UNITED
        STATES SECURITIES AND EXCHANGE
        COMMISSION
 Washington, DC
        20549
 FORM
        10-Q
 (Mark
        One)
 þ
              
              **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934**
 **For
        the Quarter ended September 30,
        2007**
 OR
 o
              
              **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                THE
                SECURITIES EXCHANGE ACT OF 1934**
 0-28252(Commission
        File Number)
 BROADVISION,
        INC.
 
  **Delaware**
              
              **94-3184303**(State
                  or other jurisdiction of
              
              (I.R.S.
                  Employerincorporation
                  or organization)
              
              Identification
                  Number)**1600
                  Seaport Blvd., Suite 550, North
                  Bldg,**
              
              **94063****Redwood
                  City, California**(Address
                  of principal executive offices)
              
              (Zip
                  code)
 (650) 331-1000
   þ o
  o o þ
  o þ
 As
          of
          October 31, 2007 there were 108,576,085 shares of the Registrant's Common
          Stock
          issued and outstanding.


Table
          of Contents




BROADVISION,
        INC. AND SUBSIDIARIESFORM 10-QQuarter Ended September 30,
        2007
 TABLE
        OF CONTENTS
 **PART
                    I.**
                
                **FINANCIAL
                    INFORMATION**Item 1.
                
                Financial
                    StatementsCondensed
                    Consolidated Balance Sheets at September 30, 2007
                    (unaudited) and December 31, 2006
                
                1Condensed
                    Consolidated Income Statements and Comprehensive
                    Income for the three and nine months ended September 30, 2007 and
                    2006 (unaudited)
                
                2Condensed
                    Consolidated Statements of Cash Flows for
                    the nine months ended September 30, 2007 and
                    2006 (unaudited)
                
                3Notes
                    to Condensed Consolidated Financial
                    Statements (unaudited)
                
                4Item 2.
                
                Management's
                    Discussion and Analysis of Financial Condition and Results ofOperations
                
                14Item 3.
                
                Quantitative
                    and Qualitative Disclosures About Market
                    Risk
                
                19Item 4.
                
                Controls
                    and Procedures
                
                19**PART
                    II.**
                
                **OTHER
                    INFORMATION**Item 1.
                
                Legal
                    Proceedings
                
                21Item 1A.
                
                Risk
                    Factors
                
                21Item 2.
                
                Unregistered
                    Sales of Equity Securities and Use of
                    Proceeds
                
                30Item 3.
                
                Defaults
                    Upon Senior Securities
                
                30Item 4.
                
                Submission
                    of Matters to a Vote of Security
                    Holders
                
                30Item 5.
                
                Other
                    Information
                
                30Item 6.
                
                Exhibits
                
                31**SIGNATURES**
                
                
                
                32
 EXHIBIT
                    31.1EXHIBIT
                    32.1 Table
                of Contents
  **PART
            I. FINANCIAL INFORMATION**
 
 **Item 1.
            Financial Statements**
  **BROADVISION,
            INC. AND SUBSIDIARIES**
 **CONDENSED
            CONSOLIDATED BALANCE SHEETS**
 **(In
            thousands, except par value amounts)**
 **September
                      30,**
                  
                  
                  **December
                      31,****2007**
                  
                  
                  **2006****(unaudited)**
                  
                  
                  
                  ***ASSETS**Current
                      assets:Cash
                      and cash equivalents
                  
                  $
                  50,735
                  
                  
                  $
                  37,003Accounts
                      receivable, net of allowance for doubtful accounts of $570 as of
                      September 30, 2007 and $1,141 as of December 31,
                      2006
                  
                  
                  7,576
                  
                  
                  
                  10,106Prepaids
                      and other
                  
                  
                  1,393
                  
                  
                  
                  1,108Restricted
                      cash
                  
                  
                  796
                  
                  
                  
                  997Total
                      current assets
                  
                  
                  60,500
                  
                  
                  
                  49,214Property
                      and equipment, net
                  
                  
                  794
                  
                  
                  
                  1,144Restricted
                      cash, net of current portion
                  
                  
                  1,000
                  
                  
                  
                  1,000Goodwill
                  
                  
                  25,066
                  
                  
                  
                  25,066Other
                      assets
                  
                  
                  531
                  
                  
                  
                  518Total
                      assets
                  
                  $
                  87,891
                  
                  
                  $
                  76,942**LIABILITIES
                      AND STOCKHOLDERS'  EQUITY**Current
                      liabilities:Accounts
                      payable
                  
                  $
                  1,316
                  
                  
                  $
                  1,249Accrued
                      expenses
                  
                  
                  7,596
                  
                  
                  
                  10,538Warrant
                      liability
                  
                  
                  5,967
                  
                  
                  
                  1,610Unearned
                      revenue
                  
                  
                  3,042
                  
                  
                  
                  6,278Deferred
                      maintenance
                  
                  
                  9,130
                  
                  
                  
                  10,584Total
                      current liabilities
                  
                  
                  27,051
                  
                  
                  
                  30,259Other
                      non-current liabilities
                  
                  
                  2,817
                  
                  
                  
                  3,429Total
                      liabilities
                  
                  
                  29,868
                  
                  
                  
                  33,688Commitments
                      and contingencies (Note 4)
                  
                  
                  -
                  
                  
                  
                  -Stockholders'
                      equity:Convertible
                      preferred stock, $0.0001 par value; 1,000 shares authorized
                      as of
                      September 30, 2007 and 10,000 shares authorized as of December
                      31, 2006;
                      none issued and outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
                      stock, $0.0001 par value; 280,000 shares authorized and 108,360
                      shares
                      issued and outstanding as of September 30, 2007; 2,000,000
                      shares
                      authorized and 106,523 shares issued and outstanding as of
                      December 31,
                      2006
                  
                  
                  10
                  
                  
                  
                  10Additional
                      paid-in capital
                  
                  
                  1,256,188
                  
                  
                  
                  1,253,135Accumulated
                      other comprehensive income
                  
                  
                  89
                  
                  
                  
                  168Accumulated
                      deficit
                  
                  
                  (1,198,264
                  )
                  
                  
                  (1,210,059
                  )Total
                      stockholders' equity
                  
                  
                  58,023
                  
                  
                  
                  43,254Total
                      liabilities and stockholders' equity
                  
                  $
                  87,891
                  
                  
                  $
                  76,942*
                      Derived from audited consolidated financial statements filed
                      in the
                      Company's 2006 Annual Report on Form 10-K.
 
 *See
            Accompanying Notes to Condensed Consolidated Financial
            Statements*
 ~1~
 Table
                of Contents
  **BROADVISION,
            INC. AND SUBSIDIARIES**
 **CONDENSED
            CONSOLIDATED INCOME STATEMENTS AND
            COMPREHENSIVE  INCOME**
 **(In
            thousands, except per share amounts)**
 **(Unaudited)**
  **Three
                        Months Ended September 30,**
                    
                    
                    **Nine
                        Months Ended September 30,****2007**
                    
                    
                    **2006**
                    
                    
                    **2007**
                    
                    
                    **2006****Revenues:**Software
                        licenses
                    
                    $
                    5,280
                    
                    
                    $
                    4,750
                    
                    
                    $
                    16,508
                    
                    
                    $
                    11,259Services
                    
                    
                    7,476
                    
                    
                    
                    8,835
                    
                    
                    
                    22,261
                    
                    
                    
                    27,679Total
                        revenues
                    
                    
                    12,756
                    
                    
                    
                    13,585
                    
                    
                    
                    38,769
                    
                    
                    
                    38,938**Cost
                        of revenues:**Cost
                        of software licenses
                    
                    
                    3
                    
                    
                    
                    22
                    
                    
                    
                    37
                    
                    
                    
                    226Cost
                        of services
                    
                    
                    2,102
                    
                    
                    
                    2,729
                    
                    
                    
                    6,710
                    
                    
                    
                    10,283Total
                        cost of revenues
                    
                    
                    2,105
                    
                    
                    
                    2,751
                    
                    
                    
                    6,747
                    
                    
                    
                    10,509**Gross
                        profit**
                    
                    
                    10,651
                    
                    
                    
                    10,834
                    
                    
                    
                    32,022
                    
                    
                    
                    28,429**Operating
                        expenses:**Research
                        and development
                    
                    
                    2,283
                    
                    
                    
                    2,766
                    
                    
                    
                    7,422
                    
                    
                    
                    7,802Sales
                        and marketing
                    
                    
                    1,898
                    
                    
                    
                    1,761
                    
                    
                    
                    5,748
                    
                    
                    
                    6,124General
                        and administrative
                    
                    
                    1,705
                    
                    
                    
                    2,429
                    
                    
                    
                    4,250
                    
                    
                    
                    7,406Restructuring
                        charge (credit)
                    
                    
                    260
                    
                    
                    
                    (1,878
                    )
                    
                    
                    845
                    
                    
                    
                    (1,403
                    )Total
                        operating expenses
                    
                    
                    6,146
                    
                    
                    
                    5,078
                    
                    
                    
                    18,265
                    
                    
                    
                    19,929Operating
                        income
                    
                    
                    4,505
                    
                    
                    
                    5,756
                    
                    
                    
                    13,757
                    
                    
                    
                    8,500Interest
                        income, net
                    
                    
                    456
                    
                    
                    
                    225
                    
                    
                    
                    1,366
                    
                    
                    
                    457Loss
                        on revaluation of warrants
                    
                    
                    (680
                    )
                    
                    
                    (317
                    )
                    
                    
                    (4,918
                    )
                    
                    
                    (703
                    )Other
                        income (expense), net
                    
                    
                    762
                    
                    
                    
                    (71
                    )
                    
                    
                    1,068
                    
                    
                    
                    191Income
                        before benefit (provision) for income taxes
                    
                    
                    5,043
                    
                    
                    
                    5,593
                    
                    
                    
                    11,273
                    
                    
                    
                    8,445Benefit
                        (provision) for income taxes
                    
                    
                    419
                    
                    
                    
                    (228
                    )
                    
                    
                    133
                    
                    
                    
                    (449
                    )**Net
                        income**
                    
                    $
                    5,462
                    
                    
                    $
                    5,365
                    
                    
                    $
                    11,406
                    
                    
                    $
                    7,996Basic
                        net income per share
                    
                    $
                    0.05
                    
                    
                    $
                    0.08
                    
                    
                    $
                    0.11
                    
                    
                    $
                    0.13Diluted
                        net income per share
                    
                    $
                    0.05
                    
                    
                    $
                    0.08
                    
                    
                    $
                    0.10
                    
                    
                    $
                    0.13**Shares
                        used in computing:**Weighted
                        average shares-basic
                    
                    
                    108,253
                    
                    
                    
                    69,489
                    
                    
                    
                    107,454
                    
                    
                    
                    60,630Weighted
                        average shares-diluted
                    
                    
                    111,577
                    
                    
                    
                    69,489
                    
                    
                    
                    110,426
                    
                    
                    
                    60,630**Comprehensive
                        income:**Net
                        income
                    
                    $
                    5,462
                    
                    
                    $
                    5,365
                    
                    
                    $
                    11,406
                    
                    
                    $
                    7,996Other
                        comprehensive (loss) gain, net of tax:Foreign
                        currency translation adjustment
                    
                    
                    (159
                    )
                    
                    
                    120
                    
                    
                    
                    (79
                    )
                    
                    
                    76Total
                        comprehensive income
                    
                    $
                    5,303
                    
                    
                    $
                    5,485
                    
                    
                    $
                    11,327
                    
                    
                    $
                    8,072
 *See
            Accompanying Notes to Condensed Consolidated Financial
            Statements*
 ~2~
 Table
                of Contents
  **BROADVISION,
            INC. AND SUBSIDIARIES**
 **CONDENSED
            CONSOLIDATED STATEMENTS OF CASH
            FLOWS**
 **(In
            thousands, Unaudited)**
 **Nine
                        Months Ended September 30,****2007**
                    
