,  $350,000  in
2003,  $223,000 in 2004, $130,000 in 2005, $138,000 in 2006,
and $273,000 thereafter.

Under the Company's January 1997 seven-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  $50 million.  At December  31,  2001,  the
borrowing  base,  representing the maximum available  credit
under the line, was $50 million, of which $10.9 million  was
allocated  to support the Company's letters of  credit.   In
2001,  the Company paid $17.8 million of the term loan  with
existing cash balances and proceeds received from the  sales
of assets.  In September 2000, the Company paid $7.1 million
of  the  term loan with proceeds received from the  sale  of
several  idle office buildings.  At December 31,  2001,  the
Company  had outstanding borrowings of $424,000  under  this
agreement,  the  $100,000 term loan  portion  of  which  was
classified  as  long-term debt in the  consolidated  balance
sheet.  The term loan is due at expiration of the agreement.

Borrowings are secured by a pledge of substantially  all  of
the   Company's   U.S.  assets  and  certain   international
receivables.   The rate of interest on all borrowings  under
the agreement is the greater of 6.5% or the Wells Fargo base
rate  of  interest (4.75% at December 31, 2001) plus  .125%.
There  are  provisions  in  the agreement  which  lower  the
interest rate upon achievement of sustained profitability by
the  Company, but only to the minimum interest rate of 6.5%.
The  average  effective rate of interest for 2001  was  7.6%
(10% in 2000).  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 .20% of the average unused portion  of
the  revolving  credit line, a letter of credit  fee  at  an
annual rate of .75% of the undrawn amount of all outstanding
letters  of credit, and a monthly agency fee.  An  amendment
was  executed  on August 1, 2001, that extends  the  current
agreement  until January 2004, allows pay-down of  the  term
loan  portion  of the line, and lowers the facility  to  $50
million,   which   will  provide  for  annual   savings   of
approximately $650,000 to the Company.

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
purchases   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 Company's  net
worth  covenant  was  increased to $250  million,  effective
August 1, 2001.

The  Company has a long-term mortgage on its office building
in  the  United  Kingdom,  payable in  monthly  installments
through  December  2009.  The outstanding principal  on  the
mortgage  was  $826,000 at December 31, 2001 ($7,800,000  at
December  31,  2000).  The mortgage bears  interest  at  the
United  Kingdom  base  rate plus 1%.   Rates  paid  on  this
mortgage ranged from 5% to 7% in 2001 (6.5% to 7% in 2000).

See  Note  5  for  discussion of  the  fair  values  of  the
Company's debt.

The  Company  leases various property, plant, and  equipment
under  operating  leases  as  lessee.   Rental  expense  for
operating  leases  was  approximately $18,298,000  in  2001,
$21,600,000 in 2000, and $25,100,000 in 1999.  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)

2002                                     $12,197
2003                                       8,788
2004                                       5,758
2005                                       4,215
2006                                       3,640
Thereafter                                23,822
------------------------------------------------------------
Total future minimum lease payments      $58,420
============================================================


NOTE 9 - INCOME TAXES

The  components of income (loss) from continuing  operations
before income taxes and minority interest are as follows:

-----------------------------------------------------------------
Year Ended December 31,                2001      2000     1999
-----------------------------------------------------------------
(In thousands)

U.S.                                 $18,010   $14,138  $(67,733)
International                         10,908     5,088    (4,725)
-----------------------------------------------------------------
Income (loss) from continuing
 operations before income taxes
 and minority interest               $28,918   $19,226  $(72,458)
=================================================================
Income tax benefit (expense) from continuing operations
consists of the following:
-----------------------------------------------------------------
Year Ended December 31,                2001      2000     1999
-----------------------------------------------------------------
(In thousands)

Current benefit (expense):
 Federal                            $(2,008)  $(3,330)  $(1,233)
 State                                 (387)     (597)     (273)
 International                       (6,028)   (3,430)   (4,128)
-----------------------------------------------------------------
  Total current                      (8,423)   (7,357)   (5,634)
-----------------------------------------------------------------
Deferred benefit (expense):
 Federal                               (103)      389       163
 State                                   (9)       38        16
 International                           35       330       (45)
-----------------------------------------------------------------
  Total deferred                        (77)      757       134
-----------------------------------------------------------------
Total income tax expense            $(8,500)  $(6,600)  $(5,500)
=================================================================

Deferred income taxes included in the Company's consolidated
balance  sheets  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,                           2001            2000
-----------------------------------------------------------------
(In thousands)

Current Deferred Tax Assets
 (Liabilities):
   Inventory reserves                $ 5,310        $ 17,218
   Vacation pay and other
    employee benefit accruals          5,619           4,996
   Other financial statement reserves,
    primarily allowances for doubtful
     accounts and warranty             9,801          15,790
   Profit on uncompleted sales
    contracts                         (1,220)            754
   Other current tax assets and
    liabilities, net                     261             507
-----------------------------------------------------------------
                                      19,771          39,265
 Less asset valuation allowance      (16,742)        (32,127)
-----------------------------------------------------------------
 Total net current asset(1)            3,029           7,138
-----------------------------------------------------------------
Noncurrent Deferred Tax Assets
 (Liabilities):
   Net operating loss and tax
    credit carryforwards:
     U.S. federal and state           86,096          58,297
     International operations         19,955          27,963
   Depreciation                       (5,595)         (5,530)
   Capitalized software
    development costs                 (8,173)         (7,628)
   Other noncurrent tax assets and
    liabilities, net                    (191)         (2,478)
----------------------------------------------------------------
                                      92,092          70,624
 Less asset valuation allowance      (94,665)        (77,228)
----------------------------------------------------------------
 Total net noncurrent liability       (2,573)         (6,604)
----------------------------------------------------------------
Net deferred tax asset (liability)   $   456        $    534
================================================================

  (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 $2,052,000 in
2001  due to decreases in deferred tax assets of $17,739,000
arising  from  changes in deductible temporary  differences,
and  by  increases  of $19,791,000 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, 2001, the Company had a U.S.  federal  net
operating  loss  carryforward of approximately  $205,596,000
expiring   from   2009  through  2021.   International   net
operating loss carryforwards total approximately $60,000,000
and expire as follows:


------------------------------------------------------------
                                        International
                                     Net Operating Loss
December 31, 2001                       Carryforwards
------------------------------------------------------------
(In thousands)

Expiration:
3 years or less                           $14,000
4 to 5 years                                6,000
6 to 10 years                               1,400
Unlimited carryforward                     38,600
------------------------------------------------------------
Total                                     $60,000
============================================================

