Five-Year Financial Summary

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                               2000     1999       1998       1997       1996
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(In   thousands  except  per share amounts)


Revenues                   $690,454 $914,880 $1,005,007 $1,095,625 $1,065,806
Reorganization charges        8,498   15,596     15,343      1,095     10,545
Loss from operations        (23,641) (67,440)  (100,998)   (38,242)   (52,556)
Gains on sales of assets     49,546   13,223    112,533      4,858     11,173
Income (loss) from
  continuing operations      10,095  (78,561)  (  6,728)   (53,490)   (54,246)
Discontinued operation (1)      ---    6,984   ( 12,906)   (16,747)   (14,866)
Net income (loss)            10,095  (71,577)  ( 19,634)   (70,237)   (69,112)
Net income (loss) from
  continuing operations
  per  share, basic and
  diluted                       .20  (  1.60)   (   .14)   (  1.11)   (  1.15)
Net income (loss) per share,
  basic and diluted             .20  (  1.46)   (   .41)   (  1.46)   (  1.46)
Working capital             184,051  168,307    216,520    204,534    230,804
Total assets                514,908  584,944    695,974    720,989    756,347
Total debt                   31,030   62,926     83,213    104,665     65,644
Shareholders' equity       $278,000 $276,700 $  355,332 $  368,783 $  447,263




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





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



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


RESULTS OF OPERATIONS

Summary.  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, 2000.  The complete consolidated financial
statements of the Company, including footnote disclosures, are
presented on pages 33 to 60 of this annual report.

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                                  2000      1999      1998
--------------------------------------------------------------------
(In millions except per share amounts)

Revenues                          $690      $915    $1,005
Cost of revenues                   438       625       694
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Gross profit                       252       290       311

Operating expenses                 267       342       397
Reorganization charges               9        15        15
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Loss from operations               (24)    (  67)     (101)

Interest expense                   ( 4)    (   6)     (  8)
Arbitration settlement             ---     (   8)      ---
Gains on sales of assets            50        13       113
Other income (expense) - net       ( 3)    (   4)     (  5)
--------------------------------------------------------------------
Income (loss) from continuing
  operations before income taxes
  and minority interest             19     (  72)     (  1)
Income tax expense                 ( 6)    (   6)     (  6)
--------------------------------------------------------------------
Income (loss) from continuing
  operations before minority
  interest                          13     (  78)     (  7)
Minority interest                  ( 3)    (   1)      ---
--------------------------------------------------------------------
Income (loss) from
  continuing operations             10     (  79)     (  7)
Discontinued operation (VeriBest)  ---         7      ( 13)
--------------------------------------------------------------------
Net income (loss)                 $ 10    $(  72)    $( 20)
====================================================================
Net income (loss) from continuing
  operations per share,
  basic and diluted               $.20    $(1.60)    $(.14)
Net income (loss) per share,
  basic and diluted               $.20    $(1.46)    $(.41)
====================================================================

In fourth quarter 1999, the Company sold its VeriBest business
segment.  Accordingly, the Company's consolidated statements of
operations reflect VeriBest's business as a discontinued operation
for the periods prior to its sale.  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" below.

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

For hardware implementation, the Company chose to use only Intel
processors and to focus its efforts and image creation on its core
capabilities, specifically very high performance computational and
graphics capabilities.  This high-end market in the Windows NT
operating system environment is supported primarily by Intel-based
hardware products.  The Company expected that its four year hardware
development effort and investment in the high-end graphics market
would result in substantially increased revenues and profits in 1997,
but these benefits were not realized due primarily to the actions of
Intel described separately in the "Intel Litigation" section of this
report.  In addition, demand for the Company's software products did
not meet expectations and gross margin on product sales continued to
decline due primarily to price competition in the industry.

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

Revenues and operating results in 1999 were negatively impacted by
increasingly weak demand for the Company's hardware product
offerings, as the Company was unable to recover completely from the
loss of momentum experienced in 1997 and 1998.  As a result, in third
quarter 1999, the Company was forced to exit the personal computer
("PC") and generic server business 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" following.)

After considering all available alternatives to help stem the
hardware losses in its ICS business segment, in first quarter 2000,
the Company announced its intention to exit the hardware development
and design business.  The Company completed this exit 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).  Upon completion
of these transactions, the Company closed the remainder of its
hardware development operations. The Company continues to sell
hardware products from other vendors through its vertical business
segments and performs hardware maintenance services for its installed
customer base, and its Intergraph Government Solutions and Z/I
Imaging business segments continue to develop and assemble
specialized hardware products.  Going forward, the Company does not
expect to incur significant losses related to hardware.

The Company also focused in 2000 on organizing the Company into six
vertical business segments, aligned according to software markets in
which Intergraph believes it is a leader.  In third quarter 2000, the
Company substantially completed the U.S. portion of this process and,
in the fourth quarter, it began efforts to align its international
operations with the new vertical businesses and bring the cost of its
international operations in line with the current level of revenue
being generated.  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" following).  The Company has
ongoing efforts to convert several other international subsidiaries
into distributorships, primarily in the Middle East and Asia, and
will continue as necessary to reduce headcount in its international
operations to help bring the Company to sustained profitability.  The
international portion of the Company's verticalization process is
expected to be completed by the end of first quarter 2001, though
some of the subsidiary sales transactions, if consummated, may carry
over into the second quarter.

The Company has reduced its operating losses substantially from the
prior year levels.  This improvement resulted primarily from the
continuing decline in the Company's operating expenses.  Operating
expenses declined by 6% in 1998, 14% in 1999, and 22% in 2000 as the
result of various reorganization efforts, including direct reductions
in workforce and sales of unprofitable business units.  The Company
has also realized considerable improvement in its gross margin levels
as the result of increasing software content in its product mix.
However, improvements in the Company's operating expense and gross
margin levels have not yet been sufficient to return the Company to
sustained profitability, as operating results in 2000 were negatively
impacted by declines in revenues resulting from the Company's exit of
the hardware development business, soft demand for its software
products, operating losses incurred by the former ICS business
segment, legal fees associated with the Intel trial, and a temporary
duplication of administrative expenses in connection with
verticalization of the Company's business segments.

Outlook for 2001.  The Company expects that the markets in which it
competes will continue to be characterized by higher performance and
lower priced products, intense competition, rapidly changing
technologies, shorter product cycles, and development and support of
software standards that result in less specific hardware and software
dependencies by customers.  Further improvement in the Company's
operating results will depend on further market penetration achieved
through the ability to accurately anticipate customer requirements
and technological trends and to rapidly and continuously develop and
deliver new products that are competitively priced, offer enhanced
performance, and meet customers' requirements for standardization and
interoperability, and will further depend on its ability to
successfully implement its strategic direction, which includes the
creation and operation of independent vertical business segments.

Additional severance costs, primarily for planned headcount
reductions in Europe and Asia which were not completed in fourth
quarter 2000, will be incurred in the first quarter, but are not
expected to be significant.  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 as well as reductions in operating costs in the first half of
2001.

The Company's worldwide business plan for 2001 provides for total
revenues of $585 million and income from operations of $24 million.
To achieve this plan and maintain 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 operational and financial uncertainty
of unknown duration and amount due to its dispute with Intel.

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

Summarized financial information for the VeriBest business segment
for 1998 and 1999 is presented in Note 4 of Notes to Consolidated
Financial Statements.

Reorganization Charges.  During the three years ended December 31,
2000, the Company implemented various reorganization actions in an
effort to restore the Company to profitability.

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

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

The remainder of the 1998 reorganization charges consisted primarily
of write-offs of a) certain intangible assets, primarily capitalized
business system software no longer in use, b) goodwill of a noncore
domestic subsidiary which was sold in 1999, and c) a noncompete
agreement with a former third party consultant.  Prior to the write-
offs, amortization of these intangibles accounted for approximately
$3.4 million of the Company's annual operating expenses.

1999.  In second quarter 1999, in response to continued operating
losses in its ICS business segment, the Company implemented a
resizing of its European computer hardware sales organization.  This
resizing involved closing most of the Company's ICS subsidiaries in
Europe and consolidating the European hardware sales effort within
the other Intergraph subsidiaries in that region.  The associated
cost of $2.5 million, primarily for employee severance pay, is
included in "Reorganization charges" 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 third quarter 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, primarily in the sales and marketing, general and
administrative, and customer support areas, consolidation of offices,
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, $7 million
of which 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's exit from the PC and generic server business.

Severance costs associated with third quarter 1999 reorganization
totaled approximately $8.7 million, $7.8 million of which is included
in "Reorganization charges" 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.

2000.  In first quarter 2000, the Company announced its intention to
exit the hardware development and design business.  The Company
completed this exit 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).  Upon completion of these transactions, the Company
closed the remainder of its hardware development operations and
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 $.2 million,
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" 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 consist
primarily of related fixed asset write-offs of $1.5 million and
accruals for lease cancellations and idle building space.

The closure of the hardware development organization has allowed the
Company to focus on providing software, systems integration, and
services to the markets in which Intergraph believes it is a leader.

In fourth quarter 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.  The Company expects to incur
additional charges in first quarter 2001 as it completes the
notification process for its planned reductions in force.  However,
these costs are not expected to be material to the Company's 2001
results of operations.

Cash Requirements, All Years.  Cash outlays for severance related to
the Company's restructuring actions over the past three years
approximated $7.3 million, $9.7 million, and $3.9 million in 2000,
1999, and 1998, respectively.  Additionally, during third and fourth
quarter 2000, European severance liabilities totaling approximately
$.6 million were reversed as some of the employees affected by the
1999 actions left the Company voluntarily.  This expense reversal is
reflected in "Reorganization charges" in the 2000 consolidated
statement of operations.  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.   At December
31, 2000, the total remaining accrued liability for severance
relating to the 2000 reductions in force was approximately $4
million.  These costs relate primarily to severance liabilities in
Europe and Asia and are expected to be paid in the first half of
2001.  The Company's liabilities for severance are reflected in
"Other accrued expenses" in its consolidated balance sheets.

Severance payments to date have been funded from existing cash
balances and from proceeds from sales of assets.  For further
discussion regarding the Company's liquidity, see "Liquidity and
Capital Resources" following.

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
noncore subsidiaries, divisions, and product lines, and gains
recorded on real estate sales.

In 1998, the Company sold its Solid Edge and Engineering Modeling
system product lines at a gain of $102.8 million, its printed circuit
board manufacturing facility at a gain of $8.3 million, and its U.S.
hardware manufacturing assets at a gain of $1.5 million.  In 1999,
the Company sold its InterCAP subsidiary at a gain of $11.5 million.
In 2000, the Company recorded gains of $23 million and $15.7 million,
respectively, from the sales of its civil, plotting, and raster
product lines and its Intense3D graphics accelerator division.  The
Company's gains on these transactions are included in "Gains on sales
of assets" in the consolidated statements of operations and 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, 2000.

In 2000, the Company sold several of the buildings on its Huntsville,
Alabama campus for net cash proceeds of approximately $10.3 million.
The Company's aggregate gain on these transactions of $1.9 million is
included in "Gains on sales of assets" in the 2000 consolidated
statements of operations and cash flows.  The resulting consolidation
of the Company's Huntsville-based personnel and operations into fewer
buildings is expected to reduce the Company's annual overhead
expenses by approximately $4 million.  Proceeds from these sales were
used, in part, to repay a portion of the Company's term loan with its
primary lender.  For further discussion regarding the Company's
borrowings and liquidity, see "Liquidity and Capital Resources"
following.

Other significant components of the Company's "Gains on sales of
assets" for 2000 include an aggregate gain of $5.2 million recognized
on the sales of land and an office building in the Netherlands, a $2
million gain recognized on the sale of a noncore software division, 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 $1.3 million loss on the sale of the Company's Singapore
subsidiary.  "Gains of sales on assets" for 1999 also includes a $1.4
million gain on the sale of land.  See "Discontinued Operation"
preceding for a discussion of the Company's October 1999 sale of its
VeriBest business segment.

 Litigation and Other Risks and Uncertainties.  The Company continues
its litigation with Intel Corporation, and its business is subject to
certain other risks and uncertainties, including those described
below.

Intel Litigation.  The Company filed a legal action on November 17,
1997, in U.S. District Court for the Northern District of Alabama,
Northeastern Division (the "Alabama Court"), charging Intel
Corporation 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, misappropriation
of trade secrets, and fraud based upon Intel's failure to promptly
notify the Company of defects in Intel's products and timely
correction of such defects, and further alleging that Intel 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, and the Company has not yet
completed its infringement analysis of Intel's Pentium 4 processor.
On December 3, 1997, the Company amended its complaint to include a
count alleging violations of federal antitrust laws.  Intergraph
asserts claims for compensatory and treble damages resulting from
Intel's wrongful conduct and infringing acts, and punitive damages in
an amount sufficient to punish and deter Intel's wrongful conduct.
Additionally, the Company requested that Intel be enjoined from
continuing the alleged wrongful conduct which is anticompetitive
and/or violates federal antitrust laws, so as to permit Intergraph
uninterrupted development and sale of Intel-based products.

On November 21, 1997, the Company filed a motion in the Alabama Court
to enjoin Intel from disrupting or delaying its supply of products
and product information pending resolution of Intergraph's legal
action.  On April 10, 1998, the Alabama Court ruled in favor of
Intergraph and 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 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.
The Company does not believe that Intel's counterclaims, including
the alleged infringement of Intel patents, 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 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.  A
decision on Intel's request is expected to be issued before May 1, 2001.
The Company believes that the Federal Circuit's March 1, 2001 patent
license decision is well supported by law and fact, and 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).  The Company believes this dismissal to be in
error and intends to pursue its antitrust case against Intel.  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.  No decision has been
issued by the Appeals Court.  However, on February 20, 2001, the US
Supreme Court denied CSU's request for appeal in CSU v. Xerox.  The
Supreme Court's denial of CSU's appeal may have an adverse impact on
the Company's antitrust appeal.  However, the Company does not
believe that the outcome 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 counter-
claims.  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.  A formal schedule has not yet been entered, and the
Company believes that a new trial date will not be scheduled until
after the conclusion of the pending Appeal process.

