---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC  20549

FORM 10 - Q



(Mark One)[X]
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarter Ended

June 30, 2000

Or

[  ]
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934


Commission File Number  0-28252

BroadVision, Inc.(Exact name of registrant as specified in its charter)

|Delaware                                 | 94-3184303            
|---------------------------------------- | ----------------------
|(State or other jurisdiction of          | (I.R.S. Employer      
|incorporation or organization)           | Identification Number)
|                                         |                       
|585 Broadway, Redwood City, California   | 94063                 
|(Address of principal executive offices) | (Zip code)            

(650) 261-5100(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days

YES
   X
   
   NO


As of August 9, 2000, there were 267,150,685 shares of the Registrants Common Stock issued and outstanding.

---

---

---



BROADVISION, INC. AND SUBSIDIARIES

FORM 10-Q
QUARTERENDEDJUNE30, 2000

TABLE OF CONTENTS

|           |                                                            |         
|---------- | ---------------------------------------------------------- | --------
|           |                                                            | Page No.
|           |                                                            |         
|           |                                                            |         
|PART I     | FINANCIAL INFORMATION                                      |         
|           |                                                            |         
|Item 1.    | Financial Statements                                       |         
|           |                                                            |         
|           | Condensed Consolidated Balance Sheets -                    |         
|           | June 30, 2000 and December 31, 1999                        | 3       
|           |                                                            |         
|           | Condensed Consolidated Statements of Operations            |         
|           | and Comprehensive Income (Loss) - Three and six months     |         
|           | ended June 30, 2000 and 1999                               | 4       
|           |                                                            |         
|           | Condensed Consolidated Statements of Cash Flows -          |         
|           | Six months ended June 30, 2000 and 1999                    | 5       
|           |                                                            |         
|           | Notes to Condensed Consolidated Financial Statements       | 6       
|           |                                                            |         
|Item 2.    | Management's Discussion and Analysis of                    |         
|           | Financial Condition and Results of Operations              | 12      
|           |                                                            |         
|Item 3.    | Quantitative and Qualitative Disclosures about Market Risk | 22      
|           |                                                            |         
|PART II    | OTHER INFORMATION                                          |         
|           |                                                            |         
|Item 1.    | Legal Proceedings                                          | 23      
|           |                                                            |         
|Item 2.    | Changes in Securities and Use of Proceeds                  | 23      
|           |                                                            |         
|Item 3.    | Defaults upon Senior Securities                            | 23      
|           |                                                            |         
|Item 4.    | Submission of Matters to a Vote of Security Holders        | 23      
|           |                                                            |         
|Item 5.    | Other Information                                          | 24      
|           |                                                            |         
|Item 6.    | Exhibits and Reports on Form 8-K                           | 24      
|           |                                                            |         
|SIGNATURES | 26                                                        

2

---

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BROADVISION, INC. AND SUBSIDIARIES
CONDENSEDCONSOLIDATEDBALANCESHEETS
(In thousands, except per share data)

|                                                                |  |   | June 30,
    2000 |  |   | December 31,
    1999 | 
|--------------------------------------------------------------- |  | - | ----------------- |  | - | --------------------- | 
|                                                                |  |   |                   |  |  
|                                                                |  |   | (unaudited)       |  |   |                       | 
|                                                                |  |   |                   |  |   |                       | 
|ASSETS                                                          |  |   |                   |  |   |                       | 
|Cash and cash equivalents                                       |  | $ | 148,830           |  | $ | 279,823               | 
|Short-term investments                                          |  |   | 178,424           |  |   | 68,758                | 
|Accounts receivable, less allowance for doubtful accounts of    |  |   |                   |  |   |                       | 
|$2,142 and $1,446, for 2000 and 1999, respectively              |  |   | 66,880            |  |   | 26,540                | 
|Prepaids and other                                              |  |   | 9,424             |  |   | 5,085                 | 
|                                                                |  |   |                   |  |  
|Total current assets                                            |  |   | 403,558           |  |   | 380,206               | 
|Property and equipment, net                                     |  |   | 32,334            |  |   | 16,751                | 
|Long-term investments                                           |  |   | 21,632            |  |   | 4,414                 | 
|Goodwill and other intangibles, net                             |  |   | 741,236           |  |   |                      | 
|Other assets                                                    |  |   | 5,657             |  |   | 4,757                 | 
|                                                                |  |   |                   |  |  
|Total assets                                                    |  | $ | 1,204,417         |  | $ | 406,128               | 
|                                                                |  |   |                   |  |  
|                                                                |  |   |                   |  |   |                       | 
|LIABILITIES AND STOCKHOLDERS EQUITY                            |  |   |                   |  |   |                       | 
|Accounts payable                                                |  | $ | 12,299            |  | $ | 5,754                 | 
|Accrued expenses                                                |  |   | 27,830            |  |   | 13,156                | 
|Unearned revenue                                                |  |   | 24,574            |  |   | 3,896                 | 
|Deferred maintenance                                            |  |   | 30,173            |  |   | 15,228                | 
|Income taxes                                                    |  |   | 2,881             |  |   | 16,769                | 
|Current portion of long-term debt and capital lease obligations |  |   | 997               |  |   | 1,247                 | 
|                                                                |  |   |                   |  |  
|Total current liabilities                                       |  |   | 98,754            |  |   | 56,050                | 
|Other noncurrent liabilities                                    |  |   | 867               |  |   |                      | 
|Long-term debt, net of current portion                          |  |   | 4,347             |  |   | 4,890                 | 
|                                                                |  |   |                   |  |  
|Total liabilities                                               |  |   | 103,968           |  |   | 60,940                | 
|                                                                |  |   |                   |  |   |                       | 
|Stockholders equity:                                           |  |   |                   |  |   |                       | 
|Convertible preferred stock, $0.0001 par value; 10,000          |  |   |                   |  |   |                       | 
|shares authorized; none issued and outstanding                  |  |   |                  |  |   |                      | 
|Common stock, $0.0001 par value; 2,000,000 shares               |  |   |                   |  |   |                       | 
|authorized;  265,963 and 244,812 shares issued and              |  |   |                   |  |   |                       | 
|outstanding for 2000 and 1999, respectively                     |  |   | 27                |  |   | 24                    | 
|Additional paid-in capital                                      |  |   | 1,141,104         |  |   | 320,259               | 
|Deferred compensation                                           |  |   | (67)              |  |   | (226)                 | 
|Accumulated other comprehensive income, net of tax              |  |   | 5,016             |  |   | 25,925                | 
|Accumulated deficit                                             |  |   | (45,631)          |  |   | (794)                 | 
|                                                                |  |   |                   |  |  
|Total stockholders equity                                      |  |   | 1,100,449         |  |   | 345,188               | 
|                                                                |  |   |                   |  |  
|Total liabilities and stockholders equity                      |  | $ | 1,204,417         |  | $ | 406,128               | 
|                                                                |  |   |                   |  |  
|                                                                |  |   |                   |  |   |                       | 