Additionally, the Company has $2,400,000 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 (expense)  at  the
U.S.  federal  statutory tax rate of 35%  to  the  Company's
income  tax expense from 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,              2001       2000      1999
---------------------------------------------------------------
(In thousands)

Income tax benefit (expense) at
 federal statutory rate           $(10,121)  $(6,729)   $25,360
Tax effects of international
 operations, net                    (1,844)   (5,667)   (10,417)
Tax effect of U.S. tax loss
 carried forward                     2,619     8,056    (20,607)
Prior year taxes                       ---      (311)      (762)
Other, net                             846    (1,949)       926
----------------------------------------------------------------
Income tax expense                $ (8,500)  $(6,600)   $(5,500)
================================================================

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, 2001, the  Company
had  not  provided  federal  income  taxes  on  earnings  of
individual   international  subsidiaries  of   approximately
$33,500,000.   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 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 $2,100,000 would be payable if all  previously
unremitted  earnings as of December 31, 2001, 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 5,000,000 shares of common stock
to  grant  as  options  to key employees.   Options  may  be
granted at exercise prices which are equal to, less than, or
greater than the fair market value of the Company's stock on
the  date of grant.  Options are granted for a term  of  ten
years   from  the  date  of  grant.   Options  first  become
exercisable two years from the date of grant and vest  at  a
rate  of 25% per year from that point, with full vesting  on
the  fifth  anniversary  date  of  the  grant.   Options  to
purchase  245,000,  2,770,000, and  216,000  shares  of  the
Company's common stock were granted in 2001, 2000, and 1999,
respectively,  under  this  plan.   At  December  31,  2001,
541,562 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  of  the
Company's  stock on the date of grant.  Options are  granted
for  a  term  of ten years from the date of grant.   Options
first become exercisable one year from the date of grant and
vest  at  a rate of 33% per year from that point, with  full
vesting  on  the third anniversary date of the grant.   Upon
approval  of  this plan, members of the Board who  were  not
otherwise  employed by the Company were granted  options  to
purchase  3,000 shares of the Company's common  stock.   Any
new non-employee director is similarly 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 non-employee director re-elected  to  the
Board  is granted an option to purchase an additional  1,500
shares  of the Company's common stock.  Options to  purchase
9,000, 9,000, and 4,500 shares of the Company's common stock
were  granted  in 2001, 2000, and 1999, respectively,  under
this  plan.   At  December  31, 2001,  215,500  shares  were
available for future grants.

Under   the  2000  Intergraph  Corporation  Employee   Stock
Purchase  Plan, 3,000,000 shares of common stock  were  made
available  for purchase through a series of five consecutive
annual offerings each June beginning June 1, 2000.  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  of the Company 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 147,478, 305,447,
and  557,713  shares  of  stock in  2001,  2000,  and  1999,
respectively,  under  the 2000 and  predecessor  plans.   At
December  31,  2001,  2,686,169 shares  were  available  for
future purchases.

As allowed under the provisions of SFAS 123, the Company has
elected  to apply 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  during the three-year period ended December 31, 2001.
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
reported  net income (loss) and income (loss) per share  for
each  of  the  three  years  would  have  been  impacted  as
indicated below.  The effects of applying SFAS 123 on a  pro
forma  basis  for the three-year period ended  December  31,
2001, 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,              2001      2000      1999
---------------------------------------------------------------
(In thousands except per share amounts)

Net income (loss)    As reported   $19,942   $10,095  $(71,577)
                     Pro forma      16,624     7,400   (74,018)

Diluted income (loss)
 per share           As reported       .39       .20     (1.46)
                     Pro forma         .32       .15     (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 1.09 years after vest date  in  2001
(1.38  years  in 2000 and 1999) and 73% expected  volatility
for the market price of the Company's stock in 2001 (60%  in
2000 and 48% in 1999).  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  rates
of  return were determined separately for each of the serial
vesting  periods  of the options and ranged  from  3.32%  to
4.57% in 2001, 6.03% to 6.37% in 2000, and 5.64% to 6.07% in
1999.

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 under the 1997 and Nonemployee Director
stock  option plans during 2001, 2000, and 1999 were  $6.92,
$3.14,  and $2.49, respectively.  During 2001, options  were
granted  under these plans at exercise prices equal  to  the
market value of the Company's stock on the date of grant.

Activity in the Company's fixed stock option plans for  each
year  in  the three-year period ended December 31, 2001,  is
summarized as follows:

-----------------------------------------------------------------------------
                             2001              2000               1999
                        --------------    --------------     --------------
                               Weighted          Weighted           Weighted
                                Average           Average            Average
                               Exercise          Exercise           Exercise
                        Shares   Price    Shares   Price     Shares   Price
----------------------------------------------------------------------------
Outstanding at beginning
 of year              5,453,510  $6.29  3,550,296  $7.46   3,587,173 $ 7.63
Granted:
  Price equal to
   market value         254,000  11.81  2,744,000   5.57     220,500   5.17
  Price less than
   market value             ---    ---     25,000   5.56         ---    ---
  Price greater than
   market value             ---    ---     10,000   5.56         ---    ---
Exercised              (344,555)  6.85     (3,250)  5.38     (16,750)  1.27
Forfeited              (727,562)  6.85   (872,536)  8.77    (240,627)  8.34
----------------------------------------------------------------------------
Outstanding at end of
 year                 4,635,393  $6.44  5,453,510  $6.29   3,550,296 $ 7.46
============================================================================
Exercisable at end of
 year                 1,112,337  $7.88  1,223,023  $8.62   1,044,111 $10.22
============================================================================

Further information relating to stock options outstanding at
December 31, 2001, is as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                               Options Outstanding                  Options Exercisable
                      ---------------------------------------     -----------------------
                             Weighted Average     Weighted                   Weighted
  Range of                      Remaining          Average                    Average
Exercise Prices       Number  Contractual Life   Exercise Price    Number  Exercise Price
-----------------------------------------------------------------------------------------

                   <c>     <c>                <c>               <c>     <c>

$ 5.063 to $ 5.813    3,685,960   7.88 years           $5.49         509,210    $ 5.37
  5.875 to   9.000      314,183   5.54 years            7.77         208,127      8.06
  9.250 to  14.000      635,250   5.87 years           11.31         395,000     11.00
-----------------------------------------------------------------------------------------
                      4,635,393   7.45 years           $6.44       1,112,337    $ 7.88
=========================================================================================
</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 were either exercised or cancelled.