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

The Company believes it was necessary to take legal action against
Intel in order to defend its 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.

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

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

As industry standards proliferate, there is a possibility that the
patents of others may become a significant factor in the Company's
business.  Personal computer technology, which 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.  With the
possible exception of its ongoing litigation with Intel (in which the
Company expects to prevail), it does not appear that the Company will
be prevented from using the technology necessary to 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 retain significant third party license rights, in
particular the Microsoft license, to protect the Company's
copyrights, trademarks, and patents, or to obtain current technical
information or any required patent rights of others through licensing
or purchase, all of which are important to success in the markets in
which the Company competes, could significantly reduce the Company's
revenues and adversely affect its results of operations.

Year 2000 Computing Issue.  The Company successfully completed all
aspects of its Year 2000 software and hardware readiness program with
respect to both its internal systems and its products.  As of the
date of this filing, the Company has encountered no significant Year
2000 computing problems.  However, any undetected errors or defects
in the current product offerings of the Company or its suppliers
could result in increased costs for the Company and potential
litigation over Year 2000 compliance issues.

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

See Notes 1, 5, 7, 8, 12 and 15 to Consolidated Financial Statements
for further discussion of risks and uncertainties related to the
Company.

Arbitration Settlement.  The Company maintains an equity ownership
position in Bentley Systems, Incorporated ("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
three million of the shares of BSI's Class A common stock owned by
the Company.  The transferred shares were valued at approximately
$3.5 million on the Company's books.  As a result of the settlement,
the Company's equity ownership in BSI was reduced from approximately
50% to approximately 33%.  Additionally, the Company had a $1.2
million net receivable from BSI relating to business conducted prior
to January 1, 1999 which was written off as part of the settlement.

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

Orders.  Systems and services orders for 2000 were $579 million, down
18% from the prior year after declining by 20% in 1999 and increasing
by 2% in 1998.  Orders in 1999 and 1998 included $12.3 million and
$16.9 million, respectively, in orders of the Company's discontinued
VeriBest operation.  Order levels in 1998 were adversely impacted by
the previously described actions of Intel and by the first quarter
1998 sale of the Company's Solid Edge and Engineering Modeling System
product lines.  In 1999, order volumes declined worldwide, primarily
in the Company's hardware business as demand continued to weaken.
Orders for the Company's hardware products continued to decline in
2000 as the result of the Company's exit from this market.  Weakness
also occurred in the Company's software segments throughout 1999 and
in the first quarter of 2000, particularly in the Company's
international markets.  The Company believes this weakness in its
software orders was related to the Company's exit from the hardware
development business as well as to uncertainty surrounding the
Company's new vertical business structure.  In 2000, these negative
factors were partially offset by a significant improvement in orders
of the Company's Intergraph Public Safety ("IPS") business segment.
IPS's orders increased by 42% from the 1999 level as the result of
several large orders received in third quarter 2000.

Geographic Regions.  U.S. systems and services orders, including
federal government orders, totaled $296 million for the year.
Excluding the impact of the VeriBest sale, U.S. orders declined by 9%
from the prior year after declining by 29% in 1999 and increasing by
8% in 1998.  The increase in 1998 was attributable to growth in the
Company's hardware business and in orders received from the federal
government.  Federal orders were up 9% in 1998. Orders growth in
1998, both federal and commercial, was concentrated primarily in the
fourth quarter as the U.S. hardware business began to recover
slightly from the effects of the Intel dispute.  However, in 1999,
demand for the Company's hardware product offerings weakened
significantly, accounting for the majority of the decline in U.S.
orders for the year.  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.   International orders for
2000 totaled $282 million, down 23% from the prior year after
declines of 9% and 4% in 1999 and 1998, respectively.  These declines
exclude the impact of the Company's former VeriBest business segment.
The Company's most significant orders declines have occurred in its
European region.  European orders totaled $128 million in 2000, down
43% from the prior year level, after declining by 7% in 1999 and 2%
in 1998.  Strengthening of the U.S. dollar resulted in successive
declines in reported European order levels of approximately 1%, 3%,
and 8% in 1998, 1999, and 2000, respectively.  The remaining decline
in 2000 was related to the Company's exit of hardware development and
to the region's focus on verticalization of the organization in
fourth quarter.  Asia Pacific orders totaled $69 million in 2000,
down 14% from the 1999 level after declines of 4% in 1999 and 8% in
1998.  Devaluation of Asian currencies, most notably the Korean won,
had a negative impact on orders for the region in 1998, reducing
reported order levels by approximately 10%.  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.  The current year orders decline can be attributed
primarily to hardware exit, as currency fluctuations in the region
reduced orders by only 2%, primarily in Australia.  Despite the
Company's overall worldwide downtrend in orders, Americas (Canada and
Latin America) and Middle Eastern orders were notably strong in 2000,
improving by 29% and 45%, respectively, from their prior year levels.
The increase in Americas orders was driven by several large orders
received by IPS Canada in the first quarter, while the Middle East
increase was the result of strong fourth quarter services orders.

Revenues.  Total revenues from continuing operations for 2000 were
$690 million, down 25% from the prior year level after declining by
9% and 8% in 1999 and 1998, respectively, all due primarily to the
Company's exit of the hardware business.

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

Systems.  Systems revenue from continuing operations was $427 million
in 2000, down 32% from the previous year after declining by 13% in
1999 and 7% in 1998. Factors cited previously as contributing to the
decline in orders, including the actions of Intel in 1998 and the
Company's exit of the hardware business, have adversely affected
systems revenues over the three year period, and competitive
conditions manifested in declining sales prices continue to adversely
affect the Company's systems revenues and margin.  The significant
revenue decline in 2000 can be attributed primarily to the Company's
exit of the hardware development business in the third quarter and to
first quarter order softness in the Company's vertical software
businesses.

Geographic Regions.  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 $227 million in 2000, down
31% from the prior year level, after decreasing by 14% in 1999 and 2%
in 1998.  The revenue decline in 1998 was due primarily to a 9%
decrease in sales to the federal government, partially offset by
growth in the Company's public safety business.  During the second
half of 1997 and the first quarter of 1998, Intergraph Public Safety
secured several large U.S. installations, significantly increasing
the subsidiary's revenue base.  The revenue declines in 1999 and 2000
were primarily attributable to declining hardware revenues as well as
to successive declines in sales of the Company's Intergraph
Government Solutions ("IGS") business segment.  IGS revenues have
been negatively impacted by exit of the hardware business, and in
fourth quarter 2000, revenues were further reduced as the result of
delayed funding on several large government contracts, now
anticipated for funding in first quarter 2001.  International systems
sales totaled $199 million in 2000, down 32% from the prior year
level after declines of 11% in 1999 and 13% in 1998.  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 4%, 1%, and 3%, respectively, in
2000, 1999, and 1998.  European sales were down 43% in 2000, after
declines of 9% and 12% in 1999 and 1998, respectively.  Asia Pacific
systems sales were down 17%, after declines of 8% and 26% in 1999 and
1998, respectively.  Systems revenues for the Americas (Canada and
Latin America) declined by 18% in 2000, while systems revenues for
the Middle East region remained relatively flat with the 1999 level.
The stability of Middle Eastern revenues is attributable primarily to
sales made by Z/I Imaging, a 60%-owned subsidiary of the Company
formed in fourth quarter 1999.

Hardware.  Hardware revenues in 2000 totaled approximately $150
million, down 50% from the prior year level, after declining by 27%
and 10%, respectively, in 1999 and 1998.  The Company exited the
hardware development business in third quarter 2000.

Federal Government Sales.  Total revenue from the United States
government was approximately $132 million in 2000, $149 million in
1999, and $166 million in 1998, representing 19% of total revenue in
2000 and 16% of total revenue in 1999 and 1998.  During the three
year period ended December 31, 2000, 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
of 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 38% of the Company's
2000 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 14% in 2000, after declines of 8% and 15% in 1999 and 1998,
respectively. The Company's hardware maintenance business has
declined as a result of the trend in the industry toward lower priced
systems products and longer warranty periods.  Maintenance revenue
will continue to decline as a result of the Company's exit of the
hardware business.

Services. Services revenue from continuing operations, consisting
primarily of revenues from Company provided training and consulting,
declined by 1% in 2000, after increasing by 17% and 1% in 1999 and
1998, 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 15% of total revenue for 2000, compared to 11% and 9% in
1999 and 1998, respectively.  The Company is endeavoring to grow its
services business; however, revenues from these services by nature
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 on revenues from
continuing operations was 36.5% in 2000, up 4.8 points after
increasing by .7 points in 1999 and declining by 4.3 points in 1998.

Margin on systems revenues from continuing operations improved 7.6
points in 2000 after increasing by 1.4 points in 1999 and declining
by 5.6 points in 1998.  Competitive pricing conditions in the
industry have acted to reduce systems margins generally.  In 1998,
margins were also negatively impacted by an increasing hardware
content in the product mix and by unfavorable volume related
manufacturing variances and inventory revaluations incurred prior to
the outsourcing of the Company's manufacturing to SCI in the fourth
quarter.  In 1999, the impact of a $7 million inventory write-off
incurred in connection with the Company's decision to exit the PC and
generic server business was offset by an increased software content
in the product and a decline in unfavorable manufacturing variances
as the result of the outsourcing to SCI.  In 2000, an additional $4.5
million inventory write-down was incurred as a result of the shutdown
of the Company's hardware development 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.  Additionally, Z/I Imaging, a subsidiary formed
in fourth quarter 1999, has had a positive impact on the Company's
systems margin due to high margins earned on sales of photogrammetric
systems.  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 general, the Company's systems margin may be improved by a 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.  Systems margins may be lowered by price competition,
a higher hardware content in the product mix, a stronger U.S. dollar
in international markets, the effects of technological changes on the
value of existing inventories, and a higher mix of federal government
sales, which generally produce lower margins than commercial sales.
While unable to predict the effects that many of these factors may
have on its systems margin, the Company expects continued improvement
as a result of the Company's exit of the hardware development
business, derived primarily from an increased software content in the
product mix and a reduction in inventory carrying and obsolescence
costs.  However, the Company continues to expect pressure on its
systems margin as the result of increasing industry price
competition.

Margin on maintenance revenues from continuing operations declined by
 .7 points in 2000, after declining by 1 point in 1999 and remaining
flat in 1998. The margin declines over the past three years have
resulted primarily from declining maintenance revenues.  The negative
impact of the Company's declining maintenance revenues has been
partially mitigated by reductions in the associated cost of revenues,
due in part to improved inventory management and a resulting
reduction in inventory obsolescence costs.  The Company monitors its
maintenance cost closely and has taken measures, including reductions
in headcount, to align these costs with the declining levels of
revenue.  As part of these efforts, in the latter part of 1999, the
Company began outsourcing its hardware maintenance function in some
of its larger European subsidiaries.  These efforts, which have
continued throughout 2000, have resulted in temporary additional
maintenance costs for the Company, primarily in the form of severance
and incentives paid to employees who transferred to hardware
maintenance subcontractors.  Additional outsourcing transactions may
occur in 2001.  The Company believes that the trend in the industry
toward lower priced products and longer warranty periods, along with
its exit of the hardware development business, will continue to
reduce its maintenance revenue, which will pressure maintenance
margin in the absence of corresponding cost reductions.

Margin on services revenues from continuing operations improved by
2.4 points in 2000, after increasing by 2.8 points in 1999 and
declining by .6 points in 1998.  Services revenues in 1999 increased
by 17% from the 1998 level without a proportional increase in costs.
Margins in 2000 were positively impacted by several large high-margin
consulting contracts acquired by IGS.  Significant fluctuations in
services revenues and margins from period to period are not unusual
as the incurrence of costs 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.

The industry in which the Company competes is characterized by rapid
technological change.  This technological change is an important
consideration in the Company's overall inventory management program,
in which the Company endeavored to purchase only inventory supported
by firm customer orders and parts as spares for the customer
contracted maintenance of systems in its installed customer base.  In
third quarter 2000, the Company exited the hardware development
business but continues to service its installed hardware base under
warranty and maintenance contractual obligations.  The majority of the
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 22% in 2000, 14% in
1999, and 6% in 1998.  In response to the level of its operating
losses, the Company has taken various actions, including employee
terminations and sales of unprofitable business operations, to reduce
the number of its employees by approximately 40% during the three
year period ended December 31, 2000.  The Company's operating
expenses have declined steadily each quarter.

Product development expense declined by 10% in 2000 after declines of
18% and 15% in the two preceding years.  Employee headcount in the
development area has been significantly reduced over the last three
years through reductions in force, attrition, and sales of
unprofitable business operations.  Additionally, 1998 and 1999
expenses were reduced due to additional software development projects
whose cost qualified for capitalization, primarily related to the
Company's shipbuilding efforts. In 2000, a decline in software
development costs qualifying for capitalization partially offset the
positive impact of the headcount decline.

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.

Sales and marketing expense declined by 30% in 2000, after declining
by 22% in 1999 and 6% in 1998. Expenses in all three years were
reduced by the strengthening of the U.S. dollar against international
currencies, primarily in Europe.  The 1998 decline was primarily due
to across-the-board expense reductions in Europe resulting from
restructuring actions taken in the first quarter (see "Reorganization
Charges" preceding.)   Additional headcount reductions in late 1998
and throughout 1999 and 2000 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 15% in 2000 after
increasing by 8% in 1999 and remaining basically flat for the
previous two years.  In 1998, increases in the Company's legal
expenses (see "Litigation and Other Risks and Uncertainties"
preceding) were offset by strengthening of the U.S. dollar in the
Company's international markets and by European headcount reductions.
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.  Expenses declined in 2000 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 Company expects that its legal
expenses will continue to fluctuate with the level of activity
associated with the Intel litigation.  Additionally, since mid-1999,
the Company has been experiencing a temporary duplication of
administrative expenses in the U.S. in connection with its efforts to
verticalize its business segments and decentralize portions of the
corporate administrative function.  The Company expects that these
duplicate expenses will decline in 2001.