                    
                    **2006****Cash
                        flows from operating activities:**Net
                        income
                    
                    $
                    11,406
                    
                    
                    $
                    7,996Adjustments
                        to reconcile net income to net cash provided by operating
                        activities:Depreciation
                        and amortization
                    
                    
                    831
                    
                    
                    
                    1,059Allowance
                        for doubtful accounts and reserves
                    
                    
                    (571
                    )
                    
                    
                    459Restructuring
                        charge (credit)
                    
                    
                    844
                    
                    
                    
                    (1,403
                    )Stock-based
                        compensation
                    
                    
                    909
                    
                    
                    
                    569Gain
                        on cost method investments
                    
                    
                    -
                    
                    
                    
                    (386
                    )Loss
                        on revaluation of warrants
                    
                    
                    4,918
                    
                    
                    
                    703Changes
                        in operating assets and liabilities:Accounts
                        receivable
                    
                    
                    3,101
                    
                    
                    
                    5,299Prepaids
                        and other
                    
                    
                    (285
                    )
                    
                    
                    (100
                    )Other
                        non-current assets
                    
                    
                    (21
                    )
                    
                    
                    99Accounts
                        payable and accrued expenses
                    
                    
                    (2,144
                    )
                    
                    
                    (1,986
                    )Restructuring
                        accrual
                    
                    
                    (1,446
                    )
                    
                    
                    (1,160
                    )Unearned
                        revenue and deferred maintenance
                    
                    
                    (4,690
                    )
                    
                    
                    1,294Other
                        non-current liabilities
                    
                    
                    (353
                    )
                    
                    
                    (404
                    )Net
                        cash provided by operating activities
                    
                    
                    12,499
                    
                    
                    
                    12,039**Cash
                        flows from investing activities:**Purchase
                        of property and equipment
                    
                    
                    (471
                    )
                    
                    
                    (115
                    )Transfer
                        from restricted cash
                    
                    
                    201
                    
                    
                    
                    -Proceeds
                        from sale of cost method investments
                    
                    
                    -
                    
                    
                    
                    386Net
                        cash (used for) provided by investing activities
                    
                    
                    (270
                    )
                    
                    
                    271**Cash
                        flows from financing activities:**Repayments
                        of bank line of credit and term debt
                    
                    
                    -
                    
                    
                    
                    (389
                    )Proceeds
                        from issuance of common stock from warrants exercise
                    
                    
                    505
                    
                    
                    
                    -Proceeds
                        from issuance of common stock, net
                    
                    
                    1,077
                    
                    
                    
                    58Net
                        cash provided by (used for) financing activities
                    
                    
                    1,582
                    
                    
                    
                    (331
                    )Effect
                        of exchange rates on cash and cash equivalents
                    
                    
                    (79
                    )
                    
                    
                    76Net
                        increase in cash and cash equivalents
                    
                    
                    13,732
                    
                    
                    
                    12,055Cash
                        and cash equivalents at beginning of period
                    
                    
                    37,003
                    
                    
                    
                    4,849Cash
                        and cash equivalents at end of period
                    
                    $
                    50,735
                    
                    
                    $
                    16,904**Supplemental
                        information of noncash financing and investing
                        activities:**Exchange
                        of convertible debt to common stock
                    
                    $
                    -
                    
                    
                    $
                    20,535Retirement
                        of fully depreciated property and equipment
                    
                    $
                    5,869
                    
                    
                    $
                    -Reclassification
                        of tax liability to accumulated deficit
                    
                    $
                    388
                    
                    
                    $
                    -Conversion
                        of accrued interest to equity
                    
                    $
                    -
                    
                    
                    $
                    167Reclassification
                        of warrant liability to additional paid-in capital upon exercise
                        of
                        warrants
                    
                    $
                    561
                    
                    
                    $
                    -
 
 *See
            Accompanying Notes to Condensed Consolidated Financial
            Statements*
 ~3~
 Table
                of Contents
  **BROADVISION,
            INC. ANDSUBSIDIARIES**
 **NOTESTO
            CONDENSED CONSOLIDATED FINANCIAL
            STATEMENTS**
  **(Unaudited)**
  **Note
            1. Organization and Summary of Significant Accounting
            Policies**
 
 There
            have been no material changes in our critical accounting policies, estimates
            and
            judgments during the nine months ended September 30, 2007 compared to
            the
            disclosures in Part II, Item 8 of our Annual Report on Form 10-K for
            the year
            ended December 31, 2006.
 
 ***Basis
            of Presentation***
 
 The
            condensed consolidated financial
            results and related information as of and for the three and nine months
            ended
            September 30, 2007 and 2006 are unaudited. The Condensed Consolidated
            Balance
            Sheet at December 31, 2006 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 U.S.
            generally
            accepted accounting principles ("U.S. GAAP"). The unaudited condensed
            consolidated financial statements should be reviewed in conjunction with
            the
            audited consolidated financial statements and related notes contained
            in our
            2006 Annual Report on Form 10-K filed with the SEC on March 27,
            2007.
 
 The
            accompanying unaudited condensed consolidated financial statements have
            been
            prepared in accordance with U.S. GAAP for interim financial information
            and with
            the instructions in Form 10-Q and Article 10 of Regulation S-X. Accordingly,
            these statements do not include all of the information and footnotes
            required by
            U.S. GAAP for annual financial statements. In the opinion of management,
            all
            adjustments (consisting of normal recurring accruals) considered necessary
            for a
            fair presentation of interim financial information have been included.
            Operating
            results for the three and nine months ended September 30, 2007 are not
            necessarily indicative of the results that may be expected for the remainder
            of
            the fiscal year ending December 31, 2007 or any future interim period.
            The
            condensed consolidated financial statements include our accounts and
            our wholly
            owned subsidiaries. All significant intercompany accounts and transactions
            have
            been eliminated.
 
 ***Use
            of Estimates***
 
 The
            preparation of condensed consolidated financial statements in conformity
            with
            U.S. GAAP requires management to make certain assumptions and estimates
            that
            affect reported amounts of assets and liabilities as of the date of the
            financial statements and the reported amounts of revenues and expenses
            during
            the reporting period. On an ongoing basis, we evaluate our estimates,
            including
            those related to the collectibility of accounts receivables, the value
            assigned
            to and the estimated useful lives of long-lived assets, the realization
            of
            goodwill and deferred tax assets, and the valuation of stock-based compensation,
            the reasonableness of the restructuring reserves, the determination of
            contingent liabilities and the valuation of warrants. We base our estimates
            on
            historical experience and on various other assumptions we believe
            are reasonable under the circumstances, the results of which form the basis
            for making judgments about the carrying values of assets and liabilities.
            Actual
            results could differ from estimates.
 ~4~
 Table
                of Contents
 
 ***Stock-Based
            Compensation***
 
 We
              currently have in effect the following stock-based compensation plans:
              the 2006
              Equity Incentive Plan (the "Equity Plan"), the 2000 Non-Officer Plan
              and
              Non-plan Grants, and the Employee Stock Purchase Plan (the "Purchase
              Plan").
              These are described in detail in Note 1 of Notes to Consolidated Financial
              Statements in our 2006 Annual Report on Form 10-K.
 *Valuation
              of stock-based options and awards*
 
 The
              fair
              value of each stock option granted under our equity stock benefit plans
              is
              estimated on the date of grant using the Black-Scholes option-pricing
              model with
              the following weighted-average assumptions:
 **Nine
                        Months Ended****September 30,****2007**
                    
                    
                    **2006**Expected
                        term
                    
                    
                    6 years
                    
                    
                    
                    6 yearsExpected
                        volatility
                    
                    
                    99
                    %
                    
                    
                    83
                    %Risk
                        free interest rate
                    
                    
                    4.587
                    %
                    
                    
                    4.823
                    %Expected
                        dividend
                    
                    
                    -
                    
                    
                    
                    -Forfeiture
                        rate
                    
                    
                    9.00
                    %
                    
                    
                    11.00
                    %
 The
              expected term was estimated using the simplified method described in
              Staff
              Accounting Bulletin ("SAB") No. 107, and represents the estimated period
              of time
              that stock options granted are expected to be outstanding.  Expected
              volatility is based on the historical volatility of the Company's common
              stock
              over the expected life of the option. The risk free interest rate is
              derived
              from comparable U.S. Treasury securities with a similar expected
              term.  We do not currently pay cash dividends on our common stock and
              do not anticipate doing so in the foreseeable future.  Accordingly,
              our expected dividend yield is zero.  We estimate forfeitures of
              options based on an analysis of historical data as it reasonably approximates
              the currently anticipated rate of forfeiture for granted and outstanding
              options
              that have not vested.
 
 The
              weighted-average fair value per share of options granted during the
              three months
              ended September 30, 2007 and 2006 was $1.73 and $0.47,
              respectively.  The weighted-average fair value per share of options
              granted during the nine months ended September 30, 2007 and 2006 was $1.30
              and $0.42, respectively.
 
 *Stock-based
            compensation expense*
 
 As
            of
            September 30, 2007, we had 2,014,491 shares available for issuance under
            the
            Purchase Plan. As of September 30, 2007, we had 8,040,624 shares available
            for issuance upon the exercise of outstanding stock options and
            warrants.
 
 Stock-based
            compensation is classified in the Condensed Consolidated Income Statements
            in
            the same expense line item as cash compensation. The following table
            sets forth
            the total stock-based compensation expense recognized in our Condensed
            Consolidated Income Statements for the three and nine months ended
            September 30, 2007 and 2006:
  **Three
                        Months Ended September 30,**
                    
                    
                    **Nine
                        Months Ended September 30,****2007**
                    
                    
                    **2006**
                    
                    
                    **2007**
                    
                    
                    **2006**Cost
                        of services
                    
                    $
                    63,228
                    
                    
                    $
                    31,727
                    
                    
                    $
                    172,992
                    
                    
                    $
                    80,392Research
                        and development
                    
                    
                    120,816
                    
                    
                    
                    123,640
                    
                    
                    
                    353,044
                    
                    
                    
                    252,608Sales
                        and marketing
                    
                    
                    66,946
                    
                    
                    
                    56,820
                    
                    
                    
                    204,148
                    
                    
                    
                    129,075General
                        and administrative
                    
                    
                    64,703
                    
                    
                    
                    48,362
                    
                    
                    
                    178,711
                    
                    
                    
                    106,561$
                    315,693
                    
                    
                    $
                    260,549
                    
                    
                    $
                    908,895
                    
                    
                    $
                    568,636
 ~5~
 Table
                  of Contents
  Activity
            in our Equity Plan for the nine months ended September 30, 2007, is as
            follows:
  **Nine
                        Months Ended****September
                        30, 2007****Weighted
                        -****Weighted
                        -**
                    
                    
                    **Average**
                    
                    
                    **Aggregate****Options**
                    
                    
                    **Average**
                    
                    
                    **Remaining**
                    
                    
                    **Intrinsic****Shares**
                    
                    
                    **Exercise**
                    
                    
                    **Contractual**
                    
                    
                    **Value****('000)**
                    
                    
                    **Price**
                    
                    
                    **Term**
                    
                    
                    **('000)**Outstanding
                        at December 31, 2006
                    
                    
                    6,239
                    
                    
                    $
                    13.48Granted
                    
                    
                    449
                    
                    
                    $
                    1.63Exercised
                    
                    
                    (498
                    )
                    
                    $
                    0.59Forfeited
                    
                    
                    (19
                    )
                    
                    $
                    1.07Expired
                    
                    
                    (64
                    )
                    
                    $
                    12.98Outstanding
                        at September 30, 2007
                    
                    
                    6,107
                    
                    
                    $
                    13.70
                    
                    
                    
                    6.69
                    
                    
                    $
                    5,192Vested
                        and expected to vest at September 30, 2007
                    
                    
                    6,028
                    
                    
                    $
                    13.86
                    
                    
                    
                    6.65
                    
                    
                    $
                    5,118Exercisable
                        at September 30, 2007
                    
                    
                    4,711
                    
                    
                    $
                    17.49
                    
                    
                    