See Accompanying Notes to Condensed Consolidated Financial Statements

3

---

BROADVISION, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)

|                                     |  | Three Months Ended
    June 30, |         | Six Months Ended
    June 30, |  
|------------------------------------ |  | ------------------------------- | ------- | ----------------------------- | -
|                                     |  |                                 |         |                               |  
|                                     |  |                                 | 2000    |                               |  
|                                     |  |                                 |         |                               |  
|                                     |  | (unaudited)                     |         | (unaudited)                   |  
|Revenues:                            |  |                                 |         |                               |  
|Software licenses                    |  | $                               | 56,848  |                               | $
|Services                             |  |                                 | 38,496  |                               |  
|                                     |  |                                 |         |                               |  
|Total revenues                       |  |                                 | 95,344  |                               |  
|                                     |  |                                 |         |                               |  
|Cost of revenues:                    |  |                                 |         |                               |  
|Cost of software licenses            |  |                                 | 1,563   |                               |  
|Cost of services                     |  |                                 | 30,282  |                               |  
|                                     |  |                                 |         |                               |  
|Total cost of revenues               |  |                                 | 31,845  |                               |  
|                                     |  |                                 |         |                               |  
|Gross profit                         |  |                                 | 63,499  |                               |  
|                                     |  |                                 |         |                               |  
|Operating expenses:                  |  |                                 |         |                               |  
|Research and development             |  |                                 | 9,706   |                               |  
|Sales and marketing                  |  |                                 | 33,570  |                               |  
|General and administrative           |  |                                 | 6,786   |                               |  
|Goodwill and intangible amortization |  |                                 | 55,351  |                               |  
|Charge for acquired in-process       |  |                                 |         |                               |  
|technology                           |  |                                 | 10,100  |                               |  
|                                     |  |                                 |         |                               |  
|Total operating expenses             |  |                                 | 115,513 |                               |  
|                                     |  |                                 |         |                               |  
|Operating income (loss)              |  |                                 | (52,014 | )                             |  
|Other income, net                    |  |                                 | 3,940   |                               |  
|                                     |  |                                 |         |                               |  
|Income (loss) before provision       |  |                                 |         |                               |  
|for income taxes                     |  |                                 | (48,074 | )                             |  
|Provision for income taxes           |  |                                 | 6,797   |                               |  
|                                     |  |                                 |         |                               |  
|Net income (loss)                    |  | $                               | (54,871 | )                             | $
|                                     |  |                                 |         |                               |  
|                                     |  |                                 |         |                               |  
|Basic earnings (loss) per share      |  | $                               | (0.21   | )                             | $
|                                     |  |                                 |         |                               |  
|Diluted earnings (loss) per share    |  | $                               | (0.21   | )                             | $
|                                     |  |                                 |         |                               |  
|                                     |  |                                 |         |                               |  
|Shares used in computing:            |  |                                 |         |                               |  
|                                     |  |                                 |         |                               |  
|Basic earnings (loss) per share      |  |                                 | 258,935 |                               |  
|                                     |  |                                 |         |                               |  
|Diluted earnings (loss) per share    |  |                                 | 258,935 |                               |  
|                                     |  |                                 |         |                               |  
|                                     |  |                                 |         |                               |  
|Comprehensive income (loss):         |  |                                 |         |                               |  
|Net income (loss)                    |  | $                               | (54,871 | )                             | $
|Other comprehensive income (loss),   |  |                                 |         |                               |  
|net of tax:                          |  |                                 |         |                               |  
|Unrealized short-term investment     |  |                                 |         |                               |  
|gains (losses)                       |  |                                 | (22,097 | )                             |  
|                                     |  |                                 |         |                               |  
|Total comprehensive income (loss)    |  | $                               | (76,968 | )                             | $
|                                     |  |                                 |         |                               |  
|                                     |  |                                 |         |                               |  

See Accompanying Notes to Condensed Consolidated Financial Statements

4

---

BROADVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) 
(unaudited)

|                                                                 |  | Six Months Ended June 30, |         
|---------------------------------------------------------------- |  | ------------------------- | --------
|                                                                 |  |                           |         
|                                                                 |  | 2000                      |         
|                                                                 |  |                           |         
|Cash flows from operating activities:                            |  |                           |         
|Net income (loss)                                                |  | $                         | (44,837 
|Adjustments to reconcile net income to net cash                  |  |                           |         
|provided by operating activities:                                |  |                           |         
|Depreciation and amortization                                    |  |                           | 4,481   
|Amortization of deferred compensation                            |  |                           | 159     
|Allowance for doubtful accounts                                  |  |                           | 696     
|Amortization of prepaid royalties                                |  |                           | 592     
|Amortization of prepaid compensation                             |  |                           | 1,034   
|Charge for acquired in-process technology                        |  |                           | 10,100  
|Goodwill and intangible amortization                             |  |                           | 55,404  
|Changes in operating assets and liabilities, net of effects from |  |                           |         
|acquired business:                                               |  |                           |         
|Accounts receivable                                              |  |                           | (30,108 
|Prepaids and other                                               |  |                           | (3,205  
|Accounts payable and accrued expenses                            |  |                           | 4,841   
|Unearned revenue and deferred maintenance                        |  |                           | 24,291  
|Income tax benefit from stock option exercises                   |  |                           | 13,131  
|Other noncurrent assets                                          |  |                           | (1,990  
|                                                                 |  |                           |         
|Net cash provided by operating activities                        |  |                           | 34,589  
|                                                                 |  |                           |         
|                                                                 |  |                           |         
|Cash flows from investing activities:                            |  |                           |         
|Purchase of property and equipment                               |  |                           | (17,168 
|Purchase of long-term investments                                |  |                           | (14,218 
|Direct costs of purchase transaction, net of cash acquired       |  |                           | (4,428  
|Other assets                                                     |  |                           | -       
|Purchase of short-term investments                               |  |                           | (200,122
|Maturity of short-term investments                               |  |                           | 55,607  
|                                                                 |  |                           |         
|Net cash used for investing activities                           |  |                           | (180,329
|                                                                 |  |                           |         
|Cash flows from financing activities:                            |  |                           |         
|Proceeds from issuance of common stock, net                      |  |                           | 15,539  
|Repayments of borrowings                                         |  |                           | (542    
|Payments on capital lease obligations                            |  |                           | (250    
|                                                                 |  |                           |         
|Net cash provided by financing activities                        |  |                           | 14,747  
|                                                                 |  |                           |         
|Net decrease in cash and cash equivalents                        |  |                           | (130,993
|Cash and cash equivalents at beginning of period                 |  |                           | 279,823 
|                                                                 |  |                           |         
|Cash and cash equivalents at end of period                       |  | $                         | 148,830 
|                                                                 |  |                           |         
|                                                                 |  |                           |         
|                                                                 |  |                           |         
|Supplemental disclosures of cash flow information:               |  |                           |         
|Cash paid for interest                                           |  | $                         | 283     
|                                                                 |  |                           |         
|Cash paid for income taxes                                       |  | $                         | 593     
|                                                                 |  |                           |         
|                                                                 |  |                           |         

See Accompanying Notes to Condensed Consolidated Financial Statements

5

---

BROADVISION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

Note 1.     Organization and Summary of
Significant Accounting Policies

Nature of Business- BroadVision, Inc. (collectively with
its wholly-owned subsidiaries, "BroadVision" or the "Company") was
incorporated in the state of Delaware on May 13, 1993. The Company develops,
markets and supports application software solutions specifically designed for
one-to-one relationship management across an extended enterprise. These
solutions enable businesses to use the Internet as a platform to conduct
electronic commerce, provide online customer self-service, deliver targeted
information to constituents and provide online financial services. Each of these
capabilities can be made available to all constituents of the extended
enterprise, including: customers, suppliers, partners, distributors and
employees. The BroadVision product suite allows businesses to tailor their
website content to the special needs and interests of individual users by
personalizing each constituent's visit on a real-time interactive basis. The
Company's applications accomplish this by capturing website visitor profile
information and targeting an enterprise's organized content to each visitor
based on easily constructed business rules. The Company believes the benefits of these applications
include greater customer satisfaction and loyalty, increased business volume,
enhanced brand awareness, reduced costs to service customers and execute
transactions, as well as higher employee productivity. The product offerings
inherited through the Interleaf acquisition include XML-based e-content
management tools that can, when combined with BroadVision's existing products,
create a comprehensive, end-to-end offering for companies needing to manage
content rich and transactional e-businesses for delivery over the Web and
wireless devices.

Basis of Presentation- The accompanying consolidated
financial statements include the accounts of the Company. They have been
prepared in accordance with the established guidelines for interim financial
information as provided by the instructions to Form 10-Q and Article 10 of
Regulation S-X. All significant intercompany transactions have been eliminated
in consolidation. The financial results and related information as of June 30,
2000 and for the three and six months ended June 30, 2000 and 1999 are unaudited.
The balance sheet at December 31, 1999, has been derived from the audited
consolidated financial statements as of that date but does not necessarily
reflect all of the informational disclosures previously reported in accordance
with Generally Accepted Accounting Principles. In the Company's opinion, the
consolidated financial statements presented herein include all necessary
adjustments, consisting of normal recurring adjustments, to fairly state the
Company's financial position, results of operations, and cash flows for the
periods indicated. The accompanying consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included with the Company's Form 10-K and other documents that have been filed
with the Securities and Exchange Commission. The results of the Company's
operations for the interim periods presented are not necessarily indicative of
operating results for the full fiscal year or any future interim periods.