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, 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 1992.

On  December  5, 2000, the Board resolved to  terminate  the
Stock Bonus Plan effective for the plan year ending December
31,  2000,  and to amend the SavingsPlus Plan to permit  the
Company  to  make discretionary profit sharing contributions
to  it.   As  part of the termination process,  the  Company
applied to the Internal Revenue Service ("IRS") and the  SEC
in  April  2001 for determination of the Stock Bonus  Plan's
tax  qualified  status on termination, and for  confirmation
that  the  special  stock  buy-back provisions  comply  with
federal securities laws.  In November 2001, the Company  was
contacted  by  the  IRS  and the SEC  requesting  additional
information  in  order to complete their  reviews,  and  the
Company  has responded to those requests.  Upon  receipt  of
favorable  responses  from  the  IRS  and  SEC,  each   Plan
participant  will  be  entitled  to  receive  a   lump   sum
distribution  of  his  or her account  balance  (subject  to
income  tax liability and withholdings), or to rollover  the
account  balance  into an Individual Retirement  Account  or
other  qualified plan.  As of December 31, 2001, there  were
9,471  participants with account balances in the Stock Bonus
Plan,  with ownership of approximately 4,593,000  shares  of
Intergraph common stock.

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.  As of January  1,  2002,
employees  may  elect  to contribute  up  to  25%  of  their
compensation to the Plan.  In 2001, the limit was 15%.   The
Company  matches 50% of employee contributions up to  6%  of
each  employee's  compensation.  Cash contributions  by  the
Company  to  the  Plan  were  $2,584,000,  $3,382,000,   and
$4,143,000 in 2001, 2000, and 1999, respectively.

The  Company maintains various retirement benefit plans  for
the  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.    The   Company's
contributions   to   these   plans   totaled   approximately
$2,988,000,  $2,400,000, and $2,900,000 in 2001,  2000,  and
1999, respectively.


NOTE 12 - SEGMENT INFORMATION

The  year  2000  was a transitional year  for  the  Company,
during  which  it  focused  its efforts  on  organizing  the
Company   into   five   business  segments.    The   Company
substantially completed the U.S. portion of this process  in
third  quarter  2000,  and  the  international  portion  was
completed  in  the  first  quarter  of  2001.   The  segment
presentation  below  provides business  segment  information
based  on the Company's new business structure for 2001  and
2000.   Segment information is also presented based  on  the
Company's previous segment structure for 2000 and 1999.  The
Company  is  unable to restate current year  data  into  the
previous  segment structure and 1999 data into  the  current
segment structure to provide comparability, as this would be
impracticable, and would involve excessive cost and  require
extensive  estimations.  One segment, Z/I Imaging,  did  not
change  as  a  result  of  the new  structure.   Information
reported  for  previous  years  is  comparable  to  the  new
presentation,  though  1999 includes only  three  months  of
activity  for  Z/I Imaging as the subsidiary was  formed  on
October 1, 1999.

The  Company's  reportable segments are  strategic  business
units which are organized by the types of products sold  and
the   specific   markets  served.   The  Company   evaluates
performance  of the business segments based on  revenue  and
income  (loss) from operations.  The accounting policies  of
the  reportable segments are consistent across segments  and
are  the same as those described for the Company as a  whole
in  Note  1.  Sales between the business segments, the  most
significant   of   which   are  associated   with   hardware
maintenance services provided by IGS and Corporate to  other
business  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.

Current   Segments:   The Company's 2001  business  segments
consist  of  IGS,  IMGS, PP&O, IPS, and  Z/I  Imaging.   The
Company's Middle East operations ("Mid World"), portions  of
which  were  sold  in  April 2001 and July  2001  (with  the
anticipated sale of the remaining portion expected to  close
during  the first quarter of 2002), are also included  as  a
segment on a temporary basis (see Note 15).  As noted above,
the  international  portion  of the  process  was  completed
during  first  quarter 2001.  As a result, the International
Distribution operation, presented as a temporary segment  in
2000,  was  absorbed  into the other business  segments  for
2001.   Segment  data for 2000 was restated to  include  the
International  Distribution  operation  in  the  appropriate
segment.

IGS  provides  specially  developed software  and  hardware,
commercial off-the-shelf products, and professional services
to  federal, state, and local governments worldwide, as well
as  to commercial customers.  Amounts presented for 2001 and
2000  for  the  IGS business segment include the  previously
reported  federal  operations of IGS, as  well  as  domestic
operations   for  the  transportation  industry,  previously
included  in the Intergraph Software business segment.   The
amounts  for  the new IGS exclude the mapping  organization,
previously  included in the IGS business segment,  which  is
now  included  in IMGS.  Additionally, hardware  maintenance
and  network services, previously included in the Intergraph
Computer  Systems  ("ICS") business unit,  are  consolidated
into IGS for 2001 and 2000 presentation.

IMGS  develops,  markets, and supports geospatial  solutions
for    business   GIS,   land   records   management,   rail
transportation,  environmental  management,  utilities   and
communications  companies,  and commercial  map  production.
Amounts  presented  for  2001 and  2000  below  include  the
domestic  and international operations for both the  federal
and commercial mapping organizations.  The results for these
organizations were included in prior years in  the  IGS  and
Intergraph Software business segments, respectively.

PP&O  supplies software and services to the process,  power,
and  offshore  petroleum industries.  Amounts presented  for
PP&O  below  represent the Company's complete  domestic  and
international  operations for this business.  These  amounts
were previously included in the Intergraph Software business
segment.

IPS develops, markets, and implements systems for the public
safety, utilities, and communications markets.  IPS includes
the  domestic and international public safety and  utilities
and communications operations.  The new presentation differs
from  the  previous  presentation due to  the  inclusion  of
international  utilities  in the  new  presentation.   These
amounts  were previously included in the Intergraph Software
segment.

Z/I  Imaging,  a 60%-owned subsidiary of the Company  formed
October   1,   1999,   supplies  end-to-end   photogrammetry
solutions  for  front-end data collection to mapping-related
and  engineering  markets.  Amounts  presented  include  all
domestic  and  international operations and  are  consistent
between 2001, 2000, and 1999.