                    6.03
                    
                    
                    $
                    3,387
  We
            grant
            options outside of our Equity Plan under the 2000 Non-Officer Plan and
            pursuant
            to non-plan grants. The terms of these options are generally identical
            to those
            granted under our Equity Plan. A summary of options outside of the Equity
            Plan
            for the nine months ended September 30, 2007, is presented below:
 
 **Nine
                        Months Ended****September
                        30, 2007****Weighted
                        -****Weighted
                        -**
                    
                    
                    **Average**
                    
                    
                    **Aggregate****Options**
                    
                    
                    **Average**
                    
                    
                    **Remaining**
                    
                    
                    **Intrinsic****Shares**
                    
                    
                    **Exercise**
                    
                    
                    **Contractual**
                    
                    
                    **Value****('000)**
                    
                    
                    **Price**
                    
                    
                    **Term**
                    
                    
                    **('000)**Outstanding
                        at December 31, 2006
                    
                    
                    763
                    
                    
                    $
                    9.70Granted
                    
                    
                    -
                    
                    
                    $
                    -Exercised
                    
                    
                    (114
                    )
                    
                    $
                    1.25Forfeited
                    
                    
                    (16
                    )
                    
                    $
                    5.72Expired
                    
                    
                    -
                    
                    
                    $
                    -Outstanding
                        at September 30, 2007
                    
                    
                    633
                    
                    
                    $
                    11.34
                    
                    
                    
                    6.61
                    
                    
                    $
                    673Vested
                        and expected to vest at September 30, 2007
                    
                    
                    629
                    
                    
                    $
                    11.38
                    
                    
                    
                    6.60
                    
                    
                    $
                    668Exercisable
                        at September 30, 2007
                    
                    
                    534
                    
                    
                    $
                    13.32
                    
                    
                    
                    6.26
                    
                    
                    $
                    507
 The
            aggregate intrinsic value is calculated as the difference between the
            exercise
            price of the underlying awards and the quoted price of our common stock
            for
            those options for which the quoted price was in excess of the exercise
            price at
            September 30, 2007. As of September 30, 2007, the total compensation
            cost
            related to the non-vested stock options, net of estimated forfeitures,
            is
            approximately $266,000 for the remainder of year 2007, $423,000 for year
            2008,
            $183,000 for year 2009, and $77,000 for year 2010.
 ~6~
 Table
                of Contents
 
 ***Earnings
            Per Share Information***
  Basic
            net
            income (loss) per share is computed using the weighted-average number
            of shares
            of common stock outstanding less shares subject to repurchase. Diluted
            net
            income (loss) per share is computed using the weighted-average number
            of shares
            of common stock outstanding and, when dilutive, common equivalent shares
            from
            outstanding stock options and warrants using the treasury stock method,
            and
            shares subject to repurchase, if any using the as-if converted method.
            There
            were 2.7 million and 11.1 million potential common shares excluded from
            the
            determination of diluted net income per share for the three months ended
            September 30, 2007 and 2006, respectively, as the effect of each share was
            anti-dilutive because the per-share strike price of the options under
            which
            these shares may be issued is higher than current market price. Similarly,
            there
            were 3.4 million and 10.5 million potential common shares excluded from
            the
            determination of diluted net income per share for the nine months ended
            September 30, 2007 and 2006, respectively, as the effect of each share was
            anti-dilutive because the per-share strike price of the options under
            which
            these shares may be issued is higher than current market price. The following
            table sets forth the basic and diluted net income per share computational
            data
            for the periods presented (in thousands, except per share amounts):
  **Three
                        Months Ended September 30,**
                    
                    
                    **Nine
                        Months Ended September 30,****2007**
                    
                    
                    **2006**
                    
                    
                    **2007**
                    
                    
                    **2006**Net
                        income
                    
                    $
                    5,462
                    
                    
                    $
                    5,365
                    
                    
                    $
                    11,406
                    
                    
                    $
                    7,996Weighted-average
                        common shares outstanding used to compute basic net income
                        per
                        share
                    
                    
                    108,253
                    
                    
                    
                    69,489
                    
                    
                    
                    107,454
                    
                    
                    
                    60,630Weighted-average
                        common equivalent shares from outstanding common stock options
                        and
                        warrants
                    
                    
                    3,324
                    
                    
                    
                    -
                    
                    
                    
                    2,972
                    
                    
                    
                    -Total
                        weighted-average common and common equivalent shares outstanding
                        used to
                        compute diluted net income per share
                    
                    
                    111,577
                    
                    
                    
                    69,489
                    
                    
                    
                    110,426
                    
                    
                    
                    60,630Basic
                        net income per share
                    
                    $
                    0.05
                    
                    
                    $
                    0.08
                    
                    
                    $
                    0.11
                    
                    
                    $
                    0.13Diluted
                        net income per share
                    
                    $
                    0.05
                    
                    
                    $
                    0.08
                    
                    
                    $
                    0.10
                    
                    
                    $
                    0.13
  *Legal
              Proceedings*
 We
            are
            subject from time to time to various legal actions and other claims arising
            in
            the ordinary course of business. We are not presently a party to any
            material
            legal proceedings.******
 
 ***Foreign
            Currency Transactions***
 
 Assets
            and liabilities of all foreign subsidiaries are translated into U.S.
            dollars at the balance sheet date. Income and expense items are translated
            at
            average exchange rates for the period. Foreign exchange gains and losses
            resulting from the remeasurement of foreign currency assets and liabilities
            are
            included as other income (expense) in the Condensed Consolidated Income
            Statements. For the nine-month period ended September 30, 2007, the translation
            loss was $79,000. For the nine-month period ended September 30, 2006,
            the
            translation gain was $76,000. These amounts are included in the accumulated
            other comprehensive income account in the Condensed Consolidated Balance
            Sheets.
 
 Our
            cash
            and cash equivalents consisted of the following as of September 30, 2007
            and December 31, 2006 (in thousands):
  **September
                        30, 2007**
                    
                    
                    **December
                        31, 2006****Fair
                        value**
                    
                    
                    **Fair
                        value****(unaudited)**Cash
                        and certificates of deposits
                    
                    $
                    15,202
                    
                    
                    $
                    15,830Money
                        market
                    
                    
                    35,533
                    
                    
                    
                    21,173Total
                        cash and cash equivalents
                    
                    $
                    50,735
                    
                    
                    $
                    37,003
 ~7~
 Table
                  of Contents
  ***Comprehensive
            Income***
  Comprehensive
            income includes net income and other comprehensive income, which primarily
            consists of foreign currency translation adjustments. Total comprehensive
            income
            is presented in the accompanying Condensed Consolidated Income Statements.
            Total
            accumulated other comprehensive income is displayed as a separate component
            of
            stockholder's equity in the accompanying Condensed Consolidated Balance
            Sheets.
            The accumulated balances of other comprehensive income consist of the
            following,
            net of taxes (in thousands):
 
 **Accumulated
                        Other****Comprehensive
                        Income**Balance,
                        December 31, 2006
                    
                    $
                    168Net
                        change during period
                    
                    
                    (79
                    )Balance,
                        September 30, 2007 (unaudited)
                    
                    $
                    89
 **Note
            2. Selected Balance Sheet Detail**
  Property
            and equipment consisted of the following (in thousands):
 
 **September
                        30,**
                    
                    
                    **December
                        31,****2007**
                    
                    
                    **2006****(unaudited)**Furniture
                        and fixtures
                    
                    $
                    766
                    
                    
                    $
                    795Computers
                        and software
                    
                    
                    7,465
                    
                    
                    
                    14,547Leasehold
                        improvements
                    
                    
                    5,329
                    
                    
                    
                    5,00713,560
                    
                    
                    
                    20,349Less
                        accumulated depreciation and amortization
                    
                    
                    (12,766
                    )
                    
                    
                    (19,205
                    )$
                    794
                    
                    
                    $
                    1,144
 Accrued
            expenses consisted of the following (in thousands):
  **September
                        30,**
                    
                    
                    **December
                        31,****2007**
                    
                    
                    **2006****(unaudited)**Employee
                        benefits
                    
                    $
                    1,072
                    
                    
                    $
                    961Commissions
                        and bonuses
                    
                    
                    932
                    
                    
                    
                    885Sales
                        and other taxes
                    
                    
                    1,212
                    
                    
                    
                    2,000Income
                        tax and tax contingency reserves
                    
                    
                    424
                    
                    
                    
                    1,378Restructuring
                        charges (See Note 6)
                    
                    
                    929
                    
                    
                    
                    1,272Customer
                        advances
                    
                    
                    288
                    
                    
                    
                    654Royalties
                    
                    
                    1,747
                    
                    
                    
                    1,745Other
                    
                    
                    992
                    
                    
                    
                    1,643Total
                        accrued expenses
                    
                    $
                    7,596
                    
                    
                    $
                    10,538
 ~8~
 Table
                  of Contents
 **Note
            3. Warrants and Other Non-Current Liabilities**
  As
            of
            September 30, 2007, the following warrants to purchase our common stock
            were
            outstanding:
  **Underlying**
                    
                    
                    **Exercise****Shares**
                    
                    
                    **Price
                        per Share**Issued
                        to landlord in real estate buyout transaction in
                        August 2004
                    
                    
                    700,000
                    
                    
                    $
                    5.00Issued
                        to convertible notes investors in November 2004
                    
                    
                    3,865,811
                    
                    
                    
                    1.48Other
                        issued in connection with revenue transactions in 2000
                    
                    
                    620
                    
                    
                    
                    435.98Total
                        warrants
                    
                    
                    4,566,431
  During
              the three months ended September 30, 2007, certain convertible notes
              investors
              exercised 341,000 warrants to purchase an equivalent number of Company
              shares
              for a total proceeds of $505,000.
 Warrant
            liability consisted of the following (in thousands):
  **September
                        30, 2007**
                    
                    
                    **December
                        31, 2006****(unaudited)**Warrants
                        related to real estate buyout
                    
                    $
                    400
                    
                    
                    $
                    79Warrants
                        related to convertible notes
                    
                    
                    5,567
                    
                    
                    
                    1,531$
                    5,967
                    
                    
                    $
                    1,610
 Losses
            on
            the revaluation of warrants were recorded as follows (in
            thousands):
 
 **Three
                        Months Ended September 30,**
                    
                    
                    **Nine
                        Months Ended September 30,****2007**
                    
                    
                    **2006**
                    
                    
                    **2007**
                    
                    
                    **2006**Warrants
                        related to convertible notes
                    
                    $
                    (731
                    )
                    
                    $
                    (271
                    )
                    
                    $
                    (4,597
                    )
                    
                    $
                    (670
                    )Warrants
                        related to real estate buyout
                    
                    
                    51
                    
                    
                    
                    (46
                    )
                    
                    
                    (321
                    )
                    
                    
                    (33
                    )Loss
                        on revaluation of warrants
                    
                    $
                    (680
                    )
                    
                    $
                    (317
                    )
                    
                    $
                    (4,918
                    )
                    
                    $
                    (703
                    )
 *Other
            Non-Current Liabilities*
  Other
            non-current liabilities consist of the following (in thousands):
  **September
                        30,**
                    
                    
                    **December
                        31,****2007**
                    
                    
                    **2006**Restructuring
                        charges (Note 6)
                    
                    $
                    1,031
                    
                    
                    $
                    1,290Deferred
                        maintenance and unearned revenue
                    
                    
                    1,102
                    
                    
                    
                    1,739Other
                    
                    
                    684
                    
                    
                    
                    400Total
                        other non-current liabilities
                    
                    $
                    2,817
                    
                    
                    $
                    3,429
 ~9~
 Table
                  of Contents
 **Note
            4. Commitments and Contingencies**
 
 *Warranties
            and Indemnification*
  We
            provide a warranty to our customers that our software will perform substantially
            in accordance with the documentation we provide with the software, typically
            for
            a period of 90 days following receipt of the software. Historically,
            costs
            related to these warranties have been immaterial. Accordingly, we have
            not
            recorded any warranty liabilities as of September 30, 2007 and December
            31,
            2006.
 