Reclassifications-Certain
prior period balances have been reclassified to conform to the current period
presentation.

6

---

Stock Splits-On September 29, 1999, the
Company's Board of Directors declared a three-for-one common stock split in the
form of a stock dividend for stockholders of record as of October 11, 1999. The
stock dividend payment date was October 25, 1999 and the Company's common stock
traded ex-dividend starting October 26, 1999, reflecting the three-for-one stock
split. On February 8 , 2000, the Company's Board of Directors declared a
three-for-one common stock split in the form of a stock dividend for
stockholders of record as of February 21, 2000. The stock dividend payment date
was March 13, 2000 and the Company's common stock traded ex-dividend starting
March 14, 2000, reflecting the three-for-one stock split. The accompanying
consolidated financial statements and related financial information contained
herein has been retroactively restated to give effect for the stock splits.

Net Earnings (Loss) Per Share-Statement
of Financial Accounting Standard ("SFAS") No. 128,Earnings
Per Share, requires the presentation of basic and diluted
earnings per share. Earnings per share are calculated by dividing net income
applicable to common stockholders by a weighted average number of shares
outstanding for the period. Basic earnings per share are determined solely on
common shares; whereas, diluted earnings per share include common equivalent
shares, as determined under the treasury stock method.

The following table
sets forth basic and diluted earnings per share computational data for the
periods presented (in thousands, except per share amounts):

|                                                   |  | Three Months Ended |         | Six Months Ended |  
|-------------------------------------------------- |  | ------------------ | ------- | ---------------- | -
|                                                   |  | June 30,           |         | June 30,         |  
|                                                   |  |                    |         |                  |  
|                                                   |  |                    | 2000    |                  |  
|                                                   |  |                    |         |                  |  
|                                                   |  |                    |         |                  |  
|Net income (loss)                                  |  | $                  | (54,871 | )                | $
|                                                   |  |                    |         |                  |  
|                                                   |  |                    |         |                  |  
|Weighted average common shares outstanding         |  |                    |         |                  |  
|utilized for basic earnings
      (loss) per share |  |                    | 258,935 |                  |  
|                                                   |  |                    |         |                  |  
|Weighted average common equivalent shares          |  |                    |         |                  |  
|outstanding:                                       |  |                    |         |                  |  
|Employee common stock options                      |  |                    |        |                  |  
|Common stock warrants                              |  |                    |        |                  |  
|                                                   |  |                    |         |                  |  
|Total weighted average common and                  |  |                    |         |                  |  
|common equivalent shares outstanding               |  |                    |         |                  |  
|utilized for diluted earnings (loss) per           |  |                    |         |                  |  
|share                                              |  |                    | 258,935 |                  |  
|                                                   |  |                    |         |                  |  
|                                                   |  |                    |         |                  |  
|Basic earnings (loss) per share                    |  | $                  | (0.21   | )                | $
|                                                   |  |                    |         |                  |  
|Diluted earnings (loss) per share                  |  | $                  | (0.21   | )                | $
|                                                   |  |                    |         |                  |  
|                                                   |  |                    |         |                  |  

7

---

Diluted net loss per share does not include the effect of the following
potential common shares at June 30, 2000 (in thousands):

|                              |  | Three Months
      Ended |        | Six Months
      Ended | 
|----------------------------- |  | ------------------------ | ------ | ---------------------- | 
|                              |  | June 30, 2000            |        | June 30, 2000          | 
|                              |  |                          |        |                        | 
|Employee common stock options |  |                          | 36,412 |                        | 
|Common stock warrants         |  |                          | 24     |                        | 
|                              |  |                          |        |                        | 

New Accounting Pronouncements- The
Financial Accounting Standards Board ("FASB") issued SFAS No. 133,Accounting
for Derivative Instruments and Hedging Activities, as amended
by SFAS No. 137. SFAS No. 133 addresses the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts. Under SFAS No. 133, entities are required to record and carry all
derivative instruments at fair value as either assets or liabilities. The
accounting for changes in fair value (i.e., gains or losses) of a derivative
instrument depends on whether it qualifies as part of a hedging relationship,
has been so designated as such and the underlying reason for holding it. The
Company must adopt SFAS No. 133, as amended, by January 1, 2001, and does not
expect such adoption will have any material effect on its financial statements.

In December 1999, the Securities and Exchange
Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"),Revenue
Recognition in Financial Statements, which provides guidance on
the recognition, presentation, and disclosure of revenue in financial statements
filed with the SEC. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosure related to revenue
recognition policies. The Company will adopt SAB 101 upon its effective date in
the fourth quarter of 2000, as required and does not expect the adoption of SAB
101 to have any material effect on its financial position or results of
operations.

Note 2.         Selective
Balance Sheet Detail

Property and equipment consisted of the following
(in thousands):

|                                               |  | June 30, |         | December, 31 |  
|---------------------------------------------- |  | -------- | ------- | ------------ | -
|                                               |  | 2000     |         | 1999         |  
|                                               |  |          |         |              |  
|Furniture and fixtures                         |  | $        | 3,811   |              | $
|Computers and software                         |  |          | 32,908  |              |  
|Leasehold improvements                         |  |          | 10,189  |              |  
|                                               |  |          |         |              |  
|                                               |  |          | 46,908  |              |  
|Less accumulated depreciation and amortization |  |          | (14,574 | )            |  
|                                               |  |          |         |              |  
|                                               |  | $        | 32,334  |              | $
|                                               |  |          |         |              |  

8

---

Accrued expenses consisted of the following (in thousands):

June 30,
      
      December 31,2000
      
      1999Employee benefits
      
      $
      6,056
      
      $
      1,340Commissions and bonuses
      
      
      8,149
      
      
      6,747Sales and other taxes
      
      
      3,438
      
      
      1,122Other
      
      
      10,187
      
      
      3,947$
      27,830
      
      $
      13,156


Note 3.     Commercial Credit Facilities

The Company has various credit facilities
with a commercial lender which include term debt in the form of notes payable
and a revolving line of credit that provides for up to $10,000,000 of additional
borrowings (based on eligible accounts receivable). As of June 30, 2000 and
December 31, 1999, outstanding term debt borrowings were approximately
$5,300,000 and $5,900,000, respectively. Borrowings bear interest at the
bank's prime rate (9.5% and 8.5% as of June 30, 2000 and December 31, 1999,
respectively). Principal and interest is due in consecutive monthly payments
through maturity based on the term of the facility. Principal payments of
$977,000 are due annually from 2000 through 2004, $611,000 due in 2005, and a
final payment of $357,000 due in 2006. As of June 30, 2000 and December 31,
1999, the Company had no outstanding borrowings under its revolving line of
credit. However, commitments totaling $1,000,000 and $2,820,000, in the form of
standby letters of credit were issued under its revolving line of credit
facility as of June 30, 2000 and December 31, 1999, respectively. Commitments
totaling $21,682,641 in the form of standing letters of credit were also issued
from a separate financial institution as of June 30, 2000. The commercial
credit facilities include covenants which impose certain restrictions on the
payment of dividends and other distributions and requires the Company to
maintain monthly financial covenants, including a minimum quick ratio, tangible
net worth ratio and debt service coverage ratio. Borrowings are collateralized
by a security interest in substantially all of the Company's owned assets. The
Company was in compliance with its financial covenants as of June 30, 2000.