Nonoperating Income and Expense.  Interest expense for continuing
operations was $4 million in 2000, $5.7 million in 1999, and $7.4
million in 1998.  The Company's average outstanding debt has declined
due primarily to repayment of borrowings utilizing the proceeds from
sales of various  noncore 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 nonoperating
income and expense.  In 2000, this amount included a $5 million write-
down of the value of a convertible debenture held by the Company (see
Note 5 of Notes to Consolidated Financial Statements), interest
income of $4.8 million resulting from the Company's increased level
of cash, and a net foreign exchange loss of $3.9 million.  See
"Impact of Currency Fluctuations and Currency Risk Management"
following.

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 2000, approximately 52% of the Company's revenues were derived
from customers outside the United States, primarily through
subsidiary operations.  Most subsidiaries sell to customers and incur
and pay operating expenses in local 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, 2000, though 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 net
strengthening of the U.S. dollar in its international markets
adversely impacted its results of operations by approximately $.08,
$.02, and $.10 per share in 2000, 1999, and 1998, respectively.  To
illustrate the sensitivity of the Company's results of operations to
changes in international currency exchange rates, the Company
estimates that the result of a uniform 10% strengthening in the value
of the dollar relative to the currencies in which the Company's sales
are denominated would result in a decrease in earnings of
approximately $5 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 $5 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 activity levels in its
international regions, directly correlated to the Company's
consolidated sales volume declines.  See Note 12 of Notes to
Consolidated Financial Statements for a summary of the Company's
revenues by geographic area.

The Company conducts business in all major markets outside the U.S.,
but the most significant of these operations with respect to currency
risk are located in Europe and Asia.  Local currencies are the
functional currencies for the Company's European subsidiaries.  The
U.S. dollar is the functional currency for all other international
subsidiaries. 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 2000 and 1999, the Company incurred net foreign exchange losses
from its continuing operations of $3.9 million and $1.3 million,
respectively, compared to a net exchange gain of $.4 million realized
from its continuing operations in 1998.  The Company's exchange
losses for the past two years have primarily resulted from the
strengthening of the U.S. dollar against the Euro, primarily with
respect to Euro denominated intercompany receivables of the U.S.
parent company.  The 2000 exchange loss also included approximately
$2.3 million in loss incurred as the result of subsidiary
liquidations and capital repatriation to the U.S. parent.  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, and at December 31, 2000, the Company had no
forward exchange contracts outstanding. Effective first quarter 2000,
the Company ceased hedging any of its foreign currency risks.

To illustrate the sensitivity of the Company's results of operations
to changes in exchange rates for international currencies underlying
its intercompany receivables and loans, the Company estimates that a
uniform 10% strengthening or weakening in the value of the dollar
relative to the currencies in which such intercompany receivables and
loans are denominated at December 31, 2000 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
of its 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 June
2000, and with effect on January 1, 2001, Greece became the twelfth
member of the EMU to adopt the Euro.  The individual national
currencies of the participating countries will continue to exist
through July 1, 2002, and Euro currency will begin to circulate on
January 1, 2002.  All of the Company's financial systems currently
accommodate the Euro and, during 1999 and 2000, 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, it at present has not identified significant risks related
to the Euro and does not anticipate that full Euro conversion in 2002
will have a material impact on its results of operations or financial
condition.  To date, the conversion to one common currency has not
impacted the Company's pricing in European markets.

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

Income Taxes. The Company earned pretax income before minority
interest of $19.2 million in 2000, compared to pretax losses of $72.5
million in 1999 and $.7 million in 1998.  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 1999 and 2000.  There was no
material income tax expense or benefit related to the Company's
discontinued VeriBest operation in 1999 or 1998.

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, 2000 and includes further details of the Company's tax
position, including net operating loss and tax credit carryforwards.

Results by Business Segment:  The year 2000 was a transitional year
for the Company during which effort was focused on organizing the
Company into six vertical business segments.  In third quarter 2000,
the Company substantially completed the U.S. portion of this process.
The international portion of this process is expected to be completed
by the end of first quarter 2001.  The following discussion provides
a comparative analysis of results of operations based on the
Company's business segmentation structure prior to 2000.  Prior year
comparative data is not available for the Company's 2000 business
structure, except for Intergraph Public Safety, Inc. and Z/I Imaging
Corporation, whose businesses did not change as a result of the 2000
verticalization process.  Z/I Imaging's results of operations for
1999 include only three months of activity, 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
its international distribution operation.  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.

ICS.  Intergraph Computer Systems ("ICS") incurred operating losses
of $18.9 million, $44.8 million, and  $71.2 million in 2000, 1999,
and 1998, respectively, on revenues of $155 million, $332.1 million,
and $447.1 million.  These operating losses exclude the impact of
certain nonrecurring income and operating expense items associated
with ICS's operations, including 1998 gains from the sales of its
printed circuit board facility and manufacturing inventory and assets
totaling $9.8 million, a net gain of $15.4 million in 2000 from the
sales of its Intense3D graphics accelerator division and workstation
and server business, and reorganization charges of $.8 million, $4.5
million, and $4.2 million incurred in 1998, 1999, and 2000,
respectively, primarily for employee severance.  The 2000
reorganization charge also included fixed asset write-offs and
accruals for lease cancellations and idle building space recorded as
the result of the final closure of this business segment.

ICS's 1998 and 1999 results of operations were significantly
adversely impacted by factors associated with the Company's dispute
with Intel, the effects of which included lost momentum, lost revenue
and margin, and increased operating expenses, primarily for marketing
and public relations.  (See "Litigation and Other Risks and
Uncertainties" preceding for a complete discussion of the Company's
dispute with Intel and its effects on the operations of ICS and the
Company). 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, and in third quarter 2000, ICS exited
the development and design of hardware products and closed its
operations.  ICS's revenue declines over the three year period ended
December 31, 2000 resulted primarily from the aforementioned factors
associated with the Intel dispute and from its closure in 2000.
ICS's total gross margin in 2000 was approximately 9% compared to
approximately 11% in both 1999 and 1998.  ICS's 1998 margins were
severely impacted by volume and inventory value related manufacturing
variances incurred prior to the outsourcing of its manufacturing to
SCI in fourth quarter 1998.  In 1999, margin improvements as the
result of this outsourcing were offset by a $7 million inventory
write-off incurred as the result of the exit from the PC and generic
server business.  An additional $4.5 million inventory write-down was
recorded in 2000 in connection with the shutdown of ICS's hardware
development business.  2000 margins were also negatively impacted by
significant discounting on sales of ICS's remaining inventory,
primarily in the fourth quarter.  ICS's operating loss improvements
in 1999 and 2000 were due primarily to successive operating expense
declines of 32% and 60% resulting from headcount reductions achieved
over the three 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 Intergraph
Government Solutions business segment.

IPS.  Intergraph Public Safety ("IPS") earned operating income of
$5.3 million, $10.8 million, and  $6.2 million in 2000, 1999, and
1998, respectively, on revenues of $90.6 million, $96.3 million, and
$93.4 million.  The segment's 2000 operating results exclude
reorganization charges of approximately $.2 million incurred in the
fourth quarter for employee terminations at its Australian
subsidiary.  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.  The improvement in
IPS's 1999 results of operations was due primarily to a 6 point
increase in gross margin, largely due to improved revenues and
margins earned on professional services projects.  This margin
improvement was partially offset by a 10% increase in operating
expenses as the result of the segment's increased headcount.  In
2000, IPS's systems and services orders increased by 42%.  However, a
correlating revenue increase has not yet materialized as most of
these orders were received late in the third quarter. These orders
should accrue to revenue incrementally over the next several quarters
as the projects are completed.  Improvements in IPS's 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 prior year level, primarily in the product development and
sales and marketing areas.  Additionally, IPS's general and
administrative expenses have 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, $7.3 million, and $13.8 million in 2000, 1999, and
1998, respectively, on revenues of $338.6 million, $469.4 million,
and $531.5 million.  Operating income in 2000 excludes the impact of
certain nonrecurring income and operating expense items associated
with Software operations, including the $23 million gain from the
sale of its civil, plotting, and raster product lines, a $2 million
gain from the sale of a noncore software division, and reorganization
charges of approximately $2.3 million, primarily for employee
terminations.  Operating income for 1999 excludes an arbitration
settlement charge of $8.6 million (see "Arbitration Settlement"
preceding), an $11.5 million gain from the sale of InterCAP, and
reorganization charges of approximately $5.8 million, primarily for
employee severance costs.  Operating income for 1998 excludes the
$102.8 million gain on sale of the business segment's Solid Edge and
Engineering Modeling System product lines and reorganization charges
of $14.6 million, primarily for asset write-offs and employee
termination expenses.  The revenue declines in 1999 and 2000 were 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 remained relatively flat in 1998 and 1999 at
approximately 37%, but increased to 42% in 2000, primarily due to
increased software content in the product mix.  During 1999, the
segment reduced and reorganized its sales force to align its expenses
more closely with the lower volume of revenue being generated,
resulting in an approximate 17% decline in sales and marketing
expenses from the 1998 level.  This reduction in expenses partially
offset the negative impact of the 12% revenue decline.  Though total
gross margin increased by 5 points 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 ongoing reorganization efforts.

IGS.  In 2000, Intergraph Government Solutions ("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, and a 1998 operating loss of $3 million on revenues
of $171.5 million.  IGS's revenues were adversely impacted by
weakened demand for the Company's hardware product offerings in all
three years, and in fourth quarter 2000, their revenues were further
reduced as the result of delayed funding on several large government
contracts which are anticipated to be funded in first quarter 2001.
The segment's total gross margin improved by approximately 4 points
in 1999 as a result of declining hardware content in the product mix
and has stabilized at approximately 24% for the last two years.  The
1999 improvement in operating results was derived primarily from this
gross margin increase and from a 30% decline in operating expenses
resulting from reductions in headcount and an increase in
shipbuilding software development costs qualifying for
capitalization.  In 2000, IGS's 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's systems revenues 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's operating expenses for 2000 were
approximately 6% above the fourth quarter 1999 annualized level due
to additional personnel added throughout the year.

General corporate expenses declined by 41% in 2000 after increasing
by 25% in 1999.  These variances are attributed primarily to
fluctuations in the Company's legal fees.  Corporate expenses
included legal fees of $6 million, $18.5 million and $10.7 million,
respectively, in 2000, 1999, and 1998.  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.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000, cash totaled $119.8 million, up $31.3 million
from December 31, 1999.  Cash generated from operations totaled $41.2
million in 2000, compared to a consumption of cash of $9.7 million in
1999 and  $31.1 million in 1998.  Cash generation in 2000 reflects
the Company's improved results of operations and continuing focus on
collection of accounts receivable.  Cash consumption in 1999 included
a $12 million payment to BSI (See "Arbitration Settlement" preceding)
and payments to SCI of $10.2 million to purchase unused inventory
(see Note 15 of Notes to Consolidated Financial Statements).  The
1998 cash consumption primarily reflected the negative cash flow
effect of the Company's operating losses.  Severance payments in
2000, 1999, and 1998 totaled $7.3 million, $9.7 million, and $3.9
million, respectively.

Net cash provided by investing activities totaled $15.9 million,
$25.5 million and $99.6 million in 2000, 1999, and 1998,
respectively.  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 noncore software division, and $1.5 million from the sale of an
investment in an affiliate.  Investing activities in 1999 included
$11.7 million contributed by the minority interest partner to 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.  Investing activities in 1998
included an investment of $26.3 million for the purchase of Zydex
software rights and $160.5 million in net proceeds from sales of
assets, including net proceeds of $102 million from the sale of the
Company's Solid Edge and Engineering Modeling System product lines,
$42.5 million from the sale of manufacturing inventory and assets to
SCI, and $16 million from the sale of the printed circuit board
manufacturing facility.  Other significant investing activities in
2000 included expenditures for capitalizable software development of
$10.8 million ($20.7 million in 1999 and $15.7 million in 1998) and
capital expenditures of $7.2 million ($10.2 million in 1999 and $17.3
million in 1998), primarily for computer equipment used in product
development and sales and marketing activities.

Net cash used for financing activities totaled $21.7 million, $21
million, and $19.3 million in 2000, 1999, and 1998, respectively, due
primarily to net debt repayments of $23.4 million, $23.6 million and
$22.3, respectively. 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 and
1998 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, 2000.

The Company's average collection period for accounts receivable in
2000 was approximately 82 days, representing a slight decrease from
the prior year.  Approximately 71% of the Company's 2000 revenues
were derived from international customers and the U.S. government,
both of which traditionally carry longer collection periods.  The
Company continues to experience slow collections throughout the
Middle East region, particularly in Saudi Arabia. Total accounts
receivable from Middle Eastern customers was approximately $18
million at December 31, 2000 and $20 million at December 31, 1999.
Total U.S. government accounts receivable was $28 million at December
31, 2000 ($33 million at December 31, 1999).  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 $7 million
to $10 million in 2001, 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 six year fixed term loan and
revolving credit agreement, available borrowings are determined by
the amounts of eligible assets of the Company (the "borrowing base"),
as defined in the agreement, primarily accounts receivable, with
maximum availability of $80 million.  In September 2000, the Company
repaid $7.1 million of the $25 million term loan portion of the
agreement with proceeds received from the sale of several idle office
buildings.  The remainder of the term loan is due at expiration of
the agreement.  Borrowings are secured by a pledge of substantially
all of the Company's assets in the U.S. and certain international
receivables. The rate of interest on all borrowings under the
agreement is the greater of 7% or the Norwest Bank Minnesota National
Association base rate of interest (9.5% at December 31, 2000) plus
 .625%.  There are provisions in the agreement which lower the
interest rate upon achievement of sustained profitability by the
Company.  The agreement requires the Company to pay a facility fee at
an annual rate of .15% of the amount available under the credit line,
an unused credit line fee at an annual rate of .25% of the average
unused portion of the revolving credit line, a letter of credit fee
at an annual rate of 1.5% of the undrawn amount of all outstanding
letters of credit, and a monthly agency fee.  At December 31, 2000,
the Company had outstanding borrowings of $19.3 million, the $17.9
million term loan portion of which was classified as long-term debt
in the consolidated balance sheet, and an additional $18.6 million of
the available credit line was allocated to support the Company's
letters of credit.  At December 31, 2000, the borrowing base,
representing the maximum available credit under the line, was
approximately $44.9 million.