 Our
            software license agreements typically provide for indemnification of
            customers
            for intellectual property infringement claims caused by use of a current
            release
            of our software consistent with the terms of the license agreement. The
            term of
            these indemnification clauses is generally perpetual. The potential future
            payments we could be required to make under these indemnification clauses
            is
            generally limited to the amount the customer paid for the software.
            Historically, costs related to these indemnification provisions have
            been
            immaterial. We also maintain liability insurance that limits our exposure.
            As a
            result, we believe the potential liability of these indemnification clauses
            is
            minimal. Accordingly, we have not recorded any liabilities for these
            agreements
            as of September 30, 2007 and December 31, 2006.
 
 We
            entered into agreements whereby we indemnify our officers and directors
            for
            certain events or occurrences while the officer is, or was, serving in
            such
            capacity. The term of the indemnification period is for so long as such
            officer
            or director is subject to an indemnifiable event by reason of the fact
            that such
            person was serving in such capacity. The maximum potential amount of
            future
            payments we could be required to make under these indemnification agreements
            may
            be unlimited; however, we have a director and officer insurance policy
            that
            limits our exposure and enables us to recover a portion of any future
            amounts
            paid. As a result of our insurance policy coverage, we believe the estimated
            fair value of these indemnification agreements is insignificant. Accordingly,
            we
            have no liabilities recorded for these agreements as of either
            September 30, 2007 or December 31, 2006. We assess the need for an
            indemnification reserve on a quarterly basis and there can be no guarantee
            that
            an indemnification reserve will not become necessary in the future.
  *Leases*
  We
            lease
            our headquarters facility and our other facilities under noncancellable
            operating lease agreements expiring in or prior to the year 2012. Under
            the
            terms of these agreements, we are required to pay property taxes, insurance
            and
            normal maintenance costs.
 
 A
            summary
            of total future minimum lease payments under noncancellable operating
            lease
            agreements is as follows (in millions):
  **Operating****Years
                        Ending December 31,**
                    
                    **Leases**2007
                    
                    $
                    1.52008
                    
                    
                    2.02009
                    
                    
                    1.82010
                    
                    
                    1.12011
                        and thereafter
                    
                    
                    1.3Total
                        minimum lease payments
                    
                    $
                    7.7
 These
                future minimum lease payments are net of approximately $3.7 million of
                sublease income to be received under sublease agreements. As of September
                30,
                2007, we have accrued $1.6 million of estimated future facilities
                costs as a
                restructuring accrual.
 *Standby
            Letter of Credit Commitments*
  As
            of
            September 30, 2007 and December 31, 2006, we had $1.8 million and $2.0
            million, respectively, of outstanding commitments in the form of standby
            letters
            of credit, primarily in favor of our various landlords to secure obligations
            under our facility leases. These standby letters of credit are collateralized
            by
            the restricted cash listed in the Condensed Consolidated Balance
            Sheets.
 ~10~
 Table
                of Contents
 
 **Note
            5. Geographic, Segment and Significant Customer
            Information**
 
 We
            operate in one segment, electronic business commerce solutions. Our reportable
            segment includes our facilities in North and South America (Americas),
            Europe
            and Asia Pacific and the Middle East (Asia/Pacific). We consider our
            CEO to be
            our chief operating decision-maker. Our CEO reviews financial information
            presented on a consolidated basis accompanied by disaggregated information
            about
            revenues by geographic region and by product for purposes of making operating
            decisions and assessing financial performance. The disaggregated revenue
            information reviewed by the CEO is as follows (in thousands):
  **Three
                        Months Ended**
                    
                    
                    **Nine
                        Months Ended****September
                        30,**
                    
                    
                    **September
                        30,**Revenues:
                    
                    **2007**
                    
                    
                    **2006**
                    
                    
                    **2007**
                    
                    
                    **2006**Software
                        licenses
                    
                    $
                    5,280
                    
                    
                    $
                    4,750
                    
                    
                    $
                    16,508
                    
                    
                    $
                    11,259Consulting
                        services
                    
                    
                    1,640
                    
                    
                    
                    2,702
                    
                    
                    
                    4,827
                    
                    
                    
                    9,697Maintenance
                    
                    
                    5,836
                    
                    
                    
                    6,133
                    
                    
                    
                    17,434
                    
                    
                    
                    17,982Total
                        revenues
                    
                    $
                    12,756
                    
                    
                    $
                    13,585
                    
                    
                    $
                    38,769
                    
                    
                    $
                    38,938
 We
            sell
            our products and provide services worldwide through a direct sales force
            and
            through a channel of independent distributors, value-added resellers
            ("VARs")
            and Application Service Providers ("ASPs"). In addition, the sales of
            our
            products are promoted through independent professional consulting organizations
            known as systems integrators. We provide services worldwide through our
            BroadVision Global Services ("BVGS") Organization and indirectly through
            distributors, VARs, ASPs, and systems integrators. We currently operate
            in three
            primary geographical territories: Americas, Europe and
            Asia/Pacific.
 
 Disaggregated
            financial information regarding our geographic revenues and long-lived
            assets is
            as follows (in thousands):
  **Three
                        months ended**
                    
                    
                    **Nine
                        months ended****September
                        30,**
                    
                    
                    **September
                        30,****2007**
                    
                    
                    **2006**
                    
                    
                    **2007**
                    
                    
                    **2006**Revenues:Americas
                    
                    $
                    9,788
                    
                    
                    $
                    8,119
                    
                    
                    $
                    25,196
                    
                    
                    $
                    28,771Europe
                    
                    
                    1,631
                    
                    
                    
                    3,029
                    
                    
                    
                    8,449
                    
                    
                    
                    5,650Asia/Pacific
                    
                    
                    1,337
                    
                    
                    
                    2,437
                    
                    
                    
                    5,124
                    
                    
                    
                    4,517Total
                        revenues
                    
                    $
                    12,756
                    
                    
                    $
                    13,585
                    
                    
                    $
                    38,769
                    
                    
                    $
                    38,938
 **September
                        30,**
                    
                    
                    **December
                        31,****2007**
                    
                    
                    **2006**Long-Lived
                        Assets:Americas
                    
                    $
                    25,680
                    
                    
                    $
                    26,025Europe
                    
                    
                    74
                    
                    
                    
                    104Asia/Pacific
                    
                    
                    106
                    
                    
                    
                    81Total
                        long-lived assets
                    
                    $
                    25,860
                    
                    
                    $
                    26,210
 For
            the three-month period ended September 30, 2007, one customer accounted for
            more than 10% of our revenues. For the three-month period ended
            September 30, 2006, no single customer accounted for more than 10% of our
            revenues. During the nine months ended September 30, 2007 and 2006, no
            single customer accounted for more than 10% of our revenues.
 ~11~
 Table
                of Contents
 
 **Note
            6. Restructuring Charges**
 
 As
            of September 30, 2007, the total restructuring accrual of $2.0 million
            consisted
            of the following (in millions):
  **Current**
                    
                    
                    **Non-Current**
                    
                    
                    **Total**Severance
                        and termination
                    
                    $
                    0.4
                    
                    
                    $
                    -
                    
                    
                    $
                    0.4Excess
                        facilities
                    
                    
                    0.6
                    
                    
                    
                    1.0
                    
                    
                    
                    1.6Total
                    
                    $
                    1.0
                    
                    
                    $
                    1.0
                    
                    
                    $
                    2.0
 We
            estimate that the $0.4 million severance and termination accrual will
            be nearly
            paid in full by December 31, 2007. We expect to pay the excess facilities
            amounts related to restructured or abandoned leased space as follows
            (in
            millions):
 **Total
                        future****minimum****Years
                        ending December 31,**
                    
                    **payments**2007
                    
                    $
                    0.22008
                    
                    
                    0.52009
                    
                    
                    0.62010
                    
                    
                    0.22011
                        and thereafter
                    
                    
                    0.1Total
                        minimum facilities payments
                    
                    $
                    1.6
 The
            following table summarizes the activity related to the restructuring
            plans
            initiated subsequent to December 31, 2002, and accounted for in accordance
            with Statement of Financial Accounting Standards No. 146, *Accounting for
            Costs Associated with Exit or Disposal Activities* ("SFAS 146") (in
            thousands):
  **Amounts****Accrued**
                    
                    
                    **charged
                        to****restructuring**
                    
                    
                    **restructuring**
                    
                    
                    **Amounts**
                    
                    
                    **Accrued****costs**
                    
                    
                    **costs**
                    
                    
                    **paid
                        or**
                    
                    
                    **restructuring****beginning**
                    
                    
                    **and
                        other**
                    
                    
                    **written
                        off**
                    
                    
                    **costs,
                        ending****Three
                        Months Ended September 30, 2007**Lease
                        cancellations and commitments
                    
                    $
                    59
                    
                    
                    $
                    19
                    
                    
                    $
                    (5
                    )
                    
                    $
                    73Termination
                        payments to employees and related costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -$
                    59
                    
                    
                    $
                    19
                    
                    
                    $
                    (5
                    )
                    
                    $
                    73**Three
                        Months Ended September 30, 2006**Lease
                        cancellations and commitments
                    
                    $
                    4,399
                    
                    
                    $
                    (2,035
                    )
                    
                    $
                    (46
                    )
                    
                    $
                    2,318Termination
                        payments to employees and related costs
                    
                    
                    38
                    
                    
                    
                    (6
                    )
                    
                    
                    -
                    
                    
                    
                    32$
                    4,437
                    
                    
                    $
                    (2,041
                    )
                    
                    $
                    (46
                    )
                    
                    $
                    2,350**Nine
                        Months Ended September 30, 2007**Lease
                        cancellations and commitments
                    
                    $
                    77
                    
                    
                    $
                    132
                    
                    
                    $
                    (136
                    )
                    
                    $
                    73Termination
                        payments to employees and related costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -$
                    77
                    
                    
                    $
                    132
                    
                    
                    $
                    (136
                    )
                    
                    $
                    73**Nine
                        Months Ended September 30, 2006**Lease
                        cancellations and commitments
                    
                    $
                    4,188
                    
                    
                    $
                    (1,927
                    )
                    
                    $
                    57
                    
                    
                    $
                    2,318Termination
                        payments to employees and related costs
                    
                    
                    105
                    
                    
                    
                    368
                    
                    
                    
                    (441
                    )
                    
                    
                    32$
                    4,293
                    
                    
                    $
                    (1,559
                    )
                    
                    $
                    (384
                    )
                    
                    $
                    2,350
 ~12~
 Table
                  of Contents
 
 The
            following table summarizes the activity related to the restructuring
            plans
            initiated on or prior to December 31, 2002, and accounted for in accordance
            with Emerging Issues Task Force Issue No. 94-3, *Liability Recognition for
            Certain Employee Termination Benefits and Other Costs to Exit an Activity
            (including Certain Costs Incurred in a Restructuring)* ("EITF 94-3") (in
            thousands):
  **Amounts****Accrued**
                    
                    
                    **charged
                        to****restructuring**
                    
                    
                    **restructuring**
                    
                    
                    **Amounts**
                    
                    
                    **Accrued****costs,**
                    
                    
                    **costs**
                    
                    
                    **paid
                        or**
                    
                    
                    **restructuring****beginning**
                    
                    
                    **and
                        other**
                    
                    
                    **written
                        off**
                    
                    
                    **costs,
                        ending****Three
                        Months Ended September 30, 2007**Lease
                        cancellations and commitments
                    
                    $
                    1,741
                    
                    
                    $
                    241
                    
                    
                    $
                    (469
                    )
                    
                    $
                    1,513Termination
                        payments to employees and related costs
                    
                    
                    356
                    
                    
                    
                    -
                    
                    
                    
                    18
                    
                    
                    
                    374$
                    2,097
                    
                    
                    $
                    241
                    
                    
                    $
                    (451
                    )
                    
                    $
                    1,887**Three
                        Months Ended September 30, 2006**Lease
                        cancellations and commitments
                    