Note 4.     Geographic, Segment and Significant
Customer Information

The Company adopted the provisions of SFAS No. 131, Disclosure
about Segments of an Enterprise and Related Information, during 1998. SFAS
No. 131 establishes standards for the reporting by public business enterprises
of information about operating segments, products and services, geographic
areas, and major customers. The methodology for determining what information is
reported is based on the organization of operating segments and the related
information that the Chief Operating Decision Maker ("CODM") uses for
operational decisions and financial performance assessments. The Company's
Chief Executive Officer ("CEO") is considered its CODM. The CEO reviews
consolidated financial information accompanied by disaggregated information for
products and services and revenues by geographic region for purposes of making
operating decisions and financial performance assessments. The Company sells its
products and provides services worldwide through a direct sales force and
through a channel of independent distributors, value-added resellers and
application service providers ("ASPs"). In addition, the sales of the
Company's products are promoted through independent professional consulting
organizations known as systems integrators. The Company provides

9

---

services worldwide directly through its Worldwide Professional Services
Organization and indirectly through distributors, value-added resellers, ASPs
and system integrators. It currently operates in three primary geographical
territories: NASA, which includes North and South America; EMEA, which includes
Europe, the Middle East, Africa and India; and Asia/Pacific/Japan (APJ), which
includes the Pacific Rim and the Far East. Disaggregated financial information
regarding the Company's products and services and geographic revenues is as
follows (in thousands):

|                      |  | Three
      Months Ended |           | Six Months Ended |  
|--------------------- |  | ------------------------ | --------- | ---------------- | -
|                      |  | June 30,                 |           | June 30,         |  
|                      |  |                          |           |                  |  
|                      |  | 2000                     |           | 1999             |  
|                      |  |                          |           |                  |  
|Software licenses:    |  |                          |           |                  |  
|One-To-One Enterprise |  | $                        | 8,031     |                  | $
|One-To-One WebApps    |  |                          | 38,230    |                  |  
|Tools                 |  |                          | 10,587    |                  |  
|Services              |  |                          | 28,491    |                  |  
|Maintenance           |  |                          | 10,005    |                  |  
|                      |  |                          |           |                  |  
|Total Revenues        |  | $                        | 95,344    |                  | $
|                      |  |                          |           |                  |  
|                      |  |                          |           |                  |  
|Revenues:             |  |                          |           |                  |  
|NASA                  |  | $                        | 64,028    |                  | $
|EMEA                  |  |                          | 21,646    |                  |  
|APJ                   |  |                          | 9,670     |                  |  
|                      |  |                          |           |                  |  
|Total Company         |  | $                        | 95,344    |                  | $
|                      |  |                          |           |                  |  
|                      |  |                          |           |                  |  
|                      |  | June 30,                 |           | December 31,     |  
|                      |  | 2000                     |           | 1999             |  
|                      |  |                          |           |                  |  
|Identifiable assets:  |  |                          |           |                  |  
|NASA                  |  | $                        | 1,172,785 |                  | $
|EMEA                  |  |                          | 28,711    |                  |  
|APJ                   |  |                          | 2,921     |                  |  
|                      |  |                          |           |                  |  
|Total Company         |  | $                        | 1,204,417 |                  | $
|                      |  |                          |           |                  |  

Prior periods have been restated to reflect changes in software license
classifications. During the three and six months ended June 30, 2000, and the
three months ended June 30, 1999, no single customer accounted for more than 10%
of the Company's total revenues. During the six months ended June 30, 1999,
one customer accounted for 11% of the Company's total revenues.

Note 5.     Acquisition

On April 14, 2000, the Company completed its acquisition of Interleaf,
Inc. and its subsidiaries ("Interleaf") pursuant to a statutory merger
involving a stock-for-stock exchange. Interleaf's software products and
related services enable automated electronic business, or e-business, and also
enable the extension of e-business to wireless users. Interleaf provides
customers with an integrated, easily implemented e-business solution based on
extensible Markup Language, or XML, that enables the design, creation and
management of XML-based content for transformation and delivery over the Web and
related services. As a result of the acquisition, the

10

---

Company will have the ability to combine technological resources to
develop a robust Web-based business solution and reduce time to market for the
combined Company's products. Through the acquisition of all of the equity
securities of Interleaf, BroadVision acquired all of the assets and assumed
liabilities of Interleaf and its existing operations which included in-process
technology. Pursuant to the terms of the Agreement and Plan of Merger and
Reorganization, dated as of January 26, 2000 (the "Merger Agreement"), each
outstanding share of Interleaf common stock was exchanged for 1.0395 shares of
Company common stock for all outstanding shares of Interleaf common stock and
all options to purchase shares of Interleaf common stock outstanding immediately
prior to the consummation of the Merger were converted into options to purchase
shares of Company common stock.

The Company issued 14,391,991 shares of Company common stock with a
fair market value of $686.9 million and exchanged options to purchase 2,338,342
shares of Company common stock with a fair market value of $102.7 million. The
fair market value of the exchanged options to purchase 2,338,342 shares of
Company common stock was valued using the Black-Scholes option-pricing model. In
connection with the acquisition, the Company incurred transaction costs
consisting primarily of financial advisor, legal and accounting professional
fees of $14.8 million, severance costs of $1.0 million and office closure costs
of $1.3 million, resulting in a total purchase price of $806.7 million. The
results of operations of Interleaf have been included with the Company's
results of operations since the April 14, 2000 acquisition date.

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

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

|Property and equipment                                |  | $ | 2,896   |  
|----------------------------------------------------- |  | - | ------- | -
|Net assets acquired, excluding property and equipment |  |   | (2,284  | )
|Identifiable intangible assets                        |  |   | 28,910  |  
|In-process research and development                   |  |   | 10,100  |  
|Goodwill                                              |  |   | 767,048 |  
|                                                      |  |   |         |  
|Total                                                 |  | $ | 806,670 |  
|                                                      |  |   |         |  

Based upon the Company's estimates prepared in conjunction with a
third-party valuation consultant, $10.1 million was allocated to acquired
in-Process research and development and $796.0 million was allocated to
intangible assets. The amounts allocated to intangible assets include completed
technologies of $20.4 million and assembled workforces of $8.5 million.

At June 30, 2000, accumulated amortization related to the goodwill and
other intangible assets acquired in the Interleaf acquisition totaled $55.3
million. Goodwill amortization was $53.3 million and other intangible asset
amortization was $2.0 million. The goodwill and other intangible assets are
being amortized over a three-year period.

11

---

The following summary, prepared on an unaudited pro forma basis,
reflects the condensed consolidated results of operations for the six-month
period ended June 30, 2000 and 1999 assuming Interleaf had been acquired at the
beginning of the periods presented (in thousands, except per share data):

|                                     |  | For the six months ended
      June 30, |         
|------------------------------------ |  | --------------------------------------- | --------
|                                     |  | 2000                                    |         
|                                     |  |                                         |         
|Revenue                              |  | $                                       | 170,508 
|Net loss                             |  |                                         | (120,121
|Basic and diluted net loss per share |  | $                                       | (0.47   
|                                     |  |                                         |         

The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the periods presented. In
addition, they are not intended to be a projection of future results and do not
reflect any synergies that might be affected from combined operations. The
charges for in-process technology have not been included in the unaudited pro
forma results because they are nonrecurring. See Management's Discussion and
Analysis of Financial Condition and Results of Operations for more information
concerning the acquisition of Interleaf.

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
                 
CONDITION AND RESULTS OF OPERATIONS

EXCEPT
FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THOSE DISCUSSED
HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT
ARE NOT LIMITED TO, THOSE DISCUSSED HEREIN WITH THIS QUARTERLY REPORT ON FORM
10-Q, THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AND OTHER DOCUMENTS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH FORWARD-LOOKING STATEMENTS
SPEAK ONLY AS OF THE DATE SUCH STATEMENTS ARE MADE.

OVERVIEW

BroadVision develops,
markets and supports fully integrated scalable application software solutions
specifically designed for one-to-one relationship management across the extended
enterprise. These total end-to-end solutions enable businesses to use the
Internet as a unique platform to conduct electronic commerce, provide online
financial services, offer online interactive customer self-service, and deliver
targeted information to all constituents of the extended enterprise. These
constituents include but are not limited to customers, suppliers, distributors,
partners, and employees.