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 reduced to $200 million effective June 30, 2000.  Additionally,
the agreement required the Company to retain, pending a return to
profitability, the services of an investment banking firm to advise
the Company regarding potential partnering arrangements and other
alternatives for its computer hardware business. This requirement was
waived by the lender in second quarter 2000.

At December 31, 2000, the Company had approximately $30 million in
debt on which interest is charged under various floating rate
arrangements, primarily its six year term loan and revolving credit
agreement and a European mortgage (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.  To
illustrate the sensitivity of the Company's results of operations to
changes in interest rates on its debt, the Company estimates that its
results of operations would not be materially affected by a two point
increase or decrease in the average interest rates related to its
floating rate debt.  This hypothetical change in rates was determined
based on the trend of the Company's actual rates over the past four
years 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, 2000 level and does not consider the
effects that further operating losses, if any, will have on the
balance of debt outstanding.

The Company improved its general financial condition in 2000 and
generated positive operating cash flow each quarter in 2000,
primarily the result of improved accounts receivable collections and
operating expense declines.  The Company expects to sustain its
positive operating cash flows in 2001 as a result of headcount
reductions and other expense savings actions taken during 2000.  The
Company is managing its cash very closely and believes that the
combination of improved cash flow from operations, its existing cash
balances, and cash available under its revolving credit agreement
will be adequate to meet cash requirements for 2001, including
requirements for severance payments associated with the various
restructuring actions taken by the Company in 2000.  For the near
term, the Company also anticipates that its cash position may benefit
from further sales of excess real estate and other noncore assets of
the Company.  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 its current operations and fund business
growth without reliance on funds from sales of assets and external
financing.  The Company anticipates no significant nonoperating
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).

FOURTH QUARTER 2000

Revenues in fourth quarter were $144.1 million, down 35% from
revenues from continuing operations in fourth quarter 1999.  The
Company earned net income of $18 million ($.36 per share) for the
quarter, compared to a loss from continuing operations of $9.9
million ($.20 per share) in fourth quarter 1999.  The revenue decline
from the prior year period was due primarily to the exit of hardware
development activities in third quarter 2000.  Additionally, the
Company's fourth quarter 2000 efforts to realign its international
sales operations with the new vertical business structure may have
detracted focus away from selling activity.  Despite the decline in
revenues, the Company's loss from operations before reorganization
charges was basically flat with the fourth quarter 1999 level at $.06
per share.  A 4.3 point gross margin improvement resulting from
increased software content in the product mix and a 26% decline in
operating expenses resulting from reductions in headcount and legal
expenses served to offset the impact of the revenue decline.  Fourth
quarter 2000 operating results were reduced by reorganization charges
of $5.1 million ($.10 per share) and increased by gains on sales of
assets of $30.4 million ($.61 per share), 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.  The fourth quarter 1999 loss from continuing
operations was offset by a $14.4 million ($.29 per share) gain on the
sale of VeriBest.


INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


---------------------------------------------------------------------
December 31,                                       2000         1999
---------------------------------------------------------------------
(In thousands except share and per share amounts)

Assets
  Cash and cash equivalents                    $119,848     $ 88,513
  Accounts receivable, net                      178,862      258,768
  Inventories                                    25,290       35,918
  Other current assets                           53,475       28,744
---------------------------------------------------------------------
     Total current assets                       377,475      411,943
  Investments in affiliates                      14,262        9,940
  Capitalized software development costs         23,871       23,522
  Other assets                                   42,971       44,632
  Property, plant, and equipment, net            56,329       94,907
---------------------------------------------------------------------
     Total Assets                              $514,908     $584,944
=====================================================================

Liabilities and Shareholders' Equity
  Trade accounts payable                       $ 35,224     $ 50,963
  Accrued compensation                           33,257       35,848
  Other accrued expenses                         61,591       71,052
  Billings in excess of sales                    46,603       66,051
  Income taxes payable                           10,984        8,175
  Short-term  debt and current
    maturities of long-term debt                  5,765       11,547
---------------------------------------------------------------------
     Total current liabilities                  193,424      243,636
---------------------------------------------------------------------
  Deferred income taxes                           6,604        2,620
  Long-term debt                                 25,265       51,379
  Other noncurrent liabilities                    4,612        5,780
---------------------------------------------------------------------
     Total noncurrent liabilities                36,481       59,779
---------------------------------------------------------------------
  Minority interest in consolidated
    subsidiaries                                  7,003        4,829
---------------------------------------------------------------------
  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                  214,079      216,943
    Retained earnings                           188,326      178,231
    Accumulated other comprehensive loss       ( 15,931)    (  5,506)
---------------------------------------------------------------------
                                                392,210      395,404

    Less- cost of 7,836,452 treasury shares
      at December 31, 2000, and 8,145,149
      treasury shares at December 31, 1999     (114,210)    (118,704)
---------------------------------------------------------------------
    Total shareholders' equity                  278,000      276,700
---------------------------------------------------------------------
    Total Liabilities and Shareholders' Equity $514,908     $584,944
=====================================================================

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

INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

------------------------------------------------------------------------------
Year Ended December 31,                    2000          1999           1998
------------------------------------------------------------------------------
(In   thousands   except   per   share amounts)

Revenues
  Systems                              $426,791      $623,451      $ 712,916
  Maintenance                           160,456       186,766        202,919
  Services                              103,207       104,663         89,172
------------------------------------------------------------------------------
    Total revenues                      690,454       914,880      1,005,007
------------------------------------------------------------------------------
Cost of revenues
  Systems                               266,147       436,254        508,836
  Maintenance                            87,793       100,823        107,608
  Services                               84,237        87,868         77,420
------------------------------------------------------------------------------
    Total cost of revenues              438,177       624,945        693,864
------------------------------------------------------------------------------

    Gross profit                        252,277       289,935        311,143

Product development                      56,319        62,638         76,818
Sales and marketing                     118,402       169,805        219,044
General and administrative               92,699       109,336        100,936
Reorganization charges                    8,498        15,596         15,343
------------------------------------------------------------------------------

    Loss from operations                (23,641)      (67,440)      (100,998)

Gains on sales of assets                 49,546        13,223        112,533
Arbitration settlement                      ---       ( 8,562)           ---
Interest expense                        ( 4,031)      ( 5,663)      (  7,441)
Other income (expense) -- net           ( 2,648)      ( 4,016)      (  4,822)
------------------------------------------------------------------------------
    Income (loss) from continuing
      operations before income taxes
      and minority interest              19,226       (72,458)      (    728)

Income tax expense                      ( 6,600)      ( 5,500)      (  6,000)
------------------------------------------------------------------------------
    Income (loss) from continuing
      operations before minority
      interest                           12,626       (77,958)      (  6,728)

Minority interest in earnings of
  consolidated subsidiaries             ( 2,531)      (   603)           ---
------------------------------------------------------------------------------
    Income (loss) from continuing
      operations                         10,095       (78,561)      (  6,728)

Gain on sale of discontinued
  operation, net of  income taxes           ---        14,384            ---
Loss from discontinued operation,
  net of income taxes                       ---       ( 7,400)      ( 12,906)
------------------------------------------------------------------------------
    Net income (loss)                   $10,095      $(71,577)     $( 19,634)
==============================================================================
    Income (loss) per share-basic
      and diluted:

      Continuing operations             $   .20      $(  1.60)     $(    .14)
      Discontinued operation                ---           .14       (    .27)
------------------------------------------------------------------------------
        Net income (loss)               $   .20      $(  1.46)     $(    .41)
==============================================================================

Weighted average shares outstanding
                      -basic             49,368        48,906         48,376
                      -diluted           49,855        48,906         48,376
==============================================================================

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,                             2000      1999       1998
------------------------------------------------------------------------------
(In thousands)

Cash Provided By (Used For):
Operating Activities:
  Net income (loss)                             $ 10,095  $(71,577) $( 19,634)
  Adjustments to reconcile net income (loss)
    to net cash provided by (used for)
    operating activities:
      Depreciation                                14,980    21,228     29,446
      Amortization                                18,906    26,878     25,274
      Noncash portion of arbitration settlement      ---     3,530        ---
      Noncash portion of reorganization charges    5,696     9,614     11,506
      Write-down of convertible debenture          5,000       ---        ---
      Gains on sales of assets                   (49,546)  (27,607)  (112,533)
      Net changes in current assets and
        liabilities                               36,115    28,253     34,833
------------------------------------------------------------------------------
      Net cash provided by (used for)
        operating activities                      41,246   ( 9,681)  ( 31,108)
------------------------------------------------------------------------------
Investing Activities:
    Net proceeds from sales of assets             38,362    54,056    160,487
    Contributions from minority interest partner     ---    11,732        ---
    Purchases of property, plant, and equipment  ( 7,244)  (10,221)  ( 17,264)
    Capitalized software development costs       (10,829)  (20,656)  ( 15,738)
    Capitalized internal use software costs      ( 1,057)  ( 5,875)  (    802)
    Purchase of software rights                      ---       ---   ( 26,292)
    Other                                        ( 3,349)  ( 3,579)  (    757)
------------------------------------------------------------------------------
      Net cash provided by investing activities   15,883    25,457     99,634
------------------------------------------------------------------------------
Financing Activities:
    Gross borrowings                                 ---       ---     10,689
    Debt repayment                               (23,368)  (23,605)  ( 32,949)
    Proceeds of employee stock purchases and
      exercises of stock options                   1,630     2,612      2,940
------------------------------------------------------------------------------
      Net cash used for financing activities     (21,738)  (20,993)  ( 19,320)
------------------------------------------------------------------------------
Effect of exchange rate changes on cash          ( 4,056)  ( 1,743)  (    378)
------------------------------------------------------------------------------
Net increase (decrease) in cash and
  cash equivalents                                31,335   ( 6,960)    48,828
Cash and cash equivalents at beginning of year    88,513    95,473     46,645
------------------------------------------------------------------------------
Cash and cash equivalents at end of year        $119,848  $ 88,513   $ 95,473
==============================================================================

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

  Balance at January 1, 1998              $5,736  $226,362  $269,442    $ 1,090    $(133,847)   $368,783

Comprehensive income (loss):
  Net loss                                   ---       ---   (19,634)       ---          ---     (19,634)
  Other comprehensive income- foreign
    currency translation adjustments         ---       ---       ---      3,071          ---       3,071
                                                                                                ---------
Comprehensive loss                           ---       ---       ---        ---          ---     (16,563)
                                                                                                =========
Issuance of 464,230 shares under
 employee stock purchase plan                ---    (3,829)      ---        ---        6,769       2,940
Other                                        ---       172       ---        ---          ---         172
------------------------------------------------------------------------------------------------------------
  Balance at December 31, 1998             5,736   222,705   249,808      4,161     (127,078)    355,332

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

Comprehensive loss                           ---       ---       ---        ---          ---     (81,244)
                                                                                                 ========
Issuance of 557,713 shares under
 employee stock purchase plan                ---    (5,539)      ---        ---        8,130       2,591
Issuance of 16,750 shares upon
 exercise of stock options                   ---    (  223)      ---        ---          244          21
------------------------------------------------------------------------------------------------------------
  Balance at December 31, 1999             5,736   216,943   178,231     (5,506)    (118,704)    276,700

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
============================================================================================================
</TABLE>

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

INTERGRAPH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000

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

Effective third quarter 2000, the Company's continuing operations
are divided into six separate business segments for operational and
management purposes: Process and Building Solutions ("PBS"),
Intergraph Public Safety, Inc. ("IPS"), Mapping and Geographic
Information Systems ("GIS") Solutions, Intergraph Government
Solutions ("IGS"), Z/I Imaging Corporation ("Z/I Imaging"), and
Intergraph Computer Systems ("ICS").  Also included as a segment on
a temporary basis is the International Distribution operation,
which will be absorbed into the applicable primary business
segments effective January 1, 2001.  See Note 12 for a description
of the business of each of these segments.

The Company's products are sold worldwide, with United States and
European revenues representing approximately 76% of total revenues
for 2000.

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

The Company's investments in debt securities are valued at fair
market value with any unrealized holding gains and losses reported
as a component of "Accumulated other comprehensive loss".  At
December 31, 2000 and 1999, the Company held various debt
securities maturing within three months or less with fair market
values of approximately $63,000,000 and $33,000,000, respectively.
Gross realized gains and losses on debt securities sold during the
three year period ended December 31, 2000 were not significant, and
there were no unrealized holding gains or losses on debt securities
at December 31, 2000 or 1999.

The Company's December 31, 2000 consolidated cash balance includes
approximately $12,600,000 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,                        2000        1999
------------------------------------------------------
(In thousands)

Raw materials                   $  6,124     $12,888
Work-in-process                    3,850       5,739
Finished goods                     6,077       5,895
Service spares                     9,239      11,396
------------------------------------------------------
Totals                           $25,290     $35,918
======================================================

Concurrent with the Company's closure of its ICS business segment
in third quarter 2000, the Company recorded an inventory write-down
of approximately $4,741,000.  Inventories on hand at December 31,
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, 1999 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 industry in which the Company competes is characterized by
rapid technological change.  Currently, the majority of the hardware
sold by the Company is purchased from third-party vendors.  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 or an inability of 3Dlabs or SGI to
accurately forecast their manufacturing requirements of SCI (see
Note 15) 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 from 3Dlabs and SGI,  the current
portion of notes receivable from sales of various noncore
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 2000.