ICS  included  the domestic and international operations  of
the  Company's hardware division prior to its third  quarter
2000  closure, although some residual activity  occurred  in
the   fourth  quarter,  primarily  for  sales  of  remaining
inventories.   Information  presented  for   2000   is   not
comparable  to prior years' information as it  excludes  the
Company's ongoing hardware maintenance and network  services
operations  which are now a part of IGS.  2000 is  the  last
year  for presentation of ICS as a business segment.   Going
forward,  the  only  hardware sold by the  Company  will  be
purchased by the business segments from third-party vendors,
and  such  purchases  and resales will be  included  in  the
results of operations of the applicable business segments.

The    International    Distribution   operation    included
international operations for information technology, mapping
and    GIS    solutions,   utilities   and   communications,
transportation, and international corporate expenses.  These
operations  were  previously  reflected  in  the  Intergraph
Software  business  segment and  are  now  included  in  the
appropriate business segments.

Amounts  included in the "Corporate" category  in  2001  and
2000  include  revenues and costs related  to  international
hardware,  previously  included in the  Intergraph  Software
segment,  and  Teranetix, previously  included  in  the  ICS
segment.   Operating expenses for both segment presentations
consist of general corporate expenses, primarily general and
administrative  expenses  remaining  after  charges  to  the
business  segments based on segment usage of  administrative
services.

The following table sets forth revenues and operating income
(loss) before reorganization charges for the Company's  2001
and  2000  reportable segments, together with  supplementary
information related to depreciation and amortization expense
attributable to the business segments.

-------------------------------------------------------------
Year Ended December 31,                   2001        2000
-------------------------------------------------------------
(In thousands)

Revenues:
IGS:
   Unaffiliated customers              $127,492    $143,587
   Intersegment revenues                  6,646      15,912
-------------------------------------------------------------
                                        134,138     159,499
-------------------------------------------------------------
IMGS:
   Unaffiliated customers               128,529     145,209
   Intersegment revenues                  8,253      15,719
-------------------------------------------------------------
                                        136,782     160,928
-------------------------------------------------------------
PP&O:
   Unaffiliated customers               110,915     114,663
   Intersegment revenues                  5,563       9,007
-------------------------------------------------------------
                                        116,478     123,670
-------------------------------------------------------------
IPS:
   Unaffiliated customers               115,624     127,517
   Intersegment revenues                    220         423
-------------------------------------------------------------
                                        115,844     127,940
-------------------------------------------------------------
Z/I Imaging:
   Unaffiliated customers                28,042      28,193
   Intersegment revenues                 10,594      15,219
-------------------------------------------------------------
                                         38,636      43,412
-------------------------------------------------------------
ICS:
   Unaffiliated customers                   ---      89,176
   Intersegment revenues                    ---      27,206
-------------------------------------------------------------
                                            ---     116,382
-------------------------------------------------------------
MidWorld:
   Unaffiliated customers                11,813      21,883
   Intersegment revenues                    ---         ---
-------------------------------------------------------------
                                         11,813      21,883
-------------------------------------------------------------
Corporate:
   Unaffiliated customers                 9,646      20,226
   Intersegment revenues                 12,342      26,459
-------------------------------------------------------------
                                         21,988      46,685
-------------------------------------------------------------
                                        575,679     800,399
-------------------------------------------------------------
Eliminations                            (43,618)   (109,945)
-------------------------------------------------------------
Total revenues                         $532,061    $690,454
=============================================================

-------------------------------------------------------------
Year Ended December 31,                      2001      2000
-------------------------------------------------------------
(In thousands)

Operating income (loss) before reorganization charges:
IGS                                       $ 10,004  $ 13,824
IMGS                                         5,090     4,492
PP&O                                         6,799     9,899
IPS                                          5,310     1,385
Z/I Imaging                                  4,492     9,217
ICS (1)                                        ---   (17,145)
MidWorld                                    (3,318)   (1,410)
Corporate                                  (20,099)  (35,405)
Eliminations                                  (575)      ---
-------------------------------------------------------------
Total                                     $  7,703  $(15,143)
=============================================================

(1)  ICS' operating losses for 2000  include charges for an
  inventory write-down of $4,700,000,  incurred in connection
  with the reorganization and eventual closure of the business
  segment (see Note 3).

-------------------------------------------------------------
Year Ended December 31,                       2001     2000
-------------------------------------------------------------
(In thousands)

Depreciation and amortization expense:
IGS                                         $ 1,323  $ 2,690
IMGS                                          1,927    5,440
PP&O                                          8,179    9,607
IPS                                           5,288    5,661
Z/I Imaging                                   1,220      567
ICS                                             ---    2,488
MidWorld                                        102      228
Corporate                                     8,185    7,205
-------------------------------------------------------------
Total depreciation and amortization expense
  from continuing operations                $26,224  $33,886
=============================================================

Previous  Segments:   Prior  to  third  quarter  2000,   the
Company's  business  segments consisted  of  ICS,  IPS,  the
Intergraph   Software  and  IGS  businesses   (collectively,
"Intergraph"), and Z/I Imaging.  Effective October 31, 1999,
the   Company  sold  its  VeriBest  business  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 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  the  year
ended December 31, 1999, is included in Note 4.

ICS  supplied  high  performance Windows  NT-based  graphics
workstations,   3D  graphics  subsystems,   and   solutions,
including   hardware  maintenance  and   network   services.
Intergraph   supplied  software  and  solutions,   including
hardware purchased from ICS, consulting, and services to the
process  and  building  and infrastructure  industries,  and
provided   services   and   specialized   engineering    and
information   technology  to  support   federal   government
programs.   Prior  to  the October  1999  formation  of  Z/I
Imaging  (see  Note 1), the Intergraph portion  of  the  Z/I
Imaging  business  was included in the  Intergraph  Software
business  segment.  The Company is unable  to  quantify  the
related  revenues and operating income for  the  first  nine
months of 1999, but believes they were insignificant to  the
Software segment as a whole.

Effective  January 1, 1999, the domestic utilities  business
of  Intergraph  Software was merged into IPS.  Additionally,
in   1999,   hardware   maintenance   revenues,   previously
attributed exclusively to ICS, were allocated to the selling
segment  entities with ICS receiving transfer price  revenue
for its indirect sales.

The following table sets forth revenues and operating income
(loss)  before  reorganization  charges  for  the  Company's
previous  business  segments for the two-year  period  ended
December  31, 2000, together with supplementary  information
related    to   depreciation   and   amortization    expense
attributable to the business segments.  Differences  between
the information provided in this table and that provided for
the   current  business  segments  are  the  result  of  the
reorganization described under "Current Segments" above, and
the  Company  considers the new segment  information  to  be
determinative.