The BroadVision product
suite allows businesses to tailor their website content to the special needs and
interests of individual users by personalizing each constituent's visit on a
real-time interactive basis. Our applications accomplish this by capturing
website visitor profile information and targeting an enterprise's organized
content to each visitor based on easily constructed business rules. We believe
the benefits of these applications include greater customer satisfaction and
loyalty, increased business volume, enhanced brand awareness, reduced costs to
service customers and execute transactions, as well as higher employee
productivity. The product offerings inherited through the Interleaf acquisition
include XML-based e-content management tools that can, when combined with
BroadVision's existing products, create one of

12

---

the most comprehensive, end-to-end offerings for companies needing to
manage content-rich and transactional e-businesses for delivery over the Web and
wireless devices.

The Company sells its
products and services worldwide through a direct sales forces and through a
channel of independent distributors, value-added resellers and application
service providers ("ASPs"). In addition, the sales of the Company's
products are promoted through independent professional consulting organizations
known as system integrators and through members of a global network of strategic
business relationships with key industry platform and Web developer partners.
The Company also engages in strategic business alliances to assist with its
marketing, selling and development of customer applications. In addition, the
Company places a strategic emphasis on technology alliances to ensure that its
products are based on industry standards and that it is positioned to take
advantage of current and emerging technologies. All of these independent
entities are often referred to in this document as "partners". The benefits
of this app roach include enabling the Company to focus on its core competencies
while reducing time to market and simplifying the task of designing and
developing applications for itself and its customers.

RESULTS OF OPERATIONS

Revenues

The Company's revenues are
derived from software license fees and fees charged for its services. Software
is generally licensed for development use and for deployment of the customer's
website using the software. Deployment licenses are generally based on the
number of persons who register on a customer's website using the Company's
software. The Company recognizes software license revenues when a non-cancelable
license agreement has been signed and the customer acknowledges an unconditional
obligation to pay, the software product has been delivered, there are no
uncertainties surrounding product acceptance, the fees are fixed and
determinable, and collection is considered probable.

The Company's professional
services are provided through its Worldwide Professional Services Organization
("WPSO") operation, presently comprised of the the Technical Services Group,
the Content and Strategic Services Group, the e-publications Group, BroadVision
University, and the Worldwide Customer Support Group. The first three groups
provide consulting services, the fourth group provides training-related services
to employees, customers, and partners, and the last group provides software
maintenance services (including technical support) to the Company's customers
and partners. Revenue from consulting services are typically recognized as
services are performed. Maintenance fees relating to technical support and
upgrades are recognized ratably over the maintenance period.

Total
Company revenuesincreased 306% during the quarter ended
June 30, 2000 to $95.3 million as compared to $23.5 million for the quarter
ended June 30, 1999. For the six months ended June 30, 2000, total Company
revenues increased 274% to $156.8 million as compared to $41.9 million for the
comparable period during 1999. A summary of the Company's revenues by
geographic region is as follows:

13

---

|(In thousands)      |  | Software |        | % |  | Services |   | % |        | Total |  | %   |  
|------------------- |  | -------- | ------ | - |  | -------- | - | - | ------ | ----- |  | --- | -
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|Three Months Ended: |  |          |        |   |  |          |   |   |        |       |  |     |  
|June 30, 2000       |  |          |        |   |  |          |   |   |        |       |  |     |  
|NASA                |  | $        | 34,368 |   |  | 60       | % | $ | 29,660 |       |  | 77  | %
|EMEA                |  |          | 14,819 |   |  | 26       |   |   | 6,827  |       |  | 18  |  
|APJ                 |  |          | 7,661  |   |  | 14       |   |   | 2,009  |       |  | 5   |  
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|Total               |  | $        | 56,848 |   |  | 100      | % | $ | 38,496 |       |  | 100 | %
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|June 30, 1999       |  |          |        |   |  |          |   |   |        |       |  |     |  
|NASA                |  | $        | 12,163 |   |  | 79       | % | $ | 6,242  |       |  | 78  | %
|EMEA                |  |          | 2,362  |   |  | 15       |   |   | 1,313  |       |  | 16  |  
|APJ                 |  |          | 959    |   |  | 6        |   |   | 437    |       |  | 6   |  
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|Total               |  | $        | 15,484 |   |  | 100      | % | $ | 7,992  |       |  | 100 | %
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|Six Months Ended:   |  |          |        |   |  |          |   |   |        |       |  |     |  
|June 30, 2000       |  |          |        |   |  |          |   |   |        |       |  |     |  
|NASA                |  | $        | 66,129 |   |  | 68       | % | $ | 45,184 |       |  | 76  | %
|EMEA                |  |          | 22,078 |   |  | 23       |   |   | 11,191 |       |  | 19  |  
|APJ                 |  |          | 9,355  |   |  | 9        |   |   | 2,908  |       |  | 5   |  
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|Total               |  | $        | 97,562 |   |  | 100      | % | $ | 59,283 |       |  | 100 | %
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|June 30, 1999       |  |          |        |   |  |          |   |   |        |       |  |     |  
|NASA                |  | $        | 19,619 |   |  | 69       | % | $ | 10,127 |       |  | 74  | %
|EMEA                |  |          | 4,830  |   |  | 17       |   |   | 2,807  |       |  | 21  |  
|APJ                 |  |          | 3,818  |   |  | 14       |   |   | 739    |       |  | 5   |  
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|Total               |  | $        | 28,267 |   |  | 100      | % | $ | 13,673 |       |  | 100 | %
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  
|                    |  |          |        |   |  |          |   |   |        |       |  |     |  

Software product
license revenuesincreased 267% during the current quarter
ended June 30, 2000 to $56.8 million as compared to $15.5 million for the
quarter ended June 30, 1999. For the six months ended June 30, 2000, license
revenues increased 245% to $97.6 million as compared to $28.3 million for the
comparable period during 1999.

The increase in software
license revenues is a result of continued strong demand by existing and new
customers for the Company's expanding product line and core competencies and
the growing market for business-to-business and business-to-consumer e-commerce
software application solutions. Software license revenue also increased in the
quarter ended June 30, 2000 as a result of sales of software licenses of
products acquired in the Interleaf transaction. In addition, software license
revenues for the Company's web-applications increased to $8.0 million for the
quarter ended June 30, 2000, as compared to $1.1 million for the quarter ended
June 30, 1999. Software product license revenues for web-enabling applications
increased to $13.7 million for the six months ended June 30, 2000, as compared
to $4.1 million for the six months ended June 30, 1999. The Company believes
that the requirements of customers to be able to handle more registered visitors
t o their websites after they have "gone live" (i.e., been deployed) has
resulted in a continued increase in deployment license revenues. During the
quarter ended June 30, 2000, the Company signed license agreements with 161 new
customers (136 end-user customers and 25 partner organizations), compared to 63
new customers (51 end users and 12 partner organizations) for the quarter ended
June 30, 1999. The Company signed license agreements with 271 new customers (238
end-user organizations and 33 partner

14

---

organizations) for the six months ended June 30, 2000, compared to 106
new licensed customers (83 end-users and 23 partner organizations) for the six
months ended June 30, 1999. As of June 30, 2000, the Company had a total
installed base of 764 end-customers and 156 partners, which compares with 415
end-user customers and 123 partners as of December 31, 1999 and 280 end-user
customers and 100 partners as of June 30, 1999.

Totalservices revenuesincreased 382% during
the current quarter ended June 30, 2000 to $38.5 million as compared to $8.0
million for the quarter ended June 30, 1999. For the six months ended June 30,
2000, services revenues increased 334% to $59.3 million as compared to $13.7
million for the comparable period during 1999.

The increase in professional
services revenue is a result of higher levels of consulting related services
associated with increased business volumes and higher customer support revenues
derived from a larger installed customer base. Maintenance related fees for
technical support and product upgrades were $10.0 million for the quarter ended
June 30, 2000 as compared to $2.7 million for the quarter ended June 30, 1999.
Maintenance related fees were $17.1 million for the six months ended June 30,
2000 as compared to $4.6 million for the six months ended June 30, 1999. The
Company also experienced increases in services and maintenance revenues as a
result of the Interleaf acquisition. During the first half of 2000, the Company
expanded its corporate training facilities by building new training centers in
Chicago, Illinois, the United Kingdom and Taipei, Taiwan.