                    $
                    1,992
                    
                    
                    $
                    163
                    
                    
                    $
                    (150
                    )
                    
                    $
                    2,005Termination
                        payments to employees and related costs
                    
                    
                    332
                    
                    
                    
                    -
                    
                    
                    
                    4
                    
                    
                    
                    336$
                    2,324
                    
                    
                    $
                    163
                    
                    
                    $
                    (146
                    )
                    
                    $
                    2,341**Nine
                        Months Ended September 30, 2007**Lease
                        cancellations and commitments
                    
                    $
                    2,138
                    
                    
                    $
                    712
                    
                    
                    $
                    (1,337
                    )
                    
                    $
                    1,513Termination
                        payments to employees and related costs
                    
                    
                    347
                    
                    
                    
                    -
                    
                    
                    
                    27
                    
                    
                    
                    374$
                    2,485
                    
                    
                    $
                    712
                    
                    
                    $
                    (1,310
                    )
                    
                    $
                    1,887**Nine
                        Months Ended September 30, 2006**Lease
                        cancellations and commitments
                    
                    $
                    2,651
                    
                    
                    $
                    156
                    
                    
                    $
                    (802
                    )
                    
                    $
                    2,005Termination
                        payments to employees and related costs
                    
                    
                    311
                    
                    
                    
                    -
                    
                    
                    
                    25
                    
                    
                    
                    336$
                    2,962
                    
                    
                    $
                    156
                    
                    
                    $
                    (777
                    )
                    
                    $
                    2,341
 ~13~
 Table
                  of Contents
 **Note
            7. Accounting for Uncertainty in Income Taxes**
  Effective
            January 1, 2007, we adopted FASB Interpretation No.48, *Accounting for
            Uncertainty in Income Taxes - an interpretation of FASB Statement
            No. 109.* ("FIN 48"). FIN 48 prescribes a recognition threshold and
            measurement attribute for the financial statement recognition and measurement
            of
            uncertain tax positions taken or expected to be taken in a company's
            income tax
            return, and also provides guidance on derecognition, classification,
            interest
            and penalties, accounting in interim periods, disclosure, and transition.
            FIN 48
            utilizes a two-step approach for evaluating uncertain tax positions accounted
            for in accordance with SFAS No. 109, *Accounting for Income Taxes*("SFAS
            109"). Step one, *Recognition*, requires a company to determine if the
            weight of available evidence indicates that a tax position is more likely
            than
            not to be sustained upon audit, including resolution of related appeals
            or
            litigation processes, if any. Step two, *Measurement*, is based on the
            largest amount of benefit, which is more likely than not to be realized
            on
            ultimate settlement. The cumulative effect of adopting FIN 48 on January
            1, 2007
            is recognized as a change in accounting principle, recorded as an adjustment
            to
            the opening balance of retained earnings on the adoption date.
 
 We
            recognized a $388,000 decrease in liability and an increase in stockholder's
            equity for unrecognized tax benefits related to tax positions taken in
            prior
            periods in the first quarter of 2007. Additionally, we reclassified $160,000
            from current taxes payable to long-term taxes payable as FIN 48 specifies
            that
            tax positions for which the timing of the ultimate resolution is uncertain
            should be recognized as long-term liabilities in the first quarter of
            2007.
 
 Despite
            the adoption of FIN 48, our policy to include interest and penalties
            related to
            unrecognized tax benefits within our provision for (benefit from) income
            taxes
            has not changed.
 
 Our
            total
            amount of unrecognized tax benefits as of January 1, 2007 (FIN 48 adoption date)
            and September 30, 2007 was $548,000 and $160,000, respectively. Total
            amount of
            unrecognized tax benefits that, if recognized, would affect our effective
            tax
            rate was $548,000 and $160,000 as of January 1, 2007 and September 30,
            2007,
            respectively.
  The
              tax
              years 1993 to 2006 remain open in several jurisdictions, none of which
              have
              individual significance.
 **Note
            8. Related Party Transactions**
  In
            June
            2007, we executed a software license agreement with a third party in
            which Dr.
            Pehong Chen, our CEO and largest stockholder, is a board member. The
            total
            contract value is $132,000.  For the nine months ended September 30,
            2007, $92,000 was recognized as revenue. We have received payment of
            $72,000 for
            the contract as of September 30, 2007.
 
 **Item 2.
            Management's Discussion and Analysis of Financial
            Condition and Results of Operations**
  *This
            report on Form 10-Q contains forward-looking statements within the meaning
            of
            Section 27A of the Securities Act of 1933, as amended, and within the
            meaning of
            Section 21E of the Securities Exchange Act of 1934, as amended, which
            are
            subject to the "safe harbor" created by those sections. These forward-looking
            statements are generally identified by words such as "expect," "anticipate,"
            "intend," "believe," "hope," "assume," "estimate," "plan," "will" and
            other
            similar words and expressions. These forward-looking statements involve
            risks
            and uncertainties that could cause our actual results to differ materially
            from
            those expressed or implied in the forward-looking statements as a result
            of
            certain factors, including those described herein and in the Company's
            most
            recently filed Annual Report on Form 10-K and other documents filed with
            the
            SEC. We undertake no obligation to publicly release any revisions to
            the
            forward-looking statements or to reflect events and circumstances after
            the date
            of this document.*
 
 **Critical
            Accounting Policies, Estimates and Judgments**
  There
            have been no material changes in our critical accounting policies, estimates
            and
            judgments during the nine months ended September 30, 2007 compared to
            the
            disclosures in Part II, Item 8 of our Annual Report on Form 10-K for
            the year
            ended December 31, 2006, other than as disclosed herein.
 ~14~
 Table
                of Contents
 
 *Income
              Taxes and Deferred Tax Assets*
  We
              recognized a decrease in liability in the amount of $388,000 for unrecognized
              tax benefits related to tax positions taken in prior periods in the
              first
              quarter of 2007. Additionally, we reclassified $160,000 from current taxes
              payable to long-term taxes payable as FIN 48 specifies that tax positions
              for
              which the timing of the ultimate resolution is uncertain should be
              recognized as
              long-term liabilities in the first quarter of 2007.
  Upon
            the
            adoption of FIN 48, our policy to include interest and penalties related
            to
            unrecognized tax benefits within our provision for (benefit from) income
            taxes
            has not changed.
 
 Our
            total
            amount of unrecognized tax benefits as of January 1, 2007 (FIN 48 adoption
            date)
            and September 30, 2007 was $548,000 and $160,000, respectively. Total
            amount of
            unrecognized tax benefits that, if recognized, would affect our effective
            tax
            rate was $548,000 and $160,000 as of January 1, 2007 and September 30,
            2007,
            respectively.
 
 ***Results
            of Operations***
  *Revenues*
  **Total
            revenues decreased 6% during the three months ended September 30, 2007 to
            $12.8 million as compared to $13.6 million for the three months ended
            September 30, 2006. Total revenues of $38.8 million for the nine
            months ended September 30, 2007 is comparable to $38.9 million for the
            nine
            months ended September 30, 2006.  A summary of our revenues by
            geographic region is as follows (dollars in thousands, unaudited):
  **Software****Licenses**
                    
                    
                    **%**
                    
                    
                    **Services**
                    
                    
                    **%**
                    
                    
                    **Total**
                    
                    
                    **%****Three
                        Months Ended:****September
                        30, 2007**Americas
                    
                    $
                    4,386
                    
                    
                    
                    83
                    %
                    
                    $
                    5,402
                    
                    
                    
                    72
                    %
                    
                    $
                    9,788
                    
                    
                    
                    77
                    %Europe
                    
                    
                    586
                    
                    
                    
                    11
                    
                    
                    
                    1,045
                    
                    
                    
                    14
                    
                    
                    
                    1,631
                    
                    
                    
                    13Asia
                        Pacific
                    
                    
                    308
                    
                    
                    
                    6
                    
                    
                    
                    1,029
                    
                    
                    
                    14
                    
                    
                    
                    1,337
                    
                    
                    
                    10Total
                    
                    $
                    5,280
                    
                    
                    
                    100
                    %
                    
                    $
                    7,476
                    
                    
                    
                    100
                    %
                    
                    $
                    12,756
                    
                    
                    
                    100
                    %**September
                        30, 2006**Americas
                    
                    $
                    3,249
                    
                    
                    
                    68
                    %
                    
                    $
                    4,870
                    
                    
                    
                    55
                    %
                    
                    $
                    8,119
                    
                    
                    
                    60
                    %Europe
                    
                    
                    462
                    
                    
                    
                    10
                    
                    
                    
                    2,567
                    
                    
                    
                    29
                    
                    
                    
                    3,029
                    
                    
                    
                    22Asia
                        Pacific
                    
                    
                    1,039
                    
                    
                    
                    22
                    
                    
                    
                    1,398
                    
                    
                    
                    16
                    
                    
                    
                    2,437
                    
                    
                    
                    18Total
                    
                    $
                    4,750
                    
                    
                    
                    100
                    %
                    
                    $
                    8,835
                    
                    
                    
                    100
                    %
                    
                    $
                    13,585
                    
                    
                    
                    100
                    %**Nine
                        Months Ended:****September
                        30, 2007**Americas
                    
                    $
                    10,798
                    
                    
                    
                    65
                    %
                    
                    $
                    14,398
                    
                    
                    
                    65
                    %
                    
                    $
                    25,196
                    
                    
                    
                    65
                    %Europe
                    
                    
                    3,810
                    
                    
                    
                    23
                    
                    
                    
                    4,639
                    
                    
                    
                    21
                    
                    
                    
                    8,449
                    
                    
                    
                    22Asia
                        Pacific
                    
                    
                    1,900
                    
                    
                    
                    12
                    
                    
                    
                    3,224
                    
                    
                    
                    14
                    
                    
                    
                    5,124
                    
                    
                    
                    13Total
                    
                    $
                    16,508
                    
                    
                    
                    100
                    %
                    
                    $
                    22,261
                    
                    
                    
                    100
                    %
                    
                    $
                    38,769
                    
                    
                    
                    100
                    %**September
                        30, 2006**Americas
                    
                    $
                    8,645
                    
                    
                    
                    77
                    %
                    
                    $
                    20,126
                    
                    
                    
                    73
                    %
                    
                    $
                    28,771
                    
                    
                    
                    74
                    %Europe
                    
                    
                    1,175
                    
                    
                    
                    10
                    
                    
                    
                    4,475
                    
                    
                    
                    16
                    
                    
                    
                    5,650
                    
                    
                    
                    14Asia
                        Pacific
                    
                    
                    1,439
                    
                    
                    
                    13
                    
                    
                    
                    3,078
                    
                    
                    
                    11
                    
                    
                    
                    4,517
                    
                    
                    
                    12Total
                    
                    $
                    11,259
                    
                    
                    
                    100
                    %
                    
                    $
                    27,679
                    
                    
                    
                    100
                    %
                    
                    $
                    38,938
                    
                    
                    
                    100
                    %
 We
            operate in a competitive industry. Although general economic conditions
            have
            improved in the past two years, we may experience declines again. Financial
            comparisons discussed herein may not be indicative of future
            performance. **
 ~15~
 Table
                of Contents
  *Software
            license revenues*increased 10% during the three months ended
            September 30, 2007 to $5.3 million as compared to $4.8 million for the
            three months ended September 30, 2006. **Software license
            revenues**increased 46% during the nine months ended
            September 30, 2007 to $16.5 million as compared to $11.3 million for the
            nine months ended September 30, 2006. The increase was mainly due to
            increased demand for additional licenses by existing
            customers.
  *Services
            revenues*consisting
            of consulting revenues,
            customer training revenues and maintenance revenues decreased 15% during
            the
            three months ended September 30, 2007 to $7.5 million as compared to
            $8.8 million for the three months ended September 30, 2006*.*Services
            revenues decreased 20% during
            the nine months ended September 30, 2007 to $22.3 million as compared to
            $27.7 million for the nine months ended September 30, 2006. The decrease in
            service revenues was mainly attributable to lower consulting revenues.
            Maintenance revenues decreased 5% for the three months ended September
            30, 2007
            to $5.8 million as compared to $6.1 million for the three months ended
            September 30, 2006. Maintenance revenues decreased 3% for the nine
            months ended September 30, 2007 to $17.4 million as compared to $18.0
            million for the nine months ended September 30, 2006.  Consulting
            and training revenues decreased 41% for the three months ended
            September 30, 2007 to $1.6 million as compared to $2.7 million for the
            three months ended September 30, 2006.  Consulting revenues
            decreased 51% for the nine months ended September 30, 2007 to $4.8 million
            as compared to $9.7 million for the nine months ended September 30, 2006.
            The decline in consulting revenues can be attributable to a lagging effect
            caused by declining license revenues in 2006. Consulting revenues tend
            to trail
            license revenues by 6 to 12 months.
 