Investments in Affiliates:  Investments in companies in which the
Company believes it has the ability to influence operations or
finances are accounted for by the equity method.  Investments in
companies in which the Company does not exert such influence are
accounted for at fair value if such values are readily
determinable, and at cost if such values are not readily
determinable.

Effective January 1, 1998, the Company ceased accounting for its
investment in Bentley Systems, Inc. ("BSI") under the equity method
due to a lack of significant influence.  On April 1, 1999, as the
result of an arbitration settlement with BSI, the Company's equity
ownership in BSI was reduced from approximately 50% to
approximately 33%.  See Note 13 and "Arbitration Settlement"
included in Management's Discussion and Analysis of Financial
Condition and Results of Operations on page 23 of this
annual report 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, 1999 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, Inc. Ltd.
("3Dlabs"), constituting an equity ownership interest of
approximately 19.7%.  Fifteen percent of these shares have been
placed in escrow for one year to cover any potential claims against
the Company by 3Dlabs.  The Company maintains its investment in
3Dlabs at market value in its consolidated balance sheets, 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 $3,337,000
at December 31, 2000 ($4,956,000 at February 28, 2001).  The
Company has recorded an unrealized holding loss of approximately
$7,911,000 for the decline in market value of this investment from
the date of acquisition through December 31, 2000.  See Note 15 for
further information regarding the 3Dlabs transaction.

Capitalized Software Development Costs:  The Company capitalizes
certain costs of development of computer software incurred after
the technological feasibility of the product has been established.
Such capitalized costs are amortized on a straight line basis over
a period of two to three years.  Amortization of these capitalized
costs, included in "Cost of revenues - Systems" in the consolidated
statements of operations, amounted to $9,100,000 in 2000,
$14,600,000 in 1999, and $12,700,000 in 1998.  Amortization
included in discontinued operations amounted to $2,400,000 in 1999
and $2,900,000 in 1998.

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.

Other assets:  Other assets reflected in the Company's
consolidated balance sheets consist primarily of purchased
software rights, long-term deposits, and notes receivable from
sales of various noncore businesses and assets. (See Note 15.)

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

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

Land and improvements (15-30 years)                $  7,464     $ 11,278
Buildings and improvements (30 years)                77,548      113,455
Equipment, furniture, and fixtures (3-8 years)      136,754      184,393
--------------------------------------------------------------------------
                                                    221,766      309,126
Allowances for depreciation                        (165,437)    (214,219)
--------------------------------------------------------------------------
Totals                                             $ 56,329     $ 94,907
==========================================================================

Significant dispositions of property, plant, and equipment in 2000
included the sale of real estate with a net book value of
$16,000,000 and the termination of a capital lease on a building
with a net book value of $6,500,000.  The remaining decline in net
property, plant and equipment is due primarily to sales of various
noncore divisions and subsidiaries (see Note 15), depreciation
expense, and write-offs of internal computer systems no longer in
use as the result of reductions in force and other actions taken
to downsize the Company.

Other Noncurrent Liabilities:  Other noncurrent liabilities
reflected in the Company's consolidated balance sheets consist
primarily of liabilities incurred in connection with a business
acquisition in January 1999 (see Note 15) and a deferred gain on
the sale and leaseback of a European office building (see Note 8).

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 Corporation, a newly formed corporation which
supplies end-to-end photogrammetry solutions for front-end data
collection to mapping related and engineering markets, in exchange
for a 60% ownership interest in the new company.  Additionally,
Carl Zeiss B.V. ("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.  Z/I Imaging's assets, liabilities and results of
operations are included in the Company's consolidated financial
statements.  Zeiss's 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
fourth quarter 1999 and full year 2000.

Treasury  Stock:   Treasury  stock is accounted  for  by  the  cost
method.  In a series of authorizations beginning in 1987, the Board
of  Directors  of  the Company authorized the  purchase  of  up  to
20,000,000 shares of the Company's common stock in the open market.
As  of  December 31, 2000, the Company had purchased  approximately
18,800,000  shares for the treasury under that authorization,  with
the  last purchase occurring in 1994.  Treasury stock activity  for
the  three year period ended December 31, 2000, consisting of stock
option  exercises  and purchases of stock by  employees  under  the
Company's  stock  purchase plan, is presented in  the  consolidated
statements of shareholders' equity.

On  October  30,  2000,  the Board of Directors  approved  a  stock
purchase   plan  which  will  allow  the  Company,  under   certain
circumstances,  to  purchase up to $30,000,000 of  its  outstanding
common  stock  in  the open market.  The Plan is  not  expected  to
commence  until  the completion of certain transactions,  including
sale  of  the  remaining  idle  building  space  on  the  Company's
Huntsville, Alabama campus and completion of the reorganization  of
the  Company's international operations into the operating business
segments.   However,  the  Board  in  its  discretion  may  approve
purchases prior to completion of these transactions.  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.

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 purchase order or a signed contract.

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 2000.

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 on systems sales with significant post-shipment
obligations, including the production, modification, or
customization of software, are recognized by the percentage-of-
completion method, with progress to completion measured on the
basis of completion of milestones, labor costs incurred currently
versus the total estimated cost of performing the contract over its
term, or other factors appropriate to the individual contract of
sale.  The total amount of revenues to be earned under contracts
accounted for by the percentage-of-completion method are generally
fixed by contractual terms.  The Company regularly reviews its
progress on these contracts and revises the estimated costs of
fulfilling its obligations.  Due to uncertainties inherent in the
estimation process, it is possible that completion costs will be
further revised on some of these contracts, which could delay
revenue recognition and decrease the gross margin to be earned. Any
losses identified in the review process are recognized in full in
the period in which determined.

Revenues from certain contracts with the U.S. government, primarily
cost-plus award fee contracts, are recognized monthly as costs are
incurred and fees are earned under the contracts.

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

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 is the functional currency for all other
international subsidiaries.  Foreign currency gains and losses
resulting from remeasurement or settlement of receivables and
payables denominated in a currency other than the functional
currency, together with gains and losses and fees paid in
connection with forward exchange contracts, are included in "Other
income (expense) - net" in the consolidated statements of
operations.  Net exchange gains (losses) from continuing operations
totaled ($3,900,000) in 2000, ($1,300,000) in 1999, and $400,000 in
1998.  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".

Derivative Financial Instruments:  The Company may at times utilize
derivative financial instruments consisting primarily of forward
exchange contracts and interest rate swap agreements.  The Company
is prohibited by policy from taking derivative positions exceeding
its known balance sheet exposures and from otherwise trading in
derivative financial instruments.

Forward exchange contracts are accounted for under the fair value
method.  Under this method, realized and unrealized gains and
losses on forward exchange contracts are recognized as offsets to
gains and losses resulting from the underlying hedged transactions
in the period in which exchange rates change and are included in
"Other income (expense) - net" in the consolidated statements of
operations.  Bank fees charged on the contracts are amortized over
the period of the contract.  Gain or loss on termination of a
forward exchange contract is recognized in the period in which the
contract is terminated.  In the event of early settlement of a
hedged intercompany asset or liability, the related forward
exchange contract gains or losses are recognized in the period in
which exchange rates change.

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

Amounts payable to or receivable from counterparties related to
derivative financial instruments are included in "Other accrued
expenses" or "Other current assets" in the consolidated balance
sheets.  These amounts were not significant at December 31, 1999.
At December 31, 2000, the Company had no freestanding derivatives.

In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"), requiring companies to recognize all derivatives as either
assets or liabilities on the balance sheet and to measure the
instruments at fair value.  This statement will become effective
for the Company in calendar year 2001.  The Company does not
anticipate that the adoption of SFAS 133 will have a significant
impact on its consolidated operating results or financial position.

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

Stock-Based Compensation Plans:  The Company maintains a stock
purchase plan and two fixed stock option plans for the benefit of
its employees and directors.  The Company accounts for these plans
in accordance with the provisions of Accounting Principles Board
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 Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, the Company has provided pro forma information
reflecting results of operations and earnings (loss) per share had
compensation expense been recognized for 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.  See Note 10.

Comprehensive Income (Loss):  Comprehensive income (loss) includes
net income (loss) as well as all other nonowner changes in equity.
With respect to the Company, such nonowner equity items include
foreign currency translation adjustments and unrealized gains and
losses on certain investments in debt and equity securities.  The
Company's comprehensive losses for each year in the three year
period ended December 31, 2000 are displayed in the Consolidated
Statements of Shareholders' Equity.  Accumulated other
comprehensive income (loss) at the end of each of these three years
consisted of foreign currency translation adjustments, with the
exception of the December 31, 2000 balance which also included a
$7,939,000 unrealized holding loss on investments primarily related
to its common stock holdings of 3Dlabs, Inc. Ltd. (See "Investments
in Affiliates" preceding.) There was no income tax effect
related to the items included in other comprehensive loss
for any year in the three year period ended December 31, 2000.
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, 1999 and 1998 to provide
comparability with the current year presentation.

NOTE 2 -- LITIGATION AND OTHER RISKS AND UNCERTAINTIES.
In addition to those described in Notes 1, 5, 7, 8, 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 Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages
20 to 23 of this annual report.

NOTE 3 -- REORGANIZATION CHARGES.
The Company recorded reorganization charges to continuing results
of operations totaling $13,239,000 (including inventory write-downs
reflected in "Cost of revenues - Systems" and "Cost of revenues -
Maintenance" of $4,531,000 and $210,000, respectively) in 2000,
$22,596,000 (including a $7,000,000 inventory write-down recorded
as a component of "Cost of revenues - Systems") in 1999, and
$15,343,000 in 1998.  For a complete description of these charges,
see "Reorganization Charges" included in Management's Discussion
and Analysis of Financial Condition and Results of Operations on
pages 18 to 20 of this annual report.

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 statements of operations reflect
VeriBest's business as a discontinued operation for all periods
prior to the October 1999 sale.  The discontinued operation has not
been presented separately in the consolidated statements of cash
flows.  Other than its operating losses for the periods 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 1998 and the  period
in   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       1998
---------------------------------------------------------------------------
(In thousands)

Revenues from unaffiliated customers             $23,704    $27,783
Operating loss before reorganization charges      (6,460)   (12,708)
Reorganization charges                               871        500
Net loss                                         $(7,400)  $(12,906)
===========================================================================

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 $30,000,000 at
December 31, 2000), primarily its six 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.  The conversion feature allows
the Company to convert the debenture into shares of Micrografx
common stock at a conversion price of $10.  This conversion price
may be adjusted, at Micrografx's option, based on the twenty day
average closing price of Micrografx stock on one remaining reset
date specified in the agreement.  Micrografx also has an option to
convert the debenture into shares of their common stock if the
twenty day average closing price of the stock is at least 120% of
the applicable conversion price.  The Company has recorded a
$5,000,000 write-down of the value of this debenture due to
financial and operational difficulties currently experienced by
Micrografx.  This write-down is included in "Other income (expense)
- net" in the 2000 consolidated statement of operations.  The
Company's recorded value for the debenture ($797,000 and $5,797,000
at December 31, 2000 and 1999, respectively) is included in "Other
assets" in the Company's consolidated balance sheets.  The Company
continues to closely monitor Micrografx's financial condition, but
at present is unable to accurately estimate the value, if any, that
will ultimately be realized from payment or conversion of the
debenture.  The Company does not anticipate conversion of the
debenture by either party in the near term.

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, Inc. at a price of $15 per share.  The warrant becomes
exercisable on October 31, 2001 and expires on October 31, 2002.
The Company's $300,000 estimated value of the warrant is included
in "Investments in affiliates" in the Company's December 31, 2000
and 1999 consolidated balance sheets.  This value was determined
using the Black-Scholes option pricing model as of the date of sale
of VeriBest and, as such, may not represent the actual value, if
any, that will be realized upon exercise of the warrant.  The
closing market price of Mentor Graphics stock on December 29, 2000
was $27.438 per share ($24.50 per share on February 28, 2001),
reflecting intrinsic values for the warrant on these dates of
$6,219,000 and $4,750,000, respectively.  The Company has not
revalued the warrant for balance sheet purposes due to the
volatility of the technology market and the restricted nature of
the instrument.

Forward exchange contracts:  Outstanding notional amounts of the
Company's forward exchange contracts totaled $808,000 at December
31, 1999, reflecting a net commitment to purchase currencies.
These notional amounts were determined by translating the foreign
currency amounts to dollars at the rates in effect on December
31, 1999.  They do not necessarily represent the amounts
exchanged between the Company and the counterparties to the
forward exchange contracts, and as such they did not represent
the amount of the Company's currency related exposures at that
date.  The amounts potentially subject to risk, arising from the
possible inability of the counterparties to meet the terms of the
contracts, are generally limited to the amounts, if any, by which
the counterparties' obligations exceed those of the Company.  Net
receivables from/payables to counterparties related to forward
exchange contracts were not significant at December 31, 1999.
The carrying amounts approximated fair value at that date due to
the short duration (generally three months or less) of the
contracts.

Forward exchange contracts outstanding at December 31, 1999
related solely to formalized intercompany loans between the
Company's European subsidiaries.  At December 31, 2000, the
Company had no forward exchange contracts outstanding. The
Company currently is not hedging any of its foreign currency
risks.

Cash requirements of forward exchange contracts are limited to
receipt of an amount equal to the exchange gain or payment of an
amount equal to the exchange loss at the contract settlement
date, and payment of bank fees related to the contracts.  Net
cash flow from forward contract activity, consisting of realized
gains and losses from settlement of exposed assets and
liabilities at exchange rates in effect at the settlement date
rather than at the time of recording, settlement of the forward
contracts purchased to mitigate the exposures, and payment of
bank fees on the forward contracts, was not significant for any
year in the three year period ended December 31, 2000.