Cost of Revenues

Cost of license revenues
include royalties payable to third parties for software that is either embedded
in, or bundled and sold with, the Company's products; commissioned agent fees
paid to distributors; and the costs of product media, duplication, packaging and
other manufacturing costs.

Cost of services consists
primarily of employee-related costs, third-party consultant fees incurred on
consulting projects, post-contract customer support, and instructional training
services.

A summary of the cost of revenues for the periods presented is as
follows:

|                             |  | Three Months
      Ended June 30, |        | Six Months
      Ended June 30, | 
|---------------------------- |  | --------------------------------- | ------ | ------------------------------- | 
|                             |  |                                   |        |                                 | 
|(In thousands)               |  | 2000                              |        | %                               | 
|                             |  |                                   |        |                                 | 
|                             |  |                                   |        |                                 | 
|Cost of software licenses[1] |  | $                                 | 1,563  |                                 | 
|Cost of services[2]          |  |                                   | 30,282 |                                 | 
|                             |  |                                   |        |                                 | 
|Total cost of revenues[3]    |  | $                                 | 31,845 |                                 | 
|                             |  |                                   |        |                                 | 
|                             |  |                                   |        |                                 | 

[1] -Percentage is calculated
based on total software license revenues for the period indicated[2] -Percentage is calculated based on total
services revenues for the period indicated[3] -Percentage is calculated based on total
revenues for the period indicated

15

---

Cost of software licensesincreased
51% in absolute dollar terms during the current quarter ended June 30, 2000 to
$1.6 million as compared to $1.0 million for the quarter ended June 30, 1999.
For the six months ended June 30, 2000, cost of software licenses increased 103%
to $3.6 million as compared to $1.8 million for the comparable period during
1999.

In absolute dollar terms,
the increases in cost of software licenses in both comparative periods were
principally a result of increased sales of the Company's products and of
royalty-bearing third party products. In relative percentage terms, cost of
software licenses decreased principally as a result of the Company renegotiating
the royalty provisions of agreements with two software suppliers from per copy
royalties to fixed fee prepaid license fees.

Cost of servicesincreased 555% during the current quarter ended June 30, 2000 to $30.3 million
as compared to $4.6 million for the quarter ended June 30, 1999. For the six
months ended June 30, 2000, cost of services increased 478% to $46.0 million as
compared to $7.9 million for the comparable period during 1999.

In absolute dollar terms,
the increases in cost of services in both comparative periods were a result of
higher business volumes as evidenced by increased services revenues. Overall
costs increased as a result of additions to our professional services staff and
the employment of outside consultants to meet short-term consulting demands. As
a percentage of services revenue, the increase in cost of services is a result
of hiring new employees within WPSO who do not generate revenue during their
internal training period and higher use of outside consultants in relation to
the extent previously used during the prior year period.

Operating Expenses and Other Income, net

Research and development
expenses consist primarily of salaries, employee-related benefit costs, and
consulting fees incurred in association with the development of the Company's
products. Costs incurred for the research and development of new software
products are expensed as incurred until such time that technological
feasibility, in the form of a working model, is established at which time such
costs are capitalized and recorded at the lower of unamortized cost or net
realizable value. The costs incurred by the Company subsequent to the
establishment of a working model but prior to general release of the product
have not been significant. To date, the Company has not capitalized any software
development costs.

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

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

16

---

|                               |  | Three Months Ended June
      30, |         | Six Months Ended June 30, | 
|------------------------------ |  | --------------------------------- | ------- | ------------------------- | 
|                               |  |                                   |         |                           | 
|(In thousands)                 |  | 2000                              |         | %[1]                      | 
|                               |  |                                   |         |                           | 
|                               |  |                                   |         |                           | 
|Research and development       |  | $                                 | 9,706   |                           | 
|Sales and marketing            |  |                                   | 33,570  |                           | 
|General and administrative     |  |                                   | 6,786   |                           | 
|Goodwill and intangible        |  |                                   |         |                           | 
|amortization                   |  |                                   | 55,351  |                           | 
|Charge for acquired in-process |  |                                   |         |                           | 
|technology                     |  |                                   | 10,100  |                           | 
|                               |  |                                   |         |                           | 
|Total Operating Expenses       |  | $                                 | 115,513 |                           | 
|                               |  |                                   |         |                           | 

[1] -Expressed as a percent of
total revenues for the period indicated

Research
and development expenses increased 197% during the current quarter ended
June 30, 2000 to $9.7 million as compared to $3.3 million for the quarter ended
June 30, 1999. For the six months ended June 30, 2000, research and development
expenses increased 151% to $15.5 million as compared to $6.2 million for the
comparable period during 1999. The increase in research and development expenses
is primarily attributable to increased personnel, as a result of additional
hires as well as employees acquired in the Interleaf transaction, involved in
the enhancement of existing applications and the development of the Company's
next generation of products. The Company expects research and development
expenses will continue to increase in absolute dollar terms.

Sales and
marketing expensesincreased 235% during the current quarter
ended June 30, 2000 to $33.6 million as compared to $10.0 million for the
quarter ended June 30, 1999. For the six months ended June 30, 2000, sales and
marketing expenses increased 232% to $58.8 million as compared to $17.7 million
for the comparable period during 1999. The increases in sales and marketing
expenses reflect the cost of increased sales and marketing personnel from
additional hires as well as employees acquired in the Interleaf transaction,
increased sales commissions paid on the greater sales levels, expenditures made
to develop and expand sales distribution channels, and costs incurred for
increased promotional activities and marketing related programs. The Company
expects sales and marketing expenses will continue to increase in absolute
dollar terms.

General and
administrative expensesincreased 321% during the current
quarter ended June 30, 2000 to $6.8 million as compared to $1.6 million for the
quarter ended June 30, 1999. For the six months ended June 30, 2000, general and
administrative expenses increased 259% to $10.3 million as compared to $2.9
million for the comparable period during 1999. The increase in general and
administrative expenses is attributable to additional administrative and
management personnel as a result of additional hires and employees acquired in
the Interleaf transaction, higher professional fees and additional
infrastructure to support the expansion of the Company's operations. The Company
expects general and administrative expenses will continue to increase in
absolute dollar terms.

17

---

Amortization
of goodwill and other intangibles.As described in Note 5 in the Notes to
the Condensed Consolidated Financial Statements above, the Company acquired
Interleaf in the quarter ended June 30, 2000. The Company has accounted for the
acquisition as a purchase business combination. As a result of this transaction,
the Company has recorded goodwill and other intangible assets on the balance
sheet of $796.0 million. Amortization of goodwill and other intangibles assets
related to the Interleaf acquisition was $55.3 million in the quarter ended June
30, 2000. The remaining $740.7 million of goodwill and other intangible assets
will be amortized on a straight-line basis through the quarter ended June 30,
2003. Please see Note 5 in the Notes to the Condensed Consolidated Financial
Statements for a more detailed discussion of the charge for in-process
technology.

In-process
technology.In connection with the Interleaf acquisition the
Company recorded a charge of $10.1 million in the quarter ended June 30, 2000.
Please see Note 5 in the Notes to the Condensed Consolidated Financial
Statements for a detailed discussion of the acquisition of Interleaf. Based upon
the Company's estimates prepared in conjunction with a third-party valuation
consultant, $10.1 million was allocated to acquired in-process technology and
$796.0 million was allocated to goodwill and intangible assets. The amounts allocated to
goodwill and intangible assets include completed technologies of $20.4 million and assembled
workforces of $8.5 million. The Company used the cost approach to estimate the
value of the assembled workforce and the income approach to estimate the value
of the business and technology projects acquired. The income approach takes into
consideration the expected future cash flows attributable to the technology
projects and discounts these cash flows to present value at a rate that
appropriately reflects their risk. The value assigned to in-process technology
was the amount attributable to the efforts of the seller up to the time of
acquisition. This amount was estimated through application of the "stage of
completion" calculation by multiplying the estimated present value of future
cash flows, excluding costs of completion, by the percentage of completion of
the purchased technology projects at the time of acquisition. Based upon these
estimates, material net cash flows from the acquired business are expected to
occur during the calendar year 2000. The cash flows for the completed and
in-process technologies were discounted using
discount rates of 15.0% to 35.0%.