------------------------------------------------------------
Year Ended December 31,                   2000       1999
------------------------------------------------------------
(In thousands)

Revenues:
ICS:
   Unaffiliated customers              $109,099   $214,476
   Intersegment revenues                 45,890    117,631
-----------------------------------------------------------
                                        154,989    332,107
-----------------------------------------------------------
IPS:
   Unaffiliated customers                80,457     84,932
   Intersegment revenues                 10,151     11,333
-----------------------------------------------------------
                                         90,608     96,265
-----------------------------------------------------------
Intergraph Software:
   Unaffiliated customers               333,162    455,551
   Intersegment revenues                  5,414     13,860
-----------------------------------------------------------
                                        338,576    469,411
-----------------------------------------------------------
IGS:
   Unaffiliated customers               139,549    152,980
   Intersegment revenues                  4,457      6,817
-----------------------------------------------------------
                                        144,006    159,797
-----------------------------------------------------------
Z/I Imaging:
   Unaffiliated customers                28,187      6,941
   Intersegment revenues                 15,225      2,809
-----------------------------------------------------------
                                         43,412      9,750
-----------------------------------------------------------
                                        771,591  1,067,330
-----------------------------------------------------------
Eliminations                            (81,137)  (152,450)
-----------------------------------------------------------
Total revenues                         $690,454   $914,880
===========================================================

-----------------------------------------------------------
Year Ended December 31,                  2000       1999
-----------------------------------------------------------
(In thousands)

Operating income (loss) before reorganization charges:
ICS (2)                               $(18,895)  $(44,808)
IPS                                      5,309     10,759
Intergraph Software                      8,594      7,285
IGS                                      3,643     12,371
Z/I Imaging                              9,217      1,872
Corporate                              (23,011)   (39,323)
-----------------------------------------------------------
Total                                 $(15,143)  $(51,844)
===========================================================
(2)  ICS'  operating  losses  for  2000  and  1999  include
  charges  for  inventory  write-downs  of  $4,700,000  and
  $7,000,000, respectively, incurred in connection with the
  reorganization  and  eventual  closure  of  the  business
  segment. (See Note 3.)

-----------------------------------------------------------
Year Ended December 31,                   2000      1999
-----------------------------------------------------------
(In thousands)

Depreciation and amortization expense:
ICS                                    $ 2,840    $ 5,239
IPS                                      5,661      5,915
Intergraph Software                     20,571     28,818
IGS                                      2,814      2,886
Z/I Imaging                                567         55
Corporate                                1,433      2,180
-----------------------------------------------------------
Total depreciation and amortization
 expense from continuing operations    $33,886    $45,093
===========================================================

Significant profit and loss items that were not allocated to
the  segments  and  not  included  in  either  the  "Current
Segments"  or  "Previous  Segments" analyses  above  include
reorganization charges (credits) of ($384,000),  $8,498,000,
and $15,596,000 in 2001, 2000, and 1999, respectively, gains
on   sales  of  assets  of   $11,243,000,  $49,546,000,  and
$13,223,000 in the three respective years, and an $8,562,000
charge for an arbitration settlement with BSI in 1999.

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

Revenues from the U.S. government were $143,000,000 in 2001,
$132,400,000 in 2000, and $149,300,000 in 1999, representing
approximately  27%, 19%, and 16% of total revenue  in  2001,
2000,   and  1999,  respectively.   The  majority  of  these
revenues  are  attributed to the IGS business segment.   The
U.S.  government was the only customer accounting  for  more
than  10% of consolidated revenue in each year of the three-
year period ended December 31, 2001.

International   markets,  particularly  Europe   and   Asia,
continue  in  importance to each of the  Company's  business
segments,  except  for  IGS.  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
third-party  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,  capitalized  software  development
costs,  investments  in  affiliates  and  other  non-current
assets.   Assets  have  been allocated to  geographic  areas
based on their physical location.

<TABLE>

<CAPTION>
--------------------------------------------------------------------------------
                            Revenues                    Long-lived Assets
                     2001      2000      1999        2001     2000      1999
--------------------------------------------------------------------------------
(In thousands)

                  <c>        <c>      <c>         <c>       <c>       <c>

United States      $281,734  $333,980  $438,649    $115,920  $113,271  $130,762
Europe              146,406   188,212   285,548      10,291    13,462    24,194
Asia Pacific         49,243    85,662    98,773       3,067     7,826    14,167
Other International  54,678    82,600    91,910       2,239     2,874     3,878
--------------------------------------------------------------------------------
Total              $532,061  $690,454  $914,880    $131,517  $137,433  $173,001
================================================================================
</TABLE>


NOTE 13 - RELATED PARTY TRANSACTIONS

BSI:  The Company maintains an equity ownership position  in
BSI,  the  developer and owner of MicroStation,  a  software
product  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  were
approximately $1,350,000 in 2001, $3,830,000  in  2000,  and
$2,980,000  in  1999.   The  Company's  sales  to  BSI  were
approximately $1,130,000 in 2001, with a receivables balance
at  December 31, 2001, of $407,000.  There were no sales  to
BSI  for 2000 and 1999.  At December 31, 2001, and 2000, the
Company had amounts payable to BSI of approximately $560,000
and $2,310,000, respectively.

On  December  27,  2000, the Company sold its  MicroStation-
based  civil  engineering, plotting, and  raster  conversion
software  product  lines  to BSI  for  initial  proceeds  of
approximately $24,600,000, consisting of $13,600,000 in cash
and  an  $11,000,000  note  due  in  quarterly  installments
through  December 2003.  In the first quarter of  2001,  the
Company reported an additional gain from the BSI transaction
of approximately $4,200,000 as the initial consideration for
the  sale,  and the Company's note receivable from  BSI  was
increased  based upon a revised calculation  of  transferred
maintenance  revenues  for  the products  sold  to  BSI,  as
provided  for in the original sale agreement.  The agreement
also  provided  for additional purchase price  consideration
based  on  renewals through December 1, 2001, of maintenance
contracts  related  to  the  product  lines.   The   Company
recorded  this  additional purchase price  consideration  of
$5,900,000   in   December  2001.   This  additional   gain,
revision,  purchase price consideration,  and  the  proceeds
received at closing of the transaction resulted in gains  of
approximately $10,100,000 and $23,000,000, respectively,  in
the  2001 and 2000 consolidated statements of operations and
cash  flows.   This resulted in an increase in the  note  of
$10,100,000 in the year 2001.