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,                             2000      1999      1998
-----------------------------------------------------------------------------
(In thousands)

(Increase) decrease in:
 Accounts receivable                             $67,134   $47,418   $16,939
 Inventories                                       9,837     3,994     7,580
 Other current assets                            ( 2,239)    7,189     8,801
Increase (decrease) in:
 Trade accounts payable                          (14,470)  (17,194)    2,600
 Accrued compensation and other
   accrued expenses                              (10,770)  (11,433)   (2,527)
 Income taxes payable                              3,015     1,876       878
 Billings in excess of sales                     (16,392)  ( 3,597)      562
-----------------------------------------------------------------------------
Net changes in current assets and liabilities    $36,115   $28,253   $34,833
=============================================================================

Cash payments for income taxes totaled $8,800,000, $9,300,000, and
$5,200,000 in 2000, 1999, and 1998, respectively.  Cash payments
for interest in those years totaled $4,100,000, $5,700,000, and
$7,700,000, respectively.

Significant noncash 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 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, a division of the Company 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 noncash 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.  Investing and financing
transactions in 1998 that did not require cash included the sale of
assets in part for a deferred installment payment of approximately
$20,000,000.

See Notes 13 and 15 for further detail regarding the Company's
acquisitions and divestitures during the three year period ended
December 31, 2000.

NOTE 7 -- ACCOUNTS RECEIVABLE.
Concentrations of credit risk with respect to accounts receivable
are limited due to the diversity of the Company's customer base.
The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral.
Historically, the Company has not experienced significant losses
related to trade receivables from individual customers or from
groups of customers in any geographic area, with the exception of
the 1994 write-off of a $5,500,000 receivable from a Middle Eastern
customer.  The Company's total accounts receivable from Middle
Eastern customers approximated $17,900,000 at December 31, 2000,
and $20,100,000 at December 31, 1999.

Revenues from the U.S. government were $132,400,000 in 2000,
$149,300,000 in 1999, and $166,100,000 in 1998, representing
approximately 19% of total revenue in 2000 and 16% of total revenue
in 1999 and 1998.  Accounts receivable from the U.S. government
totaled approximately $28,400,000 and $33,300,000 at December 31,
2000 and 1999, 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 38% of the Company's 2000 federal
government revenues were earned under long-term contracts.  The
Company believes its relationship with the federal government to be
good.  While it is fully anticipated that these contracts will
remain in effect through their expiration, the contracts are
subject to termination at the election of the government.  Any loss
of a significant government contract would have an adverse impact
on the results of operations of the Company.

Accounts receivable includes unbilled amounts of $48,300,000 and
$64,400,000 at December 31, 2000 and 1999, respectively.  These
amounts include amounts due under long-term contracts of
approximately $14,800,000 and $16,400,000 at December 31, 2000 and
1999, respectively.

The Company maintained reserves for uncollectible accounts,
included in "Accounts receivable" in the consolidated balance
sheets at December 31, 2000 and 1999, of $18,200,000 and
$16,100,000, respectively.


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

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

Revolving credit agreement and term loan            $19,344   $27,470
Australian term loan                                    278     8,141
Long-term mortgages                                   7,800    13,402
Other secured debt                                    1,417     9,800
Short-term credit facilities                          2,191     3,690
Other                                                   ---       423
-----------------------------------------------------------------------
Total debt                                           31,030    62,926
Less amounts payable within one year                  5,765    11,547
-----------------------------------------------------------------------
Total long-term debt                                $25,265   $51,379
=======================================================================

Under the Company's January 1997 six year fixed term loan and
revolving credit agreement, available borrowings are determined by
the amounts of eligible assets of the Company (the "borrowing
base"), as defined in the agreement, primarily accounts receivable,
with maximum availability of $80,000,000.  In September 2000, the
Company repaid $7,100,000 of the $25,000,000 term loan portion of
the agreement with proceeds received from the sale of several idle
office buildings.  The remainder of the term loan is due at
expiration of the agreement.  Borrowings are secured by a pledge of
substantially all of the Company's assets in the U.S. and certain
international receivables. The rate of interest on all borrowings
under the agreement is the greater of 7% or the Norwest Bank
Minnesota National Association base rate of interest (9.5% at
December 31, 2000) plus .625%.  There are provisions in the
agreement which lower the interest rate upon achievement of
sustained profitability by the Company.  The average effective rate
of interest for the period of time in 2000 during which the Company
had outstanding borrowings under this agreement was 10% (8.7% in
1999).  The agreement requires the Company to pay a facility fee at
an annual rate of .15% of the amount available under the credit
line, an unused credit line fee at an annual rate of .25% of the
average unused portion of the revolving credit line, a letter of
credit fee at an annual rate of 1.5% of the undrawn amount of all
outstanding letters of credit, and a monthly agency fee.  At
December 31, 2000, the Company had outstanding borrowings of
$19,344,000, the $17,900,000 term loan portion of which was
classified as long-term debt in the consolidated balance sheet, and
an additional $18,600,000 of the available credit line was
allocated to support the Company's letters of credit.  At December
31, 2000, the borrowing base, representing the maximum available
credit under the line, was approximately $44,900,000.

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 reduced to $200,000,000 effective June 30, 2000.
Additionally, the agreement required the Company to retain, pending
a return to profitability, the services of an investment banking
firm to advise the Company regarding potential partnering
arrangements and other alternatives for its computer hardware
business. This requirement was waived by the lender in second
quarter 2000.

In June 2000, the Company repaid substantially all of its
Australian term loan.  The remaining balance consists of a 500,000
Australian dollar fully drawn working capital facility payable in
August 2002.  The facility bears interest at the bank's variable
short-term lending rate, which ranged from 5.6% to 5.74% in 2000
(5% to 5.15% in 1999), and is secured by letters of credit issued
by the Company's primary lender.  Concurrent with repayment of the
term loan, the Company terminated an interest rate swap agreement
in the principal amount of the debt.  The terminated interest rate
swap had a fixed pay rate of 9.18%.

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 $7,800,000 at
December 31, 2000 ($9,200,000 at December 31, 1999).  The mortgage
bears interest at the United Kingdom base rate plus 1%.  Rates paid
on this mortgage ranged from 6.5% to 7% in 2000 (6% to 7.25% in
1999).

The Company sold its two office buildings in the Netherlands in
November 1999 and June 2000, respectively, and used a portion of
the proceeds of each sale to pay off mortgages on the properties.
The outstanding principal amounts retired in November 1999 and June
2000 approximated $4,200,000 and $3,800,000, respectively.  The
building sold in November 1999 was leased back for an initial term
of ten years with an early termination option after five years.
This lease is accounted for as an operating lease in accordance
with Statement of Financial Accounting Standards No. 13, Accounting
for Leases.  Payments under the lease, which are denominated in
Dutch Guilders, approximate $1,200,000 per year.  The gain realized
on the November 1999 sale of approximately $4,200,000 was deferred
and is being credited to income over the ten year lease term.  The
approximate $3,500,000 gain on the June 2000 sale is included in
"Gains on sales of assets" in the 2000 consolidated statement of
operations. Interest rates paid on the mortgages, which were based
on Euribor, ranged from 3.9% to 5% in 2000 and from 3.7% to 4.6% in
1999.

"Other secured debt" consists primarily of notes payable in varying
installments through 2004 for internal use computer software
purchased by the Company and a long-term lease on a Company
facility.  The long-term lease was terminated in February 2000.
The Company accounted for this lease as a financing 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.  The
weighted average interest rate paid on "other secured debt"
approximated 9.5% in 2000 and 10.5% in 1999.

See Note 5 for discussion of the fair values of the Company's debt
and the terminated interest rate swap agreement.

The Company leases various property, plant, and equipment under
operating leases as lessee.  Rental expense for operating leases
was approximately $21,600,000 in 2000, $25,100,000 in 1999, and
$26,600,000 in 1998.  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)

2001                                  $15,500
2002                                   11,800
2003                                    8,200
2004                                    5,000
2005                                    4,000
Thereafter                             27,000
----------------------------------------------------
Total future minimum lease payments   $71,500
====================================================

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,                          2000      1999      1998
---------------------------------------------------------------------------
(In thousands)

U.S.                                          $14,138  $(67,733)  $ 6,301
International                                   5,088   ( 4,725)   (7,029)
---------------------------------------------------------------------------
Income (loss) from continuing operations
   before income taxes and minority interest  $19,226  $(72,458)  $(  728)
===========================================================================

Income tax expense consists of the following:
----------------------------------------------------------------------------
Year Ended December 31,                          2000      1999      1998
----------------------------------------------------------------------------
(In thousands)

Current benefit (expense):
 Federal                                      $(3,330)  $(1,233)  $(3,118)
 State                                         (  597)   (  273)   (  235)
 International                                 (3,430)   (4,128)   (2,552)
----------------------------------------------------------------------------
  Total current                                (7,357)   (5,634)   (5,905)
----------------------------------------------------------------------------
Deferred benefit (expense):
 Federal                                          389       163       ---
 State                                             38        16       ---
 International                                    330    (   45)   (   95)
---------------------------------------------------------------------------
  Total deferred                                  757       134    (   95)
---------------------------------------------------------------------------
Total income tax expense                      $(6,600)  $(5,500)  $(6,000)
===========================================================================

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

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

Current Deferred Tax Assets (Liabilities):
  Inventory reserves                                  $ 17,218     $ 13,066
  Vacation pay and other employee benefit accruals       4,996        5,846
  Other financial statement reserves, primarily
    allowances for doubtful accounts and warranty       15,790        9,300
  Profit on uncompleted sales contracts                    754      (   806)
  Other current tax assets and liabilities, net            507        3,435
----------------------------------------------------------------------------
                                                        39,265       30,841
  Less asset valuation allowance                       (32,127)     (28,445)
----------------------------------------------------------------------------
  Total net current asset (1)                            7,138        2,396
----------------------------------------------------------------------------

Noncurrent Deferred Tax Assets (Liabilities):
  Net operating loss and tax credit carryforwards:
    U.S. federal and state                              58,297       69,895
    International operations                            27,963       39,446
  Depreciation                                         ( 5,530)    (  1,495)
  Capitalized software development costs               ( 7,628)    (  7,704)
  Other noncurrent tax assets and liabilities, net     ( 2,478)       3,639
----------------------------------------------------------------------------
                                                        70,624      103,781
  Less asset valuation allowance                       (77,228)    (106,401)
----------------------------------------------------------------------------
  Total net noncurrent liability                       ( 6,604)    (  2,620)
----------------------------------------------------------------------------
Net deferred tax asset (liability)                     $   534    $(    224)
============================================================================
(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, decreased by $25,491,000 in 2000 due primarily to a
decrease in deferred tax assets of $1,652,000 arising from changes
in deductible temporary differences and to a decrease of
$23,081,000 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,
2000, the Company had a U.S. federal net operating loss
carryforward of approximately $131,000,000 expiring from 2010
through 2020.  International net operating loss carryforwards total
approximately $82,000,000 and expire as follows:

----------------------------------------------------------------
                                         International
                                       Net Operating Loss
December 31, 2000                        Carryforwards
----------------------------------------------------------------
(In thousands)

Expiration:
3 years or less                              $18,000
4 to 5 years                                  17,000
Unlimited carryforward                        47,000
----------------------------------------------------------------
Total                                        $82,000
================================================================

Additionally, the Company has $2,800,000 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 for continuing operations is presented below.  There was no
material income tax benefit or expense related to the Company's
discontinued operation.

----------------------------------------------------------------------------
Year Ended December 31,                          2000       1999      1998
----------------------------------------------------------------------------
(In thousands)

Income tax benefit (expense) at federal
  statutory rate                              $(6,729)   $25,360   $   255
Tax effects of international operations, net   (5,667)   (10,417)   (6,760)
Tax effect of U.S. tax loss carried forward     8,056    (20,607)    5,107
Prior year taxes                               (  311)   (   762)   (2,482)
Other - net                                    (1,949)       926    (2,120)
----------------------------------------------------------------------------
Income tax expense                            $(6,600)  $( 5,500)  $(6,000)
============================================================================

The Company does not provide for federal income taxes or tax
benefits on the undistributed earnings or losses of its
international subsidiaries because earnings are reinvested and, in
the opinion of management, will continue to be reinvested
indefinitely.  At December 31, 2000, the Company had not provided
federal income taxes on earnings of individual international
subsidiaries of approximately $28,000,000.  Should these earnings
be distributed in the form of dividends or otherwise, the Company
would be subject to both U.S. income taxes and withholding taxes in
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
$1,100,000 would be payable if all previously unremitted earnings
as of December 31, 2000 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 2,770,000,
216,000 and 1,721,000 shares of the Company's common stock were
granted in 2000, 1999 and 1998, respectively, under this plan.  At
December 31, 2000, 201,250 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 Company's Board of Directors who were
not otherwise employed by the Company were granted options to
purchase 3,000 shares of the Company's common stock.  Any new
nonemployee director 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 nonemployee
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, 4,500 and 12,000 shares of the Company's common
stock were granted in 2000, 1999 and 1998, respectively, under this
plan.  At December 31, 2000, 224,500 shares were available for
future grants.

Under the 2000 Intergraph Corporation Employee Stock Purchase Plan,
3,000,000 shares of common stock are 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 305,447, 557,713,
and 464,230 shares of stock in 2000, 1999, and 1998, respectively,
under the 2000 and predecessor plans.  At December 31, 2000,
2,833,282 shares were available for future purchases.