The fair market value of the
technologies acquired have been grouped in three classifications. Completed
Technology represents technology that has successfully completed final Beta
test. In-Process Technology represents technology that, as of the valuation
date, has not yet entered Beta test or has commenced but not yet successfully
completed final Beta test and has no alternative future use. Core Technology is
technology that is being used in not only the current products and in-process
technology projects, but also in future, not yet defined projects. Completed
technologies are defined as those that have reached technological feasibility.
The Company defines technological feasibility as the point at which the
technologies have successfully completed Beta test.

The Completed Technologies
include projects that enable companies to create, manage and deliver e-content
for web enabled applications, using XML as its technology backbone and Microsoft
Word for content creation. These
projects also enable companies to manage XML and non-XML documents throughout
their lifecycle in one integrated system.

18

---

The
In-Process Technologies include a project to develop a version of current
software which will run on a Unix-based operating system. As of the valuation
date, the development of this project was approximately 34% complete and there
was significant technological risk remaining. Another in-process technology
project is an upgrade to an existing product that will take into account new W3C
standards being developed for XML as well as provide the capability for a user
to author and create documents for a specific output device. As of the valuation
date, this project was approximately 6% complete. This technology is not
expected to reach technological feasibility until December of fiscal 2000. The
final in-process technology project is being developed to provide a new,
cost-effective means for a website to deliver content both to full-function
personal computers and to reduced-function devices such as wireless telephones
and wireless person al digital assistants. As of the valuation date, this
project was approximately 57% complete.

Core technology encompasses
both leveraged code and general technological know-how, experience, and
expertise regarding the design, manufacture and development of content
management technology in existing products and it is therefore not appropriate
to consider the value of the core technology to be part of the estimated value
of in-process technology. Thus, the value of the in-process technology has been
isolated by allocating a portion of the cash flow to this core technology that
gives full recognition to its contribution.

As noted above, the income
forecast method was used to value the business and technology projects acquired.
The value of the acquired in-process technology and the completed technologies
was estimated by discounting to present value the free cash flows generated by
the products, with which the technologies are associated, over the remaining
economic lives of the technologies. Discount rates used ranged from 15% to 35%
and were based upon the relative risk associated with the completed technologies
and the incomplete development projects and upon considerations such as stage of
completion, remaining development milestones, technological uncertainties, and
projected cost to complete. The Company believes that these discount rates are
consistent with the overall costs of capital and the relative risks of the
completed technologies and the R&D project. The Company has valued the
in-process technology using the "Percentage Completion Approach" as
suggested by t he U.S. Securities and Exchange Commission. This approach varies
from the traditional discounted cash flow approach that is used to value
in-process technology. The Percentage Completion Approach does not include
completion costs in the discounted cash flow analysis and the present value of
future cash flows is multiplied by the estimated percentage complete as of the
valuation date to determine the value of the acquired in-process technology.

The cost approach was
utilized to value the assembled workforce. This approach considers the concept
of avoided costs as an indicator of value and is an appropriate method for
estimating the fair market value of an asset where reliable data for sales of
comparable property are not available and where the property does not directly
produce an income stream. The basis of the valuation is the estimated cost to
recruit and train the new work force.

19

---

As part of the
Purchase and Sale Agreement and the closing compilation documents, Non-Compete
Agreements (the "Agreements") were executed with certain Interleaf
employees. No value of the aggregate purchase price was allocated to the
Agreements based upon numerous facts and circumstances such as the likelihood of
employees leaving the Company and the effect on performance of the Company these
employees would have should they leave the Company and were not barred from
competing.

Income Taxes

During the quarter ended
June 30, 2000, the Company recognized tax expense of $6.8 million for an
effective tax rate of approximately 39%. For the six months ended June 30, 2000,
the Company recognized tax expense of $13.2 million for an effective tax rate of
approximately 39%. Due to the Company's continuing trend of positive earnings,
the Company has utilized a significant portion of its net operating loss
carryforwards and as a result, the Company's effective tax rate is similar to
its statutory rate.

Litigation Settlement

On February 22, 2000, the
Company reached a settlement agreement and entered into a license agreement with
Art Technology Group ("ATG") in connection with the lawsuit filed by the
Company on December 11, 1998 against ATG alleging infringement on the
Company's U.S. Patent No. 5,710,887. In accordance with the terms of the
agreement, the Company granted ATG a nonexclusive, nontransferable, worldwide,
perpetual license and was paid $8 million by ATG at the effective date of the
settlement and will receive a total of $7 million payable in quarterly
installments commencing February 24, 2000 (four consecutive quarterly payments
of $750,000 during 2000 and eight consecutive quarterly payments of $500,000
during 2001 and 2002).

LIQUIDITY AND CAPITAL RESOURCES

|                              | June 30, |         | December 31, |  
|----------------------------- | -------- | ------- | ------------ | -
|(In thousands)                | 2000     |         | 1999         |  
|                              |          |         |              |  
|Cash, cash equivalents and    |          |         |              |  
|liquid short-term investments | $        | 327,254 |              | $
|                              |          |         |              |  
|Working capital               | $        | 304,804 |              | $
|                              |          |         |              |  
|Working capital ratio         |          | 4.1 : 1 |              |  
|                              |          |         |              |  

At June 30, 2000, the
Company had $327.3 million of cash, cash equivalents and liquid short-term
investments, which represents a decrease of $21.3 million as compared to
December 31, 1999. The Company currently has no significant capital commitments
other than obligations under operating leases and $ 5.3 million of outstanding
term debt under its existing credit facility with a commercial bank.

20

---

Cash provided by
operating activities was $34.6 million and $11.0 million for the six months
ended June 30, 2000 and 1999, respectively. Cash used for investing activities
was $180.3 million and $22.8 million for the six months ended June 30, 2000 and
1999, respectively, and was primarily for capital expenditures and purchase of
short-term and long-term investments. Cash provided by financing activities was
$14.8 million and $3.6 million for the six months ended June 30, 2000 and 1999,
respectively, and consists primarily of proceeds from the issuance of common
stock.

The Company believes that
its available cash and short-term investment resources, cash generated from
operations and amounts available under its commercial credit facilities will be
sufficient to meet its expected working capital and capital expenditure
requirements for at least the next 12 months. This estimate is a forward-looking
statement that involves risks and uncertainties, and actual results may vary as
a result of a number of factors, including those discussed under "Risk
Factors" and elsewhere herein. The Company may need to raise additional
funds in order to support more rapid expansion, develop new or enhanced
services, respond to competitive pressures, acquire complementary businesses or
technologies, or respond to unanticipated requirements. The Company may seek to
raise additional funds through private or public sales of securities, strategic
relationships, bank debt, financing under leasing arrangements, or otherwise. If
additional funds are ra ised through the issuance of equity securities, the
percentage ownership of the stockholders of the Company will be reduced,
stockholders may experience additional dilution, or such equity securities may
have rights, preferences, or privileges senior to those of the holders of the
Company's common stock. There can be no assurance that additional financing will
be available on acceptable terms, if at all. If adequate funds are not available
or are not available on acceptable terms, the Company may be unable to develop
or enhance its products, take advantage of future opportunities, or respond to
competitive pressures or unanticipated requirements, which could have a material
adverse effect on the Company's business, financial condition, and operating
results.

FACTORS AFFECTING QUARTERLY OPERATING RESULTS

The Company may experience
significant fluctuations in quarterly operating results that may be caused by
many factors including, but not limited to, those discussed below and herein
with this quarterly report on Form 10-Q, as contained in the Company's annual
report on Form 10-K under the caption "Risk Factors" and elsewhere therein,
and as disclosed in other documents filed with the Securities and Exchange
Commission.