 Cost
            of Revenue
  Cost
            of software license revenues includes the costs of product media, duplication,
            packaging and other manufacturing costs, as well as royalties payable
            to third
            parties for software that is either embedded in, or bundled and licensed
            with,
            our products. 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 our
            cost of
            revenues is as follows (dollars in thousands, unaudited):
 **Three
                        Months Ended September 30,**
                    
                    
                    **Nine
                        Months Ended September 30,****2007**
                    
                    
                    **%** **(1)**
                    
                    
                    **2006**
                    
                    
                    **%** **(1)**
                    
                    
                    **2007**
                    
                    
                    **%** **(1)**
                    
                    
                    **2006**
                    
                    
                    **%** **(1)**Cost
                        of software licenses
                    
                    $
                    3
                    
                    
                    
                    -
                    %
                    
                    $
                    22
                    
                    
                    
                    -
                    %
                    
                    $
                    37
                    
                    
                    
                    -
                    %
                    
                    $
                    226
                    
                    
                    
                    1
                    %Cost
                        of services
                    
                    
                    2,102
                    
                    
                    
                    17
                    
                    
                    
                    2,729
                    
                    
                    
                    20
                    
                    
                    
                    6,710
                    
                    
                    
                    17
                    
                    
                    
                    10,283
                    
                    
                    
                    26Total
                        cost of revenues
                    
                    $
                    2,105
                    
                    
                    
                    17
                    %
                    
                    $
                    2,751
                    
                    
                    
                    20
                    %
                    
                    $
                    6,747
                    
                    
                    
                    17
                    %
                    
                    $
                    10,509
                    
                    
                    
                    27
                    %
 _______________________
 (1)
                  Expressed
                      as a percent of total revenues for the period
                      indicated.
 **
 *Cost
            of software licenses*decreased 86% during the three months ended
            September 30, 2007 to $3,000 as compared to $22,000 for the three months
            ended September 30, 2006.  Cost of software licenses decreased
            84% during the nine months ended September 30, 2007 to $37,000 as compared
            to $226,000 for the nine months ended September 30, 2006.  This
            decrease is primarily a result of a decrease in the portion of license
            revenues
            generated from royalty-bearing products.
  *Cost
            of services*decreased 22% during the three months ended September 30,
            2007 to $2.1 million as compared to $2.7 million for the three months
            ended September 30, 2006. Cost of services**decreased 35%
            during the nine months ended September 30, 2007 to $6.7 million as compared
            to $10.3 million for the nine months ended September 30,
            2006.  This decrease was the result of a reduction in consulting
            headcount, the consolidation of our facilities and less services
            revenue.
  *Gross
            margin*increased to 84% during the three months ended September 30,
            2007 from 80% for the three months ended September 30, 2006. Gross
            margin**increased to 83% during the nine months ended
            September 30, 2007 from 73% for the nine months ended September 30,
            2006.  The increase is a result of increased license revenue and our
            restructuring and cost control plans.
 ~16~
 Table
                of Contents
  A
            summary of operating expenses is set forth in the following table. The
            percentage of expenses is calculated based on total revenues (dollars
            in
            thousands, unaudited):
  **Three
                        months ended**
                    
                    
                    **Nine
                        months ended****September
                        30,**
                    
                    
                    **September
                        30,****2007**
                    
                    
                    ****
                    **%(1)**
                    
                    
                    **2006**
                    
                    
                    ****
                    **%(1)**
                    
                    
                    **2007**
                    
                    
                    ****
                    **%(1)**
                    
                    
                    **2006**
                    
                    
                    ****
                    **%(1)**Research
                        and development
                    
                    $
                    2,283
                    
                    
                    
                    18
                    %
                    
                    $
                    2,766
                    
                    
                    
                    20
                    %
                    
                    $
                    7,422
                    
                    
                    
                    19
                    %
                    
                    $
                    7,802
                    
                    
                    
                    20
                    %Sales
                        and marketing
                    
                    
                    1,898
                    
                    
                    
                    15
                    
                    
                    
                    1,761
                    
                    
                    
                    13
                    
                    
                    
                    5,748
                    
                    
                    
                    15
                    
                    
                    
                    6,124
                    
                    
                    
                    16General
                        and administrative
                    
                    
                    1,705
                    
                    
                    
                    14
                    
                    
                    
                    2,429
                    
                    
                    
                    18
                    
                    
                    
                    4,250
                    
                    
                    
                    11
                    
                    
                    
                    7,406
                    
                    
                    
                    19Restructuring
                        charges
                    
                    
                    260
                    
                    
                    
                    2
                    
                    
                    
                    (1,878
                    )
                    
                    
                    (14
                    )
                    
                    
                    845
                    
                    
                    
                    3
                    
                    
                    
                    (1,403
                    )
                    
                    
                    (4
                    )Total
                        operating expenses
                    
                    $
                    6,146
                    
                    
                    
                    49
                    %
                    
                    $
                    5,078
                    
                    
                    
                    37
                    %
                    
                    $
                    18,265
                    
                    
                    
                    48
                    %
                    
                    $
                    19,929
                    
                    
                    
                    51
                    %
 _______________________
 (1)
                  Expressed
                      as a percent of total revenues for the period
                      indicated.
 
 *Research
            and development expenses*decreased 18% during the three months ended
            September 30, 2007 to $2.3 million as compared to $2.8 million
            for the three months ended September 30, 2006.  Research and
            development expenses during the nine months ended September 30, 2007 were
            $7.4 million as compared to $7.8 million for the nine months ended
            September 30, 2006. The reduction was the result of a number of small
            savings across the board, including, for example, a reduction in consulting
            costs.
  *Sales
            and marketing expenses*during the three months ended September 30,
            2007 was $1.9 million which is comparable to $1.8 million for the three
            months ended September 30, 2006.  Sales and marketing
            expenses**decreased 7% during the nine months ended
            September 30, 2007 to $5.7 million as compared to $6.1 million for the nine
            months ended September 30, 2006.  This decrease was primarily due
            to a favorable employee payroll tax adjustments in Europe during the
            second and
            third quarters of year 2007.
  *General
              and administrative expenses*decreased 30% during the three months ended
              September 30, 2007 to $1.7 million as compared to $2.4 million for the
              three months ended September 30, 2006.  General and administrative
              expenses**decreased 42% during the nine months ended
              September 30, 2007 to $4.3 million as compared to $7.4 million
              for the nine months ended September 30, 2006.  The decrease was
              primarily attributable to a reduction in legal and accounting fees,
              decrease in
              bad debt reserve, and function consolidations.
 *Interest
            income, net*was of $456,000 for the three months ended
            September 30, 2007 as compared to $225,000 for the three months ended
            September 30, 2006.  Interest income, net was $1.4
            million for the nine months ended September 30, 2007 as compared to
            $457,000 for the nine months ended September 30, 2006.  The
            increase was due to increased cash balances from positive cash from operating
            activities and the closing of the rights offering.
  *Loss on revaluation of warrants*was $680,000 for the three months ended
            September 30, 2007 as compared to $317,000 for the three months ended
            September 30, 2006.  Loss on revaluation of
            warrants**was $4.9 million for the nine months ended
            September 30, 2007 as compared to $703,000 for the nine months ended
            September 30, 2006.  The changes were primarily due to the
            fluctuations of our stock price during the comparison periods.
  *Other
            income (expense), net,*was $762,000 for the three months ended
            September 30, 2007 as compared to expenses of  $71,000 for the
            three months ended September 30, 2006.  Other income,
            net,**was $1.1 million for the nine months ended September 30,
            2007 as compared to $191,000 for the nine months ended September 30,
            2006.  The changes were primarily due to realized foreign exchange
            transaction gains and losses. **
 ~17~
 Table
                of Contents
  *Benefit
            (provision) for income taxes* was $419,000 for the three months ended
            September 30, 2007 as compared to a provision of $228,000 for the three
            months
            ended September 30, 2006.  Benefit for income taxes was $133,000 for
            the nine months ended September 30, 2007 as compared to a provision of
            $449,000
            for the nine months ended September 30, 2006. This is the result of expenses
            related to Alternative Minimum Tax calculated at both Federal and state
            levels after the application of net operating loss carryforwards, plus
            $400,000 of favorable income tax adjustment mainly for foreign tax credit
            filed
            in our 2006 income tax return.
  ***Liquidity
            and Capital Resources***
  **Overview**
 
 Our
            consolidated balance sheet strengthened considerably throughout 2006
            and in the
            first three quarters of 2007. As of September 30, 2007, we had $50.7
            million of
            cash and cash equivalents, with no long-term debt borrowings. This compares
            with
            a cash position of $37.0 million at December 31, 2006. The increase was
            due
            primarily to $12.5 million cash generated from our operations.
 
 Revenues
            for the first nine months of 2007 were $38.8 million, comparable to revenues
            of
            $38.9 million for the first nine months of 2006. License revenue for
            the first
            nine months of 2007 was $16.5 million compared to $11.3 million for the
            first
            nine months of 2006. The majority of our license revenue for the first
            nine
            months of 2007 was generated by our core Commerce and Portal solutions,
            from
            customers such as DSG Retail, Alstom, DPD, Epson, Vodafone, Gemeente
            Tilburg,
            Canon, Circuit City and several other international, brand-name customers.
            License revenues increased in all regions as compared to the first nine
            months
            of 2006. Revenues from customers in Americas increased by $2.2 million,
            revenues
            from customers in Europe increased by $2.6 million and revenues from
            customers
            in Asia Pacific increased by $0.5 million. The most significant change
            was the
            year-over-year decline in consulting revenues due to the lagging effects
            of
            decreased licenses demand. Typically consulting projects tend to trail
            licenses
            by 6 to 12 months. This decline was more than offset by corresponding cost
            savings in both direct headcount and contractor expenses. As a result,
            consulting services generated better operating margins than many prior
            higher-revenue quarters.
 