As allowed under the provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), the Company has elected to apply
Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations in
accounting for its stock-based plans.  Accordingly, the Company has
recognized no compensation expense for these plans during the three
year period ended December 31, 2000, other than for 25,000 options
granted during 2000 at an exercise price which was below the market
value of the Company's stock on the date of grant.  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, 2000
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,                           2000      1999       1998
-----------------------------------------------------------------------------
(In thousands except per share amounts)

Net income (loss)          As reported         $10,095  $(71,577)  $(19,634)
                           Pro forma           $ 7,400  $(74,018)  $(21,496)

Basic and diluted income (loss) per share
                           As reported         $   .20  $(  1.46)  $(   .41)
                           Pro forma           $   .15  $(  1.51)  $(   .44)
=============================================================================

Under the methodology of SFAS 123, the fair value of the Company's
fixed stock options was estimated at the date of grant using the
Black-Scholes option pricing model.  The multiple option approach
was used, with assumptions for expected option life of 1.38 years
after vest date in all three years and 60% expected volatility for
the market price of the Company's stock in 2000 (48% in 1999 and
45% in 1998).  Dividend yield is excluded from the calculation
since it is the present policy of the Company to retain all
earnings to finance operations.  Risk free interest rates were
determined separately for the grants in each year and are as
follows:



-----------------------------------------------------------
Expected Life              Risk Free Interest Rates
 (in years)                  2000     1999    1998
-----------------------------------------------------------
   2.38                     6.03%    5.64%   4.13%
   3.38                     6.15%    5.73%   4.19%
   4.38                     6.37%    5.87%   4.28%
   5.38                     6.29%    6.00%   4.40%
   6.38                     6.29%    6.07%   4.53%
===========================================================

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 2000, 1999, and 1998 were $3.14, $2.49, and $2.37,
respectively.  During 2000, options were granted under these plans
at exercise prices which were equal to, less than, and greater than
the market value of the Company's stock on the date of grant, with
weighted average grant date fair values of $3.13, $4.32, and $2.92,
respectively.  The weighted average grant date fair values of
options granted to employees under the 2000 and predecessor stock
purchase plans were $.93, $.82, and  $1.12, during 2000, 1999, and
1998, respectively.

Activity in the Company's fixed stock option plans for each year in
the three year period ended December 31, 2000 is summarized as
follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
                              2000               1999                1998
                         ---------------    ---------------    ------------------
                                 Weighted            Weighted            Weighted
                                 Average             Average             Average
                                 Exercise            Exercise            Exercise
                        Shares    Price    Shares     Price    Shares     Price
                      ---------  -------- --------- --------  ---------  --------
<S>                   <C>         <C>     <C>        <C>      <C>         <C>

Outstanding at
  beginning of year   3,550,296   $7.46   3,587,173  $ 7.63   2,259,923   $ 9.61
Granted:
  Price equal to
    market value      2,744,000    5.57    220,500    5.17  1,733,000     5.41
  Price less than
    market value         25,000    5.56        ---     ---        ---      ---
  Price greater than
    market value         10,000    5.56        ---     ---        ---      ---
Exercised              (  3,250)   5.38   ( 16,750)   1.27        ---      ---
Forfeited              (872,536)   8.77   (240,627)   8.34   (405,750)    9.21
----------------------------------------------------------------------------------
Outstanding at end
  of year             5,453,510   $6.29  3,550,296  $ 7.46  3,587,173   $ 7.63
==================================================================================
Exercisable at end
  of year             1,223,023   $8.62  1,044,111  $10.22    728,171   $10.22
==================================================================================
</TABLE>

Further information relating to stock options outstanding at
December 31, 2000 is as follows:

-----------------------------------------------------------------------------
                             Options Outstanding           Options Exercisable
                      ----------------------------------   -------------------
                                                Weighted             Weighted
                              Weighted Average  Average               Average
Range of                          Remaining     Exercise             Exercise
Exercise Prices       Number  Contractual Life   Price      Number     Price
------------------------------------------------------------------------------

$5.063 to $ 5.813  4,402,750      8.81 years     $ 5.48    383,875    $ 5.38
$6.219 to $ 8.875    403,750      6.60 years       7.88    207,138      7.93
$9.000 to $11.750    647,010      4.49 years      10.79    632,010     10.82
------------------------------------------------------------------------------
                   5,453,510      8.14 years     $ 6.29  1,223,023    $ 8.62
==============================================================================

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 of Directors, and the contributions were funded with
Company stock.  Amounts were allocated to the accounts of
participants based on compensation.  Benefits are payable to
participants subject to the vesting provisions of the Plan.  The
Company has not made a contribution to the Plan since 1991.

In 1990, the Company established the Intergraph Corporation
SavingsPlus Plan, an employee savings plan qualified under Section
401(k) of the Internal Revenue Code, covering substantially all
U.S. employees.  Employees may elect to contribute up to 15% of
their compensation  to the Plan.  The Company matches 50% of
employee contributions up to 6% of each employee's compensation.
Cash contributions by the Company to the Plan were $3,382,000,
$4,143,000, and $5,082,000, in 2000, 1999, and 1998, respectively.

On December 5, 2000, the Company's Board of Directors 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 will apply to the
Internal Revenue Service ("IRS") for a determination that the Stock
Bonus Plan will maintain its qualified status at termination.
Additionally, the Company believes that shares to be distributed
from the Stock Bonus Plan will be exempt from the registration
requirements of the Securities Act of 1933, and may be subsequently
transferred by the Plan participants without registration.
However, the Company will request a "no action letter" from the
Securities and Exchange Commission ("SEC") to confirm the
availability of such an exemption.  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, 2000 there were 9,687
participants with account balances in the Stock Bonus Plan, with
ownership of approximately 4,886,000 shares of Intergraph common
stock.

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
$2,400,000,  $2,900,000, and $3,100,000 in 2000, 1999, and 1998,
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 six vertical
business segments.  The Company substantially completed the U.S.
portion of this process in third quarter 2000, and plans completion
of the international portion of this process for first quarter 2001
reporting.  The segment presentation below provides business
segment information based on the Company's new business structure
for the year 2000 and, as required, comparative information based
on the Company's previous segment structure.  The Company is unable
to restate its prior year data in a fashion that would provide
accurate comparative information.  However, two of the Company's
business segments, Intergraph Public Safety, Inc. and Z/I Imaging
Corporation, did not change as a result of the new structure.
Information reported for these two segments 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 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 are
accounted for under a transfer pricing policy.  Transfer prices
approximate prices that would be charged for the same or similar
property to similarly situated unrelated buyers.  In the U.S.,
intersegment sales of products and services to be used for internal
purposes are charged at cost.  For international subsidiaries,
transfer price is charged on intersegment sales of products and
services to be used for either internal purposes or sale to
customers.

2000 Segments.  The Company's 2000 business segments consist of
Process and Building Solutions ("PBS"), Intergraph Public Safety,
Inc. ("IPS"), Mapping and Geographic Information Systems ("GIS")
Solutions, Intergraph Government Solutions ("IGS"), Z/I Imaging
Corporation ("Z/I Imaging"), and Intergraph Computer Systems
("ICS").  Also included as a segment on a temporary basis is the
International Distribution operation, which will be absorbed into
the other business segments for first quarter 2001 reporting.

PBS supplies software and services to the process, power, offshore,
and marine industries.  Amounts presented for PBS 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
and utilities and communications industries.  Unchanged from the
previous years' presentations, IPS includes the domestic and
international public safety operations and the domestic utilities
and communications operations.

Mapping and GIS Solutions 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 2000 below consist of the domestic operations for
both the federal and commercial mapping organizations.  The results
for these organizations were included in prior years in the
Intergraph Government Solutions and Intergraph Software business
segments, respectively.

IGS provides specially developed software and hardware, commercial
off-the-shelf products, and professional services to federal,
state, and local governments worldwide.  Information presented for
2000 for the IGS business segment is not comparable to prior years'
IGS information.  Amounts presented for the new IGS below include
the previously reported federal operations of IGS, excluding the
mapping organization which is now included in Mapping and GIS
Solutions, as well as domestic operations for the transportation
industry, previously included in the Intergraph Software business
segment.  Additionally, hardware maintenance and network services,
previously included in the ICS business unit, are consolidated into
IGS for 2000 presentation.

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 1999 and 2000.

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 will be the
last year for presentation of ICS as a business segment.  Going
forward, the majority of the 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 includes 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.  The IGS, Mapping and GIS
Solutions, and IPS business segments sell to the International
Distribution operation (essentially subsidiaries of the Company
located outside the United States) at transfer price.  These
transfer price revenues are included in the intersegment revenues
reported below for each of these business segments.

Amounts included in the "Corporate" category in both the 2000 and
previous years' 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 Corporate category includes legal
fees of $5,957,000, $18,470,000 and $10,650,000, respectively, for
2000, 1999, and 1998.

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

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
Year Ended December 31, 2000
(In thousands)
                              Mapping
                              and GIS             Z/I          International
                PBS     IPS  Solutions    IGS   Imaging    ICS  Distribution  Corporate  Eliminations    Total
----------------------------------------------------------------------------------------------------------------

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

Revenues:
Unaffiliated
  customers  $119,306 $80,457 $49,825  $141,533 $28,187 $ 90,821   $180,161    $    164    $     ---    $690,454
Intersegment
  revenues      8,051  10,151  32,727    18,027  15,225   27,206      9,783         329     (121,499)        ---
-----------------------------------------------------------------------------------------------------------------
  Total
    Revenues $127,357 $90,608 $82,552  $159,560 $43,412 $118,027   $189,944    $    493    $(121,499)   $690,454
-----------------------------------------------------------------------------------------------------------------

Operating income
(loss) before
reorgani-
zation
charges      $ 10,397 $ 5,309 $ 5,381  $ 11,499 $ 9,217 $(17,285)  $(12,559)   $(27,102)   $     ---    $(15,143)
=================================================================================================================
Depreciation and
amortization
expense      $  9,607 $ 5,661 $ 4,873  $  3,257 $   567 $  2,488   $  5,274    $  2,159    $     ---    $ 33,886
=================================================================================================================
</TABLE>

Previous Segments.  Prior to third quarter 2000, the Company's
business segments consisted of ICS, IPS, the Software and
Intergraph Government Solutions businesses (collectively, the
Software and Government Solutions businesses formed what was termed
"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 the periods prior to the date of sale.
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 two years 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.

The following table sets forth revenues and operating income (loss)
before reorganization charges for the Company's previous business
segments for the three 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 2000 business segments are the result of the
reorganization described under "2000 Segments" above, and the
Company considers the new 2000 segment information to be
determinative.


-----------------------------------------------------------------------------
Year Ended December 31,                         2000       1999       1998
-----------------------------------------------------------------------------
(In thousands)

Revenues:
ICS:
   Unaffiliated customers                   $109,099   $214,476   $229,005
   Intersegment revenues                      45,890    117,631    218,103
-----------------------------------------------------------------------------
                                             154,989    332,107    447,108
-----------------------------------------------------------------------------
IPS:
   Unaffiliated customers                     80,457     84,932     87,881
   Intersegment revenues                      10,151     11,333      5,537
-----------------------------------------------------------------------------
                                              90,608     96,265     93,418
-----------------------------------------------------------------------------
Intergraph Software:
   Unaffiliated customers                    333,162    455,551    520,714
   Intersegment revenues                       5,414     13,860     10,819
-----------------------------------------------------------------------------
                                             338,576    469,411    531,533
-----------------------------------------------------------------------------
Intergraph Government Solutions:
   Unaffiliated customers                    139,549    152,980    167,407
   Intersegment revenues                       4,457      6,817      4,081
-----------------------------------------------------------------------------
                                             144,006    159,797    171,488
-----------------------------------------------------------------------------
Z/I Imaging:
   Unaffiliated customers                     28,187      6,941        ---
   Intersegment revenues                      15,225      2,809        ---
-----------------------------------------------------------------------------
                                              43,412      9,750        ---
-----------------------------------------------------------------------------
                                             771,591  1,067,330  1,243,547
-----------------------------------------------------------------------------
Eliminations                                 (81,137)  (152,450)  (238,540)
-----------------------------------------------------------------------------
Total revenues                              $690,454   $914,880  $1,005,007
=============================================================================


-----------------------------------------------------------------------------
Operating income (loss) before reorganization charges:

ICS (1)                                     $(18,895)  $(44,808) $(71,166)
IPS                                            5,309     10,759     6,236
Intergraph Software                            8,594      7,285    13,792
Intergraph Government Solutions                3,643     12,371   ( 2,953)
Z/I Imaging                                    9,217      1,872       ---
Corporate                                    (23,011)   (39,323)  (31,564)
-----------------------------------------------------------------------------
Total                                       $(15,143)  $(51,844) $(85,655)
=============================================================================
(1)  ICS's 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.
-----------------------------------------------------------------------------
Depreciation and amortization expense:

ICS                                         $  2,840   $  5,239  $ 10,314
IPS                                            5,661      5,915     5,099
Intergraph Software                           20,571     28,818    30,171
Intergraph Government Solutions                2,814      2,886     3,003
Z/I Imaging                                      567         55       ---
Corporate                                      1,433      2,180     2,294
----------------------------------------------------------------------------
Total depreciation and amortization expense
  from continuing operations                $ 33,886   $ 45,093  $ 50,881
============================================================================

Significant profit and loss items that were not allocated to the
segments and not included in either the 2000 or "Previous Segments"
analyses above include reorganization charges of $8,498,000,
$15,596,000, and $15,343,000 in 2000, 1999, and 1998, respectively,
gains on sales of assets of  $49,546,000, $13,223,000, and
$112,533,000 in the three respective years, and an $8,562,000
charge for an arbitration settlement with Bentley Systems, Inc. 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.

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
Company's 1998 segment information was restated to reflect both of
these operational changes.

Revenues from the U.S. government were $132,400,000 in 2000,
$149,300,000 in 1999, and $166,100,000 in 1998, representing
approximately 19% of total revenue in 2000 and 16% of total revenue
in 1999 and 1998.  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 in the three year period ended December 31, 2000.

International markets, particularly Europe and Asia, continue in
importance to the industry and to each of the Company's business
segments.  The Company's operations are subject to and may be
adversely affected by a variety of risks inherent in doing business
internationally, such as government policies or restrictions,
currency exchange fluctuations, and other factors.  Following is a
summary of 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
noncurrent assets.  Assets have been allocated to geographic areas
based on their physical location.