Under  the agreement, the Company may continue to  sell  and
support   MicroStation  and  certain  other  BSI   products,
including  the  product lines sold to BSI, through  reseller
agreements  with BSI.  The operating results of all  of  the
Company's   business  segments,  except  Z/I  Imaging,   are
affected  by  this  agreement.   The  gross  margin  of  the
affected  business segments has been negatively impacted  by
the  loss of maintenance revenue for the product lines  sold
and  by increased software license costs for purchases  from
BSI.   The  resulting  negative impact should  be  partially
offset  by  a  reduction in operating expenses of  the  IMGS
business  segment as the segment will no longer be producing
or marketing the products sold 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 3,000,000 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.
As   a  result  of  the  settlement,  the  Company's  equity
ownership  in  BSI  was  reduced from approximately  50%  to
approximately   31%.   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  settlement" in the consolidated  statement  of
operations  for  the  year ended  December  31,  1999.   See
"Arbitration  Settlement"  included  in  MD&A  for   further
discussion  of  the  Company's  arbitration  proceeding  and
business relationship with BSI.

Zeiss:    Zeiss,  a  manufacturer  of  aerial  cameras   and
photogrammetric  scanning  systems,  has  a  40%   ownership
interest  in  Z/I  Imaging,  a  60%-owned  and  consolidated
subsidiary  of  the  Company formed October  1,  1999.   See
"Minority  Interest"  in  Note 1 for  a  discussion  of  the
formation  of Z/I Imaging.  Z/I Imaging and Zeiss are  party
to  various  license, supply, and reseller agreements  under
which  the two companies sell products and services to  each
other, and Zeiss subsidiaries in Europe provide services  to
Z/I  Imaging  subsidiaries in that  region  through  various
administrative,   marketing,   and   development    services
agreements.   Z/I  Imaging's purchases  from  Zeiss  totaled
$7,228,000  in  2001,  $12,151,000 in 2000,  and  $1,770,000
during  the  three-month  period ended  December  31,  1999.
Related  payables to Zeiss were $3,300,000, $2,498,000,  and
$3,003,000   at   December  31,  2001,   2000,   and   1999,
respectively.  Z/I Imaging's other transactions  with  Zeiss
during  these  periods were insignificant to  the  Company's
consolidated results and financial position.

3Dlabs:  As initial proceeds from the July 2000 sale of  its
Intense3D   graphics  accelerator  division,   the   Company
received   approximately  3,000,000  (excluding  shares   in
escrow) of the common shares of 3Dlabs.  In March 2001,  the
Company  received approximately 7,591,000 shares  valued  at
$10,000,000.   The  Company  now  has  an  equity  ownership
interest  of  approximately 37% in 3Dlabs (see Notes  1  and
15).  Under its agreement with 3Dlabs, the Company served as
intermediary between 3Dlabs and SCI (the Company's  contract
manufacturer) for manufacturing performed by SCI for 3Dlabs.
In  2001,  this obligation to serve as intermediary expired.
The Company earned no margin on the inventory purchased from
SCI  and sold to 3Dlabs, and recorded no associated revenues
or  cost  of  revenues in its results of operations.   Gross
billings to 3Dlabs during 2001 and the second half  of  2000
totaled  $17,833,000  and  $14,114,000,  respectively.    At
December 31, 2001, and 2000, the Company's receivables  from
3Dlabs   for  inventory  purchased  on  its  behalf  totaled
$1,543,000  and  $6,271,000, respectively.   This  non-trade
receivable  is  included in "Other current  assets"  in  the
Company's December 31, 2001, and 2000, consolidated  balance
sheets.


NOTE 14 - SHAREHOLDER RIGHTS PLAN

On  March  4, 2002, the Board approved an amendment  to  the
Shareholder Rights Plan that was adopted on August 25, 1993.
As  part of this plan, the Board 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  $65,  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
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 under certain circumstances.
The Rights expire on March 5, 2012.


NOTE 15 - ACQUISITIONS AND DIVESTITURES

Marian:   In  January 2001, the Company acquired the  MARIAN
materials  management  business unit from  debis  Systemhaus
Industry GmbH of Germany for a purchase price consisting  of
2,000,000 Euros paid at closing and additional payments  due
March  1,  2002, and 2003 to be calculated  as  15%  of  the
annual  revenues  earned by the Company  from  the  sale  of
MARIAN products in 2001 and 2002.  The Company's payment  at
closing approximated $1,820,000 and is included in "Business
acquisitions"  in  the Company's consolidated  statement  of
cash  flows  for  the  year ended December  31,  2001.   The
Company accounted for the acquisition as a purchase  of  the
intangible assets (amortized over a useful life of 2  years)
and  software  rights  (of which the intangible  assets  are
amortized  over a useful life of 4 years and the maintenance
contract  is amortized over a useful life of 3 years).   The
unamortized  balance, approximately $1,700,000  at  December
31,  2001,  is  included in "Other assets" in the  Company's
consolidated  balance  sheet. The accounts  and  results  of
operations of MARIAN have been combined with those  of  PP&O
since the January 1, 2001, effective date of the acquisition
using  the  purchase method of accounting.  This acquisition
did  not  result  in  changes  to  the  Company's  reporting
segments, and has not had a material effect on the Company's
results of operations, nor does the Company expect SFAS  142
to  have  a  material  effect on  the  accounting  for  this
acquisition (see "Recently Issued Accounting Pronouncements"
in MD&A).

Mid  World:   In  the  first quarter of  2001,  the  Company
announced its intention to sell its Mid World operations and
convert  them  into  distributorships.   During  the   first
quarter  of 2001, in connection with its ongoing efforts  to
sell  its  Mid  World  operations, the Company  performed  a
detailed  review of all outstanding contracts,  commitments,
and   receivables   in   the  region.    A   memorandum   of
understanding  was reached on the anticipated completion  of
the largest contract in the region, resulting in charges  to
Mid  World  operations  totaling  $1,629,000  in  the  first
quarter,  including a $923,000 increase to cost of  revenues
for projected cost overruns and a $706,000 charge to general
and administrative expense for the settlement of outstanding
receivables for the project.