 We
            continued to focus on expense control in the third quarter of 2007 with
            the goal
            of achieving strong operating results and profit margins. Operating expenses
            for
            the third quarter of 2007 were $6.1 million, as compared to $5.1 million
            for the
            third quarter of 2006. Operating expenses were lower in the third quarter
            of
            2006 due to a restructuring credit offset of approximately $1.9 million.
            For the
            three months ended of September 30, 2007 and 2006, we took a charge of
            $ 680,000
            and $ 317,000, respectively, on the revaluation of warrants. As a result,
            for
            the three months ended September 30, 2007, net income was $5.5 million,
            or $0.05
            per diluted share. This compares to net income of $5.4 million, or $0.08
            per
            diluted share, for the three months ended September 30, 2006.
  The
            following table represents our liquidity at September 30, 2007 and December
            31,
            2006 (dollars in thousands):
  **September
                        30,**
                    
                    
                    **December
                        31,****2007**
                    
                    
                    **2006****(unaudited)**Cash
                        and cash equivalents
                    
                    $
                    50,735
                    
                    
                    $
                    37,003Restricted
                        cash
                    
                    $
                    796
                    
                    
                    $
                    997Restricted
                        cash, net of current portion
                    
                    $
                    1,000
                    
                    
                    $
                    1,000Working
                        capital
                    
                    $
                    33,449
                    
                    
                    $
                    18,955Working
                        capital ratio
                    
                    
                    2.24
                    
                    
                    
                    1.63
 *Cash
            Provided By Operating Activities*
  Cash
            provided by operating activities was $12.5 million for the nine months
            ended
            September 30, 2007. Net cash provided by operating activities in this
            period
            consisted primarily of $15.7 million in operating profit (excluding
            restructuring charges and revaluation of warrants) generated from sales
            margin
            improvement and company-wide cost reduction efforts, plus the cash collected
            from account receivable of $3.1 million, and offset by the payment of
            $6.8
            million in accounts payable and accrued expenses and a reduction in unearned
            revenue accounts.
 ~18~
 Table
                of Contents
 
 Cash
              provided by operating activities was $12.0 million for nine months ended
              September 30, 2006. The primary reason for the net cash provided by
              operating activities was net operating income of $8.0 million, along with
              $1.3 million of unearned revenue and deferred maintenance revenue received
              in the nine months ended September 30, 2006. Other significant adjustments
              to reconcile net income to cash provided by operating activities included
              a net
              increase in accounts receivable of approximately $5.3 million and decreases
              in accounts payable and accrued expenses of
              $2.0 million.
  *Cash
            (Used For) Provided By Investing Activities*
  Cash
            used
            for investing activities was $270,000 for the nine months ended September
            30,
            2007. This figure reflects the release of $201,000 of restricted cash,
            offset
            by $471,000 in expenditures for the purchase of property and equipment and
            leasehold improvements related to the relocation of our corporate headquarters.
            Cash provided by investing activities was $271,000 for the nine months
            ended
            September 30, 2006 and was primarily due to $386,000 in proceeds from
            investment sales.
  *Cash
            Provided By (Used For) Financing Activities*
  Cash
            provided by financing activities was $1.6 million for the nine months
            ended
            September 30, 2007, primarily consisting of cash received in connection
            with the
            exercise of stock options and warrants and employees' purchases of common
            stock
            under the Purchase Plan. Cash used in financing activities was $331,000
            for the
            nine months ended September 30, 2006, mainly as a result of paying down
            bank term debt offset by proceeds from stock issuances of $58,000.
 
 *Leases
            and Other Contractual Obligations*
  We
            lease
            our headquarters facility and other facilities under non-cancelable operating
            lease agreements expiring through the year 2012. Under the terms of the
            agreements, we are required to pay lease costs, property taxes, insurance
            and
            normal maintenance costs. (See Note 4 of Condensed Consolidated Financial
            Statements).
  $1.8
            million of restricted cash as shown on our Condensed Consolidated Balance
            Sheets
            represents collateral for letters of credit, all of which are due to
            mature
            within one year.  These letters of credit have been issued primarily
            in connection with our facility lease obligations.
 
 **Item 3.
            Quantitative and Qualitative Disclosures About
            Market Risk**
  Our
            exposure to market risk for changes in interest rates relates primarily
            to our
            investment portfolio. We had no derivative financial instruments as of
            September 30, 2007 and 2006. We place our investments 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.
  **Item
            4. Controls and Procedures**
  We
            maintain disclosure controls and procedures that are designed to ensure
            that
            information required to be disclosed in our reports filed under the Securities
            Exchange Act of 1934, as amended, (the "Exchange Act") is recorded,
            processed, summarized and reported within the time periods specified
            in the
            SEC's rules and forms and that such information is accumulated and communicated
            to our management, including the individual who serves as our Chief Executive
            Officer and interim Chief Financial Officer, as appropriate, to allow
            for timely
            decisions regarding required disclosures. In designing and evaluating
            the
            disclosure controls and procedures, our management recognizes that any
            controls
            and procedures, no matter how well designed and operated, can provide
            only
            reasonable assurance of achieving the desired control objectives, and
            our
            management is required to apply its judgment in evaluating the cost-benefit
            relationship of possible controls and procedures. Our disclosure controls
            and
            procedures were designed to provide reasonable assurance that the controls
            and
            procedures would meet their objectives.
 ~19~
 Table
                of Contents
  As
              required by Rules 15(e) and 15d-15(e) under the Exchange Act, we carried
              out an
              evaluation, under the supervision and with the participation of our
              management,
              including the individual who serves as both our Chief Executive Officer
              and our
              interim Chief Financial Officer, of the effectiveness of the design
              and
              operation of our disclosure controls and procedures as of the end of
              the period
              covered by this report. Based on the foregoing, our Chief Executive
              Officer and
              interim Chief Financial Officer concluded that our disclosure controls
              and
              procedures were not effective at the reasonable assurance level. This
              conclusion
              was based on the identification of one material weakness in internal
              control
              over financial reporting as of December 31, 2006, which we are unable
              to
              conclude had been remediated as of September 30, 2007.
  ***Changes
            in Internal Control over Financial Reporting***
  There
            has
            been no change in our internal control over financial reporting during
            the
            quarter ended September 30, 2007 that has materially affected, or is
            reasonably
            likely to materially affect, our internal control over financial
            reporting.
 
 ***Limitations
            on the Effectiveness of Controls***
  Our
            management, including our Chief Executive Officer and interim Chief Financial
            Officer, does not expect that our disclosure controls and procedures
            or our
            internal controls will prevent all error and fraud. A control system,
            no matter
            how well conceived and operated, can provide only reasonable, not absolute,
            assurance that the objectives of the control system are met. Further,
            the design
            of a control system must reflect the fact that there are resource constraints,
            and the benefits of controls must be considered relative to their costs.
            Because
            of the inherent limitations in all control systems, no evaluation of
            controls
            can provide absolute assurance that all control issues and instances
            of fraud,
            if any, within the company have been detected. These inherent limitations
            include the realities that judgments in decision-making can be faulty,
            and that
            breakdowns can occur because of simple error or mistake. Additionally,
            controls
            can be circumvented by the individual acts of some persons, by collusion
            of two
            or more people, or by management override of the controls. The design
            of any
            system of controls also is based in part upon certain assumptions about
            the
            likelihood of future events, and there can be no assurance that any design
            will
            succeed in achieving its stated goals under all potential future conditions;
            over time, controls may become inadequate because of changes in conditions,
            or
            the degree of compliance with the policies or procedures may deteriorate.
            Because of the inherent limitations in a cost-effective control system,
            misstatements due to error or fraud may occur and not be detected. Our
            disclosure controls and procedures are designed to provide reasonable
            assurance
            of achieving their objectives, and we are in the process of remediating
            the
            material weakness that existed at December 31, 2006 and September 30,
            2007.  We anticipate that we will be able to remediate the material
            weakness that existed as of December 31, 2006 by the end of 2007, but
            we cannot
            provide assurance that we will be successful in doing so.
 ~20~
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                of Contents
  **PART
            II. OTHER INFORMATION**
 **Item 1.
            Legal Proceedings**
  We
            are subject from time to time to various legal actions and other claims
            arising
            in the ordinary course of business. We are not presently a party to any
            material
            legal proceedings.
  **Item 1A.
            Risk Factors**
  *The
            risks and uncertainties described below are not the only ones facing
            us.
            Additional risks and uncertainties not presently known to us or that
            we
            currently deem immaterial also may impair our business operations. If
            any of the
            following risks actually occur, our business could be harmed. In that
            event, the
            trading price of our common stock could decline.*
 
 ***We
            have a history of losses and our future profitability on a quarterly
            or annual
            basis is uncertain, which could have a harmful effect on our business
            and the
            value of BroadVision common stock.***
  While
            we
            have recently generated positive operating income and cash flow, we have
            incurred substantial cumulative net operating losses and negative cash
            flows
            from operations since 2000. As of September 30, 2007, we had an accumulated
            deficit of approximately $1.2 billion.
  Given
            our
            planned operating and capital expenditures, for the foreseeable future
            we expect
            our results of operations to fluctuate, and during this period we may
            incur
            losses and/or negative cash flows. If our revenue does not increase or
            if we
            fail to maintain our expenses at an amount less than our projected revenue,
            we
            will not be able to achieve or sustain operating profitability on a consistent
            basis. We are continuing our efforts to reduce and control our expense
            structure. We believe strict cost containment and expense reductions
            are
            essential to achieving positive cash flow and profitability. A number
            of factors
            could preclude us from successfully bringing costs and expenses in line
            with our
            revenues, including unplanned uses of cash, the inability to accurately
            forecast
            business activities and further deterioration of our revenues. If we
            are not
            able to effectively reduce our costs and achieve an expense structure
            commensurate with our business activities and revenues, we may have inadequate
            levels of cash for operations or for capital requirements, which could
            significantly harm our ability to operate our business.
  Our
            failure to operate profitably or control negative cash flows on a quarterly
            or
            annual basis could harm our business and the value of BroadVision common
            stock.
            If the negative cash flow continues, our liquidity and ability to operate
            our
            business would be severely and adversely impacted. Additionally, our
            ability to
            raise financial capital may be hindered due to our operational losses
            and
            negative cash flows, reducing our operating flexibility.
 
 ***Because
            our quarterly operating results are volatile and difficult to predict,
            our
            quarterly operating results in one or future periods are likely to fluctuate
            significantly, which could cause our stock price to decline if we fail
            to meet
            the expectations of securities analysts or
            investors.***
  Our
            quarterly operating results have varied significantly in the past and
            are likely
            to continue to vary significantly in the future. In the quarters ended
            June 30,
            2006, and September 30, 2006, our revenue increased 1%, and 7% respectively,
            as
            compared to the previous quarters. In the quarters ended December 31,
            2006 and
            March 31, 2007, our revenue declined 4%, and 2% respectively, as compared
            to the
            previous quarters. In the quarter ended June 30, 2007, our revenue increased
            4%
            as compared to the previous quarter. In the quarter ended September 30,
            2007, our revenue decreased 4% as compared to the previous quarter. If our
            revenues, operating results, earnings or future projections are below
            the levels
            expected by securities analysts or investors, our stock price is likely
            to
            decline.
 ~21~
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                of Contents
  We
            expect
            to continue to experience significant fluctuations in our results of
            operations
            due to a variety of factors, some of which are outside of our control,
            including:
  •
                  introduction
                      of products and services and enhancements by us and our
                      competitors;•
                  competitive
                      factors that affect our pricing;•
                  market
                      acceptance of new products;•
                  the
                      mix of products sold by us;•
                  changes
                      in our pricing policies or our competitors;•
                  changes
                      in our sales incentive plans;•
                  the
                      budgeting cycles of our customers;•
                  customer
                      order deferrals in anticipation of new products or enhancements
                      by our
                      competitors or us or because of macro-economic
                      conditions;•
                  nonrenewal
                      of our maintenance 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 our products are
                      sold;•
                  the
                      mix of international and domestic sales;•
                  the
                      rate at which new sales people become productive;•
                  changes
                      in the level of operating expenses to support projected
                      growth;•
                  increase
                      in the amount of third party products and services that we
                      use in our
                      products or resell with royalties attached;•
                  fluctuations
                      in the recorded value of outstanding common stock warrants
                      that will be
                      based upon changes to the underlying market value of BroadVision
                      common
                      stock;•
                  the
                      timing of receipt and fulfillment of significant orders;
                      and•
                  costs
                      associated with litigation, regulatory compliance and other
                      corporate
                      events such as operational
                      reorganizations.
 