----------------------------------------------------------------------------
                            Revenues                    Long-lived Assets
----------------------------------------------------------------------------
                       2000      1999      1998     2000     1999     1998
----------------------------------------------------------------------------
(In thousands)

United States        $333,980 $438,649 $  488,908 $113,271 $130,762 $139,128
Europe                188,212  285,548    308,118   13,462   24,194   40,878
Asia Pacific           85,662   98,773    105,860    7,826   14,167   17,975
Other International    82,600   91,910    102,121    2,874    3,878    3,468
----------------------------------------------------------------------------
Total                $690,454 $914,880 $1,005,007 $137,433 $173,001 $201,449
============================================================================

NOTE 13 -- RELATED PARTY TRANSACTIONS.
Bentley Systems, Inc.:  The Company maintains an equity ownership
position in  Bentley Systems, Inc. ("BSI"), the developer and owner
of MicroStation, a software product 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 during
the three year period ended December 31, 2000 and its related
payables to BSI at December 31, 2000 and 1999 were insignificant to
the Company's consolidated results.

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.  The agreement
provides for possible additional purchase price consideration based
on renewals through December 1, 2001 of maintenance contracts
related to the product lines.  The Company estimates that the total
purchase price, including this possible additional consideration,
may approximate $40,000,000.  Only the proceeds received at closing
of the transaction have been recorded by the Company, resulting in
a gain of approximately $23,000,000 in the 2000 consolidated
statements of operations and cash flows.  Full year 1999 revenues
for the product lines sold to BSI approximated $35,000,000.  Under
the agreement, the Company will 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, with
the exceptions of Z/I Imaging and IPS, will be affected by this
agreement.  The gross margins of the affected business segments
will be 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
Mapping and GIS Solutions 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 three million of
the shares of BSI's Class A common stock owned by the Company.  The
transferred shares were valued at approximately $3,500,000 on the
Company's books.  As a result of the settlement, the Company's
equity ownership in BSI was reduced from approximately 50% to
approximately 33%.  Additionally, the Company had a $1,200,000 net
receivable from BSI relating to business conducted prior to January
1, 1999 which was written off in connection with the settlement.
The Company recorded a nonoperating charge to earnings of
$8,562,000 in connection with this settlement, representing the
portion of settlement costs not previously accrued.  This charge is
included in "Arbitration settlement" in the consolidated statement
of operations for the year ended December 31, 1999.  See
"Arbitration Settlement" included in Management's Discussion and
Analysis of Financial Condition and Results of Operations on page
23  of this annual report for further discussion of the
Company's arbitration proceeding and business relationship with
BSI.

Carl Zeiss B.V.:  Carl Zeiss B.V.  ("Zeiss"), a manufacturer of
aerial cameras and photogrammetric scanning systems, has a 40%
ownership interest in Z/I Imaging Corporation ("Z/I Imaging"), a
60%-owned and consolidated subsidiary of the Company formed October
1, 1999.  See 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 $12,151,000
in 2000 and $1,770,000 during the three month period ended December
31, 1999.  Z/I Imaging's selling and other transactions with Zeiss
during these periods and its related payables to Zeiss at December
31, 2000 and 1999 were insignificant to the Company's consolidated
results and financial position.

3Dlabs, Inc. Ltd.: As initial proceeds from the July 2000 sale of
its Intense3D graphics accelerator division, the Company received
approximately 3,600,000 of the common shares of 3Dlabs, Inc. Ltd.
("3Dlabs"), constituting an equity ownership interest of
approximately 19.7%.  See Note 15.  Under its agreement with
3Dlabs, the Company serves as intermediary between 3Dlabs and SCI
(the Company's contract manufacturer) for manufacturing performed
by SCI for 3Dlabs.  The Company earns no margin on the inventory
purchased from SCI and sold to 3Dlabs and records no associated
revenues or cost of revenues in its results of operations.  Gross
billings to 3Dlabs during the second half of 2000 totaled
$14,114,000.  At December 31, 2000, the Company's receivable from
3Dlabs for inventory purchased on its behalf totaled $6,271,000.
This non-trade receivable is included in "Other current assets" in
the Company's December 31, 2000 consolidated balance sheet.

NOTE 14 -- SHAREHOLDER RIGHTS PLAN.
On August 25, 1993, the Company's Board of Directors adopted a
Shareholder Rights Plan.  As part of this plan, the Board of
Directors declared a distribution of one common stock purchase
right (a "Right") for each share of the Company's common stock
outstanding on September 7, 1993.  Each Right entitles the holder
to purchase from the Company one common share at a price of $50,
subject to adjustment.  The Rights are not exercisable until the
occurrence of certain events related to a person or a group of
affiliated or associated persons acquiring, obtaining the right to
acquire, or commencing a tender offer or exchange offer, the
consummation of which would result in beneficial ownership by such
a person or group of 15% or more of the outstanding common shares
of the Company.  Rights will also become exercisable in the event
of certain mergers or an asset sale involving more than 50% of the
Company's assets or earnings power.  Upon becoming exercisable,
each Right will allow the holder, except the person or group whose
action has triggered the exercisability of the Rights, to either
buy securities of Intergraph or securities of the acquiring
company, depending on the form of the transaction, having a value
of twice the exercise price of the Rights.  The Rights trade with
the Company's common stock.  The Rights are subject to redemption
at the option of the Board of Directors at a price of $.01 per
Right until the occurrence of certain events, and are exchangeable
for the Company's common stock at the discretion of the Board of
Directors under certain circumstances.  The Rights expire on
September 7, 2003.

NOTE 15 -- ACQUISITIONS AND DIVESTITURES
3Dlabs.  On July 21, 2000 (but with effect from July 1, 2000), the
Company sold the Intense3D graphics accelerator division of ICS to
3Dlabs, Inc. Ltd. ("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 have been placed in escrow for one year 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 considers this amount to be the minimum earn-out due from
3Dlabs and, as such, it has 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. The market
value of the Company's investment in 3Dlabs is included in
"Investments in affiliates" in the Company's consolidated balance
sheets.  See Note 1 for information regarding the valuation of this
investment at December 31, 2000.  Full year 1999 third-party
revenue for the Intense3D division approximated $38,000,000, with
operating results at an approximate breakeven level.  For the
period in 2000 prior to the sale, the division earned operating
income of approximately $8,500,000 on third party revenues of
$34,000,000.

Significant contingencies associated with the Intense3D sale
include potential penalties for the failure of ICS or its successor
(see "SGI" following) to meet its forecasted level of purchases
from 3Dlabs and potential liability for inventory included in the
sale that proves to be obsolete or in excess, if any.  In addition,
the Company, under its existing contract with SCI, its contract
manufacturer, serves as the intermediary between 3Dlabs and SCI for
manufacturing performed by SCI for 3Dlabs and, as such, is exposed
should 3Dlabs be unable to meet its obligations to SCI, though such
exposure is mitigated by a certain payment guarantee in favor of
the Company.  The Company is actively managing the contingencies
associated with this transaction and would record any associated
loss in the period of its determination.  See "SCI" following for a
discussion of the Company's business relationship with SCI.

SGI.  On September 8, 2000, the Company formed a strategic alliance
with Silicon Graphics, Inc. ("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's 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 also contains a provision which could
provide additional purchase price consideration if revenues from
the product lines sold reach a certain level in the one year period
after the closing date.  The Company does not expect to earn
significant 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.  As with 3Dlabs, the
Company serves as the intermediary between SGI and SCI for
manufacturing performed by SCI for SGI.  The Company does not
believe this intermediary role exposes it to substantial risk.

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 due in varying installments through March 31, 2002.
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, $8,316,000 in 1999, and $11,107,000 in 1998,
with operating results at an approximate breakeven level for all
three 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 February 2002.  The accounts and results of
operations of PID have been combined with those of the PBS 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, 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.  InterCAP's revenues and losses for 1998
were $4,660,000 and $1,144,000, respectively.  Assets of the
subsidiary at December 31, 1998 totaled $1,550,000.  The subsidiary
did not have a material effect on the Company's results of
operations for the period in 1999 prior to its sale.  InterCAP's
results of operations were included in the "Intergraph Software"
business segment in the Company's 1998 and 1999 segment
presentations.

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

Zydex.  After legal action dating from 1995 between the Company
and Zydex, Inc., co-developer of the Company's plant design
software application ("PDS"), the Company on January 15, 1998
purchased 100% of the common stock of Zydex for $26,300,000, with
$16,000,000 paid at closing of the agreement and the remaining
amount payable in 15 equal monthly installments, including
interest.  In March 1998, the Company prepaid in full the
remaining amount payable to Zydex.  The former owner of Zydex
retains certain rights to use, but not sell or sublicense, PDS
products for a period of 15 years following the date of closing.
The first quarter 1998 cash payments to Zydex were funded by the
Company's primary lender and by proceeds from the sale of the
Company's Solid Edge and Engineering Modeling System product
lines.  The Company accounted for the acquisition as the purchase
of  PDS software rights and is amortizing those rights over an
estimated useful life of seven years.  The unamortized balance,
approximately $15,000,000 at December 31, 2000 ($18,800,000 at
December 31, 1999), is included in "Other assets" in the Company's
consolidated balance sheets.

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

Printed Circuit Board Facility.  In April 1998, the Company sold
its printed circuit board manufacturing facility for $16,002,000 in
cash.  The Company's gain on this transaction of $8,275,000 is
included in "Gains on sales of assets" in the 1998 consolidated
statements of operations and cash flows. This operational change
did not materially impact the Company's results of operations or
cash flows.  The Company outsourced its printed circuit board needs
for the period of time between this sale and the Company's exit of
the manufacturing and development of hardware products business.

SCI.  In November 1998, the Company sold substantially all of its
U.S. manufacturing assets to SCI Technology Inc. ("SCI"), a wholly-
owned subsidiary of SCI Systems, Inc., and SCI assumed
responsibility for manufacturing of substantially all of the
Company's hardware products.  In addition, the Company licensed
certain related intellectual property to SCI, and SCI employed
approximately 300 of the Company's manufacturing employees.  The
total purchase price was $62,404,000, $42,485,000 of which was
received during the fourth quarter of 1998.  The final purchase
price installment of $19,919,000 was received on January 12, 1999.
The fourth quarter 1998 and first quarter 1999 payments are
included in "Net proceeds from sales of assets" in the Company's
consolidated statements of cash flows for the corresponding
periods.  These proceeds were used primarily to retire debt.  The
Company's gain on this transaction of $1,491,000 is included in
"Gains on sales of assets" in the 1998 consolidated statements of
operations and cash flows.  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 31   June 30   Sept. 30    Dec. 31
-----------------------------------------------------------------------------
(In thousands except per share amounts)

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 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 -
  basic and diluted                      .02   (   .07)  (   .11)      .36
Weighted average shares
  outstanding - basic                 49,254    49,330    49,435    49,480
              - diluted               49,475    49,330    49,435    50,000


Year ended December 31, 1999:
Revenues                            $244,610  $227,076  $220,548  $222,646
Gross profit                          78,926    75,420    57,585    78,004
Reorganization charges                   ---   ( 2,472)  (13,124)      ---
Loss from operations                 ( 6,005)  (17,241)  (40,960)   (3,234)
Gains on sales of assets               1,685    10,705        81       752
Arbitration settlement               ( 8,562)      ---       ---       ---
Loss from continuing operations      (15,475)  ( 9,648)  (43,534)   (9,904)
Net income (loss)                    (17,558)  (12,092)  (45,501)    3,574
Loss from continuing operations
  per share - basic and diluted      (   .32)  (   .20)  (   .89)   (  .20)
Net income (loss) per share -
  basic and diluted                  (   .36)  (   .25)  (   .93)      .07
Weighted average shares
outstanding - basic and diluted       48,697    48,831    48,971    49,121
-----------------------------------------------------------------------------


On October 31, 1999, the Company sold the assets of its VeriBest,
Inc. business segment.  Accordingly, the gain on the sale and the
results of operations for this business segment through the date of
sale were excluded from continuing operations in 1999.

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 Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages
18 to 20 of this annual report.





      REPORT OF ERNST & YOUNG LLP, 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,  2000  and 1999, and the related consolidated statements
of operations, shareholders' equity, and cash flows for each
of  the  three years in the period ended December 31,  2000.
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,  2000  and  1999,  and  the
consolidated  results  of their operations  and  their  cash
flows  for  each  of  the three years in  the  period  ended
December  31, 2000 in conformity with accounting  principles
generally accepted in the United States.


                                       /s/ Ernst & Young LLP

Birmingham, Alabama
January 31, 2001



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, 2001, there
were  49,552,385 shares of common stock outstanding, held by  4,258
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.

----------------------------------------------------------------
                          2000                   1999
Period               High      Low         High        Low
----------------------------------------------------------------
First Quarter     $ 9        $ 4 1/4      $ 7 1/4   $ 4 29/32
Second Quarter      8 7/8      5           10 1/4     6
Third Quarter       7 15/16    3 1/4        7 15/16   4 3/8
Fourth Quarter      7 1/2      5 5/32       5 13/16   3 3/16
================================================================

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 17,
2001, at the Corporate offices in Huntsville, Alabama.


Board Members and Executive Officers

Board of Directors                 Executive Officers

James W. Meadlock                  Roger O. Coupland
Chairman of the Board              President, Intergraph Public Safety, Inc.

James F. Taylor Jr.                Graeme J. Farrell
Chief Executive Officer            Executive Vice President and
                                   Managing Director, Asia Pacific Operations
Larry J. Laster
Chief Financial Officer,           William E. Salter
Intergraph Public Safety, Inc.     President, Intergraph Government Solutions

Lawrence R. Greenwood              K. David Stinson Jr.
                                   President, Process and Building Solutions
Thomas J. Lee
                                   Preetha R. Pulusani
Sidney L. McDonald                 Executive Vice President,
                                   Mapping and GIS Solutions
Joe C. Moquin
                                   Edward A. Wilkinson
Robert E. Thurber                  Executive Vice President

                                   Jack C. Ickes
                                   Vice President of Corporate Services

                                   David Vance Lucas
SECRETARY                          Vice President and General Counsel

John R. Wynn                       Larry T. Miles
                                   Vice President of  Finance

                                   Eugene H. Wrobel
                                   Vice President and Treasurer