Significant fluctuations in
future quarterly operating results may be caused by many factors including,
among others, the timing of introductions or enhancements of products and
services by the Company or its competitors, market acceptance of new products,
the mix of the Company's products sold, changes in pricing policies by the
Company or its competitors, the ability of the Company to retain customers,
changes in the Company's sales incentive plans, budgeting cycles of its
customers, customer order deferrals in anticipation of new products or
enhancements by the Company or its competitors, nonrenewal of service agreements
(which generally automatically renew for one year terms unless earlier
terminated by either party upon 90-days notice), product life cycles, changes in
strategy, seasonal trends, the mix of distribution channels through which the
Company's products are sold, the mix of international and domestic sales, the
rate at which new s ales people become productive, changes in the level of
operating

21

---

expenses to support projected growth, and general economic conditions.
The Company anticipates that a significant portion of its revenues will be
derived from a limited number of orders, and the timing of receipt and
fulfillment of any such orders is expected to cause material fluctuations in the
Company's operating results, particularly on a quarterly basis. Due to the
foregoing factors, quarterly revenues and operating results are difficult to
forecast, and the Company believes that period-to-period comparisons of its
operating results will not necessarily be meaningful and should not be relied
upon as any indication of future performance.

It is likely that the
Company's future quarterly operating results from time to time will not meet
the expectations of market analysts or investors, which may have an adverse
effect on the price of the Company's common stock. The Company anticipates
that its operating expenses will continue to be substantial in relation to total
revenues as it continues the development of its technology, increases its sales
and marketing activities, creates and expands its distribution channels, grows
its professional services organization and implements the administrative
infrastructure to support those operations.

Some of these risks and uncertainties relate to the new and rapidly
evolving nature of the markets in which the Company operates. These related
market risks include, among other things, the early stage of the developing
online commerce market, the dependence of online commerce on the development of
the Internet and its related infrastructure, the uncertainty pertaining to
widespread adoption of online commerce, and the risk of government regulation of
the Internet. Other risks and uncertainties facing the Company relate to the
Company's ability to, among other things, successfully implement its marketing
strategies, respond to competitive developments, continue to develop and upgrade
its products and technologies more rapidly than its competitors, and
commercialize its products and services by incorporating these enhanced
technologies. There can be no assurance that the Company will succeed in
addressing any or all of these risks.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET               
RISK

The Company's exposure to
market risk for changes in interest rates relates primarily to its investment
portfolio. The Company had no derivative financial instruments as of June 30,
2000 or December 31, 1999. The Company invests in instruments that meet high
credit quality standards and the amount of credit exposure to any one issue,
issuer and type of instrument is limited. The Company does not expect any
material loss with respect to the investment portfolio. The Company's
financial instrument holdings as of June 30, 2000 were analyzed to determine
their sensitivity to interest rate changes. In the sensitivity analysis, the
Company assumed an adverse change in interest rates of 250 basis points and the
potential effect on the financial statements was not material.

22

---

PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS               
Not applicable

ITEM 2.     CHANGES IN SECURITIES AND USE OF
PROCEEDS        (a)   
Modification of Constituent Instruments   Not applicable.

(c)
Changes in Securities   Not applicable.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES               
Not applicable

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

For
      
      WithheldPehong Chen
      
      213,481,058
      
      278,849David L. Anderson
      
      213,488,635
      
      271,272Yogen K. Dalal
      
      194,725,981
      
      19,033,926Koh Boon Hwee
      
      213,475,815
      
      284,092Todd A. Garrett
      
      213,488,381
      
      271,526Klaus Luft
      
      213,479,035
      
      280,872Carl Pascarella
      
      213,479,755
      
      280,152


23

---

> (ii) To approve the Company's Certificate of Incorporation, as amended and
>   restated, to increase the number of shares of common stock, par value $.0001
>   per share, to 2,000,000,000:

| | For:     | 168,381,793 |  | Against:  |  | 45,162,127
| | -------- | ----------- |  | --------- |  | ----------
| | Abstain: | 212,176     |  | Not Voted |  | 3,811     

> (iii) To approve the Company's Equity Incentive Plan, as amended, to
>   increase the number of shares of common stock authorized for issuance
>   thereunder by 13,125,000:

| | For:     | 154,934,026 |  | Against:  |  | 57,860,680
| | -------- | ----------- |  | --------- |  | ----------
| | Abstain: | 207,690     |  | Not Voted |  | 757,511   

> (iv) To ratify the appointment of Arthur Andersen LLP to serve as
>   independent auditors of the Company for the fiscal year ending December 31,
>   2000:

| | For:     | 213,530,742 |  | Against:  |  | 114,532
| | -------- | ----------- |  | --------- |  | -------
| | Abstain: | 114,633     |  | Not Voted |  | N/A    

ITEM 5.     OTHER INFORMATION

Not applicable

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

|(a) | Exhibits |   |                                                                                                                                                                                                                    
|--- | -------- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Item     |   | Description                                                                                                                                                                                                        
|    |          |   |                                                                                                                                                                                                                    
|    | 3.1      |   | Amendment of Certificate of Incorporation                                                                                                                                                                          
|    | 10.19    |   | Building lease dated March 21, 2000 between VEF III
      Funding LLC, as Landlord and Interleaf, Inc., as Tenant for premises
      located at 400 Fifth Avenue, Waltham, Massachusetts.                          
|    | 10.20    |   | Amendment, dated April 26, 2000, of lease dated March
      21, 2000 between VEF III Funding LLC, as Landlord and Interleaf, Inc., as
      Tenant for premises located at 400 Fifth Avenue, Waltham, Massachusetts
|    | 10.21    | * | Equity Incentive Plan, as amended (The "Equity
      Incentive Plan").                                                                                                                                             
|    | 27.1     |   | Financial Data Schedule                                                                                                                                                                                            

*     Filed as an exhibit to the Company's Proxy
Statement filed on May 25, 2000 and incorporated herein by reference.

24

---

|(b) | Reports on Form 8-K
           A current report on Form 8-K was filed
      with the Securities and Exchange Commission by BroadVision on April 14,
      2000 to report the consummation of the Company's merger with Interleaf,
      Inc.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

---

SIGNATURES

Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

BROADVISION, INC



|Date: | August 14, 2000 |  | /s/ Pehong Chen                                   
|----- | --------------- |  | --------------------------------------------------
|      |                 |  |                                                   
|      |                 |  | Pehong Chen                                       
|      |                 |  | President and Chief Executive Officer             
|      |                 |  | (Principal Executive Officer)                     
|      |                 |  |                                                   
|Date: | August 14, 2000 |  | /s/ Randall C. Bolten                             
|      |                 |  |                                                   
|      |                 |  | Randall C. Bolten                                 
|      |                 |  | Executive Vice President                          
|      |                 |  | and Chief Financial Officer                       
|      |                 |  | (Principal Financial and Accounting
      Officer)





26

---

INDEX TO EXHIBITS



| | Exhibit |   |                                                                                                                                                                                                                     
| | ------- | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | No.     |   | Description                                                                                                                                                                                                         
| |         |   |                                                                                                                                                                                                                     
| | 3.1     |   | Amendment of Certificate of Incorporation                                                                                                                                                                           
| | 10.19   |   | Building lease dated March 21, 2000 between VEF III
      Funding LLC, as Landlord and Interleaf, Inc., as Tenant for premises
      located at 400 Fifth Avenue, Waltham, Massachusetts.                           
| | 10.20   |   | Amendment, dated April 26, 2000, of lease dated March
      21, 2000 between VEF III Funding LLC, as Landlord and Interleaf, Inc., as
      Tenant for premises located at 400 Fifth Avenue, Waltham, Massachusetts.
| | 10.21   | * | Equity Incentive Plan, as amended (The "Equity
      Incentive Plan").                                                                                                                                              
| | 27.1    |   | Financial Data Schedule                                                                                                                                                                                             
| |         | * | Filed as an exhibit to the Company's Proxy
      Statement filed on May 25, 2000 and incorporated herein by reference.                                                                                              





27



---