In April 2001, the Company closed the sales of it operations
in Turkey and Kuwait.  Effective July 2001, the Company also
closed  the sale of its Saudi Arabian operation and recorded
a  $680,000 gain.  The company also expects to complete  the
sale of Intergraph Middle East, Ltd. ("IMEL"), based in  Abu
Dubai,  United  Arab Emirates, by the end of  first  quarter
2002,  and booked an impairment reserve of $150,000 in third
quarter of 2001 in anticipation of an expected loss  on  the
IMEL  sale.   The  gain on Saudi Arabia,  net  of  the  IMEL
impairment  reserve,  is included  in  "Gains  on  sales  of
assets"  in  the 2001 consolidated statements of  operations
and  cash  flows.   Upon completion of the  IMEL  sale,  the
Company  will no longer have any subsidiaries in the  region
and  will  do  business  solely through  distributors.   The
Company will retain responsibility for some of the Mid World
contracts in effect at the date of the sale.

None  of  the  Mid  World operations were  material  to  the
Company,  and  the  Company  believes  the  sale  of   these
operations will not have a material impact on the  Company's
consolidated  operating results or cash flow.   Mid  World's
consolidated  revenues and after-tax loss for  2001  totaled
approximately   $11,813,000  and  $3,257,000,  respectively.
Consolidated  revenues and after-tax losses  for  2000  were
$21,883,000 and $1,490,000, respectively, and for 1999  were
$25,979,000 and $2,435,000, respectively. Net assets for the
region  totaled  approximately $6,000,000  at  December  31,
2001.   Net  assets for December 31, 2000, and 1999  totaled
approximately $9,000,000 and $11,000,000, respectively.

3Dlabs:   On  July 21, 2000 (but with effect  from  July  1,
2000),  the  Company sold the Intense3D graphics accelerator
division of ICS to 3Dlabs, a supplier of integrated hardware
and software graphics accelerator solutions for workstations
and  design professionals.  As initial consideration for the
acquired  assets, 3Dlabs issued to the Company approximately
3,600,000  of  its common shares, subject to a  registration
rights  agreement and a three-year irrevocable proxy granted
to  3Dlabs,  with an aggregate market value of approximately
$13,200,000 on the date of closing.  Fifteen percent of  the
shares  are in escrow to cover any potential claims  against
the Company by 3Dlabs.

An earn-out provision in the agreement provided for possible
additional consideration, payable March 31, 2001,  in  stock
and/or  cash  at  the  option of 3Dlabs,  based  on  various
performance  measures for the Intense3D  operations  through
the end of 2000, including the financial contribution of the
division,  the  retention  of key  employees,  the  delivery
schedules  of new products, and the performance of  products
developed  by the division.  In December 2000,  the  Company
recorded  a  receivable of $8,550,000  (included  in  "Other
current  assets"  in  the  December 31,  2000,  consolidated
balance sheet) for additional consideration due from 3Dlabs.
The  Company considered this amount to be the minimum  earn-
out  due  from  3Dlabs  and, as such,  recorded  a  gain  of
approximately $15,700,000 in its 2000 results of  operations
based  on  the  initial  proceeds from  the  sale  and  this
estimated minimum earn-out.  This gain is included in "Gains
on  sales of assets" in the 2000 consolidated statements  of
operations and cash flows.

On  March  31,  2001,  the  Company recorded  an  additional
$600,000  gain  as  a  result of the final  calculation  and
settlement  of the earn-out provisions.  The total  earn-out
of  $10,000,000, $8,550,000 of which was accrued  in  fourth
quarter  2000  (see above), was paid to the Company  in  the
form  of stock of 3Dlabs, increasing the Company's ownership
interest  to  approximately 37%, although this  interest  is
subject  to a registration rights agreement and a three-year
irrevocable proxy granted to 3Dlabs.  This gain is  included
in  "Gains  on  sales  of assets" in the  2001  consolidated
statements of operations and cash flows.  As a result of the
final  earn-out  settlement, all contingencies  and  related
transitional services associated with the sale of  Intense3D
have been satisfied.

The  market value of the Company's investment in  3Dlabs  is
included  in  "Investments in affiliates" in  the  Company's
consolidated  balance sheets.  On March 11,  2002,  Creative
Technology  Ltd. ("Creative") signed a definitive  agreement
to  acquire  3Dlabs in a stock and cash transaction.   Under
the  terms  of  the  agreement, Creative will  purchase  the
3Dlabs stock for $3.60 per share, with one-third in cash and
two-thirds   being   converted  to  Creative   stock.    The
transaction  is  expected to close in  late  second  quarter
2002.  See Note 1 for information regarding the valuation of
this investment at December 31, 2001, and December 31, 2000.
For  the period in 2000 prior to the effective date  of  the
sale,  the  Intense3D  division earned operating  income  of
approximately   $8,500,000  on   third-party   revenues   of
$34,000,000.   Full year 1999 third-party  revenue  for  the
division approximated $38,000,000, with operating results at
an approximate breakeven level.

SGI:   On  September 8, 2000, the Company formed a strategic
alliance  with SGI, a worldwide provider of high-performance
computing  and advanced graphics solutions, under which  SGI
acquired   certain  of  the  Company's  hardware  production
business  assets, including ICS' Zx10 family of workstations
and  servers,  and  the Company became  a  reseller  of  SGI
products, offering its software application solutions on the
SGI platform.  The Company received $299,000 as initial cash
consideration  for  the assets sold to SGI.   The  agreement
contained   a  provision,  which  would  provide  additional
purchase  price consideration if revenues from  the  product
lines  sold  reached a certain level in the one-year  period
after  the  closing  date.  The Company  did  not  earn  any
additional   purchase   price   consideration   under   this
provision.   The  Company recorded a loss from  the  initial
cash proceeds of this transaction of approximately $280,000.
This  loss is included in "Gains on sales of assets" in  the
2000  consolidated statements of operations and cash  flows.
The  Company has completed all intermediary and transitional
services responsibilities related to this sale.

Singapore:   On  November 30, 2000,  the  Company  sold  its
Singapore subsidiary for approximately $2,700,000, primarily
in  the  form  of a long-term note receivable  (included  in
"Other  assets"  in  the  December  31,  2000,  consolidated
balance  sheet).  The consideration becomes due  in  varying
installments  beginning June 30, 2001, and  ending  December
31,  2004.  At December 31, 2001, the balances on the  notes
in  the  consolidated  balance sheet  include  approximately
$600,000 in "Other current assets" and $1,500,000 in  "Other
assets."   The  Company will continue to sell products  into
Singapore  and  related  territories through  a  distributor
arrangement   with  the  purchaser.   The   loss   on   this
transaction of $1,300,000 is included in "Gains on sales  of
assets"  in  the 2000 consolidated statements of  operations
and  cash  flows.  Revenues for the disposed subsidiary  and
related  territories totaled $8,153,000 for  the  period  in
2000  prior  to  their sale, and $8,316,000  in  1999,  with
operating results at an approximate breakeven level for both
years.   Assets  of  the  disposed  subsidiary  and  related
territories at December 31, 1999, totaled $5,054,000.

BSI:  See Note 13 for a discussion of the December 2000 sale
of  the Company's civil, plotting, and raster product  lines
to BSI.

PID:   In January 1999, the Company acquired 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 January 2002.  The accounts
and  results  of operations of PID have been  combined  with
those of the PP&O business segment of the Company since  the
date of acquisition using the purchase method of accounting.
This  acquisition  has  not had a  material  effect  on  the
Company's results of operations.

InterCAP:  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.  See Note  5  for  a
discussion of the terms of this debenture and its  valuation
at December 31, 2001, 2000, and 1999.  The resulting gain on
this  transaction of $11,505,000 is included  in  "Gains  on
sales  of  assets"  in the 1999 consolidated  statements  of
operations  and cash flows.  The subsidiary did not  have  a
material  effect on the Company's results of operations  for
the period in 1999 prior to its sale.  InterCAP's results of
operations  were  included  in  the  "Intergraph   Software"
business    segment   in   the   Company's   1999    segment
presentations.

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

SCI:   In November 1998, the Company sold substantially  all
of  its  U.S.  manufacturing assets to SCI, a  wholly  owned
subsidiary   of   SCI  Systems,  Inc.,   and   SCI   assumed
responsibility for manufacturing 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  was
$62,404,000,  with the final purchase price  installment  of
$19,919,000 received on January 12, 1999.  The first quarter
1999  payments are included in "Net proceeds from  sales  of
assets" in the Company's 1999 consolidated statement of cash
flows.   These proceeds were used primarily to retire  debt.
As part of this transaction, SCI retained the option to sell
back  to  the Company any inventory included in the  initial
sale 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
bore  interest at a rate of 9% and was paid in three monthly
installments  concluding October  1,  1999.   The  Company's
payments  to  SCI were funded primarily from  existing  cash
balances.



NOTE 16 - SUMMARY OF QUARTERLY INFORMATION - UNAUDITED

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

Year ended December 31, 2001:
Revenues                           $144,122   $127,791  $127,056  $133,092
Gross profit                         58,409     57,962    56,150    60,805
Reorganization credit (charges)         384        ---       ---       ---
Income (loss) from operations         2,897      1,381     2,164     1,645
Gains on sales of assets              4,831        ---       530     5,882
Net income (loss)                     4,967      1,830     1,242    11,903
Net income (loss) per share -  basic   . 10        .04       .02       .24
                            - diluted   .10        .04       .02       .23
Weighted average shares
 outstanding - basic                 49,569     49,638    49,655    49,761
             - diluted               50,960     52,018    51,854    51,845


Year ended December 31, 2000:
Revenues                           $199,405   $187,981  $158,937  $144,131
Gross profit                         72,228     69,007    54,449    56,593
Reorganization credit (charges)         ---        ---    (3,362)   (5,136)
Income (loss) from operations           358     (2,728)  (12,887)   (8,384)
Gains on sales of assets              3,633      3,491    12,065    30,357
Net income (loss)                     1,025     (3,662)   (5,279)   18,011
Net income (loss) per share -           .02       (.07)     (.11)      .36
 basic and diluted
Weighted average shares
 outstanding - basic                 49,254     49,330    49,435    49,480
             - diluted               49,475     49,330    49,435    50,000
===========================================================================


For  complete descriptions of the net gains on  asset  sales
and reorganization charges included in the Company's results
of  operations, see Notes 13 and 15 and "Gains on  Sales  of
Assets" and "Reorganization Charges" included in MD&A.


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,  2002,  there  were 49,919,242 shares  of  common  stock
outstanding,  held  by 3,924 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.

-------------------------------------------------------------
                             2001                  2000
Period                  High       Low        High      Low
-------------------------------------------------------------
First Quarter      $ 11  3/8   $ 5  3/4    $ 9       $ 4 1/4
Second Quarter       15 31/32    8 11/32     8  7/8    5
Third Quarter        15  1/16    8 11/16     7 15/16   3 1/4
Fourth Quarter       13  7/8     8  1/4      7  1/2    5 5/32
=============================================================

TRANSFER AGENT AND REGISTRAR

Computershare Investor Services, LLC
2 North LaSalle Street
Chicago, IL 60602
(312) 588-4992


INDEPENDENT AUDITORS

Ernst & Young LLP
1901 Sixth Avenue North
Suite 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  16,  2002,  at  the  Corporate offices  in  Huntsville,
Alabama.


               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,  2001  and 2000, and the related consolidated statements
of operations, shareholders' equity, and cash flows for each
of  the  three years in the period ended December 31,  2001.
These  financial  statements are the responsibility  of  the
Company's  management. Our responsibility is to  express  an
opinion on these financial statements based on our audits.

We   conducted  our  audits  in  accordance  with   auditing
standards  generally accepted in the United  States.   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,  2001  and  2000,  and  the
consolidated  results  of their operations  and  their  cash
flows  for  each  of  the three years in  the  period  ended
December  31, 2001 in conformity with accounting  principles
generally accepted in the United States.

/s/ Ernst & Young
Birmingham, Alabama
January 30, 2002,
except for Note 14 and the eighth
paragraph of Note 15, as to which the date is
March 11, 2002




Board Members and Executive Officers


Board of Directors                 Executive Officers

James F. Taylor Jr.                Roger O. Coupland
Chairman of the Board and          President, Intergraph
Chief Executive Officer            Public Safety, Inc.

                                   Graeme J. Farrell
Larry J. Laster                    Executive Vice President
Executive Vice President and       Asia Pacific Operations
Chief Financial Officer

Linda L. Green                     William E. Salter
                                   President, Intergraph Government
                                   Solutions
Lawrence R. Greenwood
                                   Gerhard Sallinger
Thomas J. Lee                      President, Intergraph Process,
                                   Power & Offshore

Sidney L. McDonald                 Preetha R. Pulusani
                                   President, Intergraph Mapping and
                                   GIS Solutions
Joseph C. Moquin
                                   Edward A. Wilkinson
                                   Executive Vice President

                                   Jack C. Ickes
SECRETARY                          Vice President, Corporate Services

John R. Wynn                       David Vance Lucas
                                   Vice President and General Counsel

                                   Larry T. Miles
                                   Vice President, Finance

                                   Eugene H. Wrobel
                                   Vice President and Treasurer