 As
            a
            result of these factors, we believe that quarter-to-quarter comparisons
            of our
            revenue and operating results are not necessarily meaningful, and that
            these
            comparisons are not accurate indicators of future performance. Because
            our
            staffing and operating expenses are based on anticipated revenue levels,
            and
            because a high percentage of our costs are fixed, small variations in
            the timing
            of the recognition of specific revenue could cause significant variations
            in
            operating results from quarter to quarter. If we were unable to adjust
            spending
            in a timely manner to compensate for any revenue shortfall, any significant
            revenue shortfall would likely have an immediate negative effect on our
            operating results. If our operating results in one or more future quarters
            fail
            to meet the expectations of securities analysts or investors, we would
            expect to
            experience an immediate and significant decline in the trading price
            of our
            stock.
  ***Our
            business currently depends on revenue related to BroadVision e-business
            solutions, and if the market does not increasingly accept these products
            and
            related products and services, our revenue may continue to
            decline.***
  We
            generate our revenue from licenses of BroadVision e-business solutions,
            including process, commerce, portal and content management and related
            products
            and services. We expect that these products, and future upgraded versions,
            will
            continue to account for a large portion of our revenue in the foreseeable
            future. Our future financial performance will depend on increasing acceptance
            of
            our current product and on the successful development, introduction and
            customer
            acceptance of new and enhanced versions of our products. If new and future
            versions and updates of our products and services do not gain market
            acceptance
            when released commercially, or if we fail to deliver the product enhancements
            and complementary third party products that customers want, demand for
            our
            products and services, and our revenue, may decline.
 ~22~
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                of Contents
 ***We
              have recently introduced new products, services and technologies and
              our
              business will be harmed if we are not successful in selling these offerings
              to
              our existing customers and new customers.***
 In
            early
            2007, we introduced a product roadmap that included new products, services
            and
            technologies, to complement and replace certain of our existing products,
            services and technologies.  We formally released BroadVision 8.1 TM at the
            end of the third quarter of 2007, a major milestone in completing our
            new K2 (Kona
            * Kukini)
            e-business solution sets. We have spent significant resources in developing
            these offerings and training our employees to implement and support the
            offerings, and we plan to add additional sales and marketing resources
            to
            support these new products, services and technologies.  We do not yet know
            whether any of these new offerings will appeal to existing and potential
            new
            customers, and if so, whether sales of these new offerings will be sufficient
            for us to offset the costs of development, implementation, support and
            marketing. Our existing customers may determine that the BroadVision
            products
            and services they currently use are sufficient for their purposes, or
            that the
            added benefit from these new offerings is not sufficient to merit the
            additional
            cost.  As a result we may need to decrease our prices or develop
            modifications.  Although we have performed extensive testing of our new
            products and technologies, their broad-based implementation may require
            more
            support than we anticipate, which would further increase our expenses.
            If sales
            of our new products, services and technologies are lower than we expect,
            or if
            we must lower our prices or delay implementation to fix unforeseen problems
            and
            develop modifications, our operating margins are likely to decrease and
            we may
            not be able to operate profitably.  A failure to operate profitably would
            significantly harm our business.
 
 ***Our
            management identified a material weakness in the effectiveness of our
            internal
            control over financial reporting as of December 31, 2005 and as of December
            31, 2006. The 2005 material weakness caused restatement of our historical
            operating results. Additional material weaknesses may be discovered and
            additional restatements may be required in the
            future.***
  We
            previously reported that as of March 31, 2006, we did not have a sufficient
            number of experienced personnel in our accounting and finance organization
            to
            facilitate an efficient financial statement close process and permit
            the
            preparation of our financial statements in accordance with U.S. GAAP.
            For
            example, there were a significant number of adjustments to our financial
            statements during the course of the 2005 audit, at least one of which
            was
            individually material and required us to restate several prior quarters.
            Our
            personnel also lacked certain required skills and competencies to oversee
            the
            accounting operations and perform certain important control functions,
            such as
            the review, periodic inspection and investigation of transactions of
            our foreign
            locations. We consider this to be a deficiency that was also a material
            weakness
            in the operation of entity-level controls.
 
 In
            2006
            we hired several new full-time employees, and we believe that as of December
            31,
            2006, we have retained a sufficient number of experienced personnel in
            our
            accounting and finance organization to enable us to address the material
            weakness that existed as of December 31, 2005. These new hires have augmented
            the capabilities of our organization, but in many cases they replaced
            employees
            or part-time contractors who had left us for various reasons. In addition,
            several experienced members of our accounting staff left in early 2007.
            This
            turnover has caused a reduction in our institutional knowledge regarding
            historical events. While we believe that the recent additions to our
            accounting
            and finance organization continue to gain familiarity with the complex
            issues
            relating mainly to our historical operations, as of December 31, 2006
            the full
            organization had not yet been in place for a sufficient amount of time
            to allow
            us to conclude that no material weakness existed as of December 31, 2006.
            Accordingly, when our management assessed the effectiveness of our internal
            control over financial reporting as of December 31, 2006, this assessment
            identified one material weakness. If we are not successful in retaining
            experienced personnel in our accounting and finance organization in order
            to
            sufficiently address the reduction in institutional knowledge referenced
            above,
            there is more than a remote likelihood that our quarterly or annual financial
            statements could be materially misstated, which could require a
            restatement.
  We
            anticipate that we will be able to remediate the material weakness that
            existed
            as of December 31, 2006 by the end of 2007, but we cannot provide assurance
            that
            we will be successful in doing so. Maintaining sufficient expertise and
            historical institutional knowledge in our accounting and finance organization
            is
            dependent upon retaining existing employees and filling any open positions
            with
            experienced personnel in a timely fashion. The market for skilled accounting
            and
            finance personnel is competitive and we may have continued difficulty
            in
            retaining our staff because (1) the region in which we compete consists of
            many established companies that can offer more lucrative compensation
            packages
            and (2) some professionals are reluctant to deal with the complex
            accounting issues relating to our historical operations. Several experienced
            members of our accounting staff left in early 2007. Our inability to
            staff the
            department with competent personnel with sufficient training will affect
            our
            internal controls over financial reporting to the extent that we may
            not be able
            to prevent or detect material misstatements. Remediating the material
            weakness
            that existed as of December 31, 2006 will require us to incur the recruiting
            and
            compensation costs necessary to attract and retain an adequate staff
            of
            qualified accounting and finance personnel. These costs may be higher
            than
            normal due to the importance to us of remediating this weakness, but
            we do not
            anticipate that any incremental costs associated with this remediation
            effort
            will be material.
 ~23~
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  ***If
            we are unable to keep pace with the rapid technological changes in online
            commerce and communication, our products and services may fail to be
            competitive.***
 
 Our
            products and services may fail to be competitive if we do not maintain
            or exceed
            the pace of technological developments in Internet commerce and communication.
            Failure to be competitive could cause our revenue to decline. The information
            services, software and communications industries are characterized by
            rapid
            technological change, changes in customer requirements, frequent new
            product and
            service introductions and enhancements and evolving industry standards
            and
            practices. The introduction of products and services embodying new technologies
            and the emergence of new industry standards and practices can render
            existing
            products and services obsolete. Our future success will depend, in part,
            on our
            ability to:
  •
                  develop
                      leading technologies;•
                  enhance
                      our existing products and services;•
                  develop
                      new products and services that address the increasingly sophisticated
                      and
                      varied needs of our prospective customers; and•
                  respond
                      to technological advances and emerging industry standards and
                      practices on
                      a timely and cost-effective basis.
 
 ***Our
            sales and product implementation cycles are lengthy and subject to delay,
            which
            make it difficult to predict our quarterly results.***
  Our
            sales
            and product implementation cycles generally span months. Delays in customer
            orders or product implementations, which are difficult to predict, can
            affect
            the timing of revenue recognition and adversely affect our quarterly
            operating
            results. Licensing our products is often an enterprise-wide decision
            by
            prospective customers. The importance of this decision requires that
            we engage
            in a lengthy sales cycle with prospective customers. A successful sales
            cycle
            may last up to nine months or longer. Our sales cycle is also affected
            by a
            number of other factors, some of which we have little or no control over,
            including the volatility of the overall software market, the business
            condition
            and purchasing cycle of each prospective customer, and the performance
            of our
            technology partners, systems integrators and resellers. The implementation
            of
            our products can also be time and resource intensive, and subject to
            unexpected
            delays. Delays in either product sales or implementations could cause
            our
            operating results to vary significantly from quarter to quarter.
  ***Current
            and potential competitors could make it difficult for us to acquire and
            retain
            customers now and in the future.***
 
 The
            market for our products is intensely competitive. We expect competition
            in this
            market to persist and increase in the future. If we fail to compete successfully
            with current or future competitors, we may be unable to attract and retain
            customers. Increased competition could also result in price reductions
            for our
            products and lower profit margins and reduced market share, any of which
            could
            harm our business, results of operations and financial condition.
  Many
            of
            our competitors have significantly greater financial, technical, marketing
            and
            other resources, greater name recognition, a broader range of products
            and a
            larger installed customer base, any of which could provide them with
            a
            significant competitive advantage. In addition, new competitors, or alliances
            among existing and future competitors, may emerge and rapidly gain significant
            market share. Some of our competitors, particularly established software
            vendors, may also be able to provide customers with products and services
            comparable to ours at lower or at aggressively reduced prices in an effort
            to
            increase market share or as part of a broader software package they are
            selling
            to a customer. We may be unable to match competitor's prices or price
            reductions, and we may fail to win customers that choose to purchase
            an
            information technology solution as part of a broader software and services
            package. As a result, we may be unable to compete successfully with current
            or
            new competitors.
  ***Because
            a significant portion of our sales activity occurs at the end of each
            fiscal
            quarter, delays in a relatively small number of license transactions
            could
            adversely affect our quarterly operating
            results.***
  A
            significant proportion of our sales are concentrated in the last month
            of each
            fiscal quarter. Gross margins are high for our license transactions.
            Customers
            and prospective customers may use these conditions in an attempt to obtain
            more
            favorable terms. While we endeavor to avoid making concessions that could
            result
            in lower margins, the negotiations often result in delays in closing
            license
            transactions. Small delays in a relatively small number of license transactions
            could have a significant impact on our reported operating results for
            that
            quarter.
 ~24~
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  ***We
            have substantially modified our business and operations and will need
            to manage
            and support these changes effectively in order for our business plan
            to
            succeed.***
  We
            have
            substantially expanded and subsequently contracted our business and operations
            since our inception in 1993. We grew from 652 employees at the end of
            1999 to
            2,412 employees at the end of 2000 and then reduced our numbers to 1,102
            at the
            end of 2001, 449 at the end of 2002, 367 at the end of 2003, 337 at the
            end of
            2004, 181 at the end of 2005, and 159 at the end of 2006. On September
            30, 2007,
            we had approximately 182 employees. As a consequence of our employee
            base
            growing and then contracting so rapidly, we entered into significant
            contracts
            for facilities space for which we ultimately determined we did not have
            a future
            use. We announced during the third and fourth quarters of 2004 that we
            had
            agreed with the landlords of various facilities to renegotiate future
            lease
            commitments, extinguishing a total of approximately $155 million of future
            obligations. The management of the expansion and later reduction of our
            operations has taken a considerable amount of our management's attention
            during
            the past several years. As we manage our business to introduce and support
            new
            products, we will need to continue to monitor our workforce and make
            appropriate
            changes as necessary. If we are unable to support past changes and implement
            future changes effectively, we may have to divert additional resources
            away from
            executing our business plan and toward internal administration. If our
            expenses
            significantly outpace our revenues, we may have to make additional changes
            to
            our management systems and our business plan may not succeed.
  ***We
            may face liquidity challenges and need additional financing in the
            future.***
  We
            currently expect to be able to fund our working capital requirements
            from our
            existing cash and cash equivalents and our anticipated cash flows from
            operations and subleases through at least September 30, 2008. However,
            we could
            experience unforeseen circumstances, such as an economic downturn, difficulties
            in retaining customers and/or key employees, or other factors that could
            increase our use of available cash and require us to seek additional
            financing.
            We may find it necessary to obtain additional equity or debt financing
            due to
            the factors listed above or in order to support a more rapid expansion,
            develop
            new or enhanced products or services, respond to competitive pressures,
            acquire
            complementary businesses or technologies or respond to unanticipated
            requirements.
 
 We
            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 raised through the issuance of equity
            securities, the percentage ownership of our stockholders will be reduced,
            stockholders may experience additional dilution or any equity securities
            we sell
            may have rights, preferences or privileges senior to those of the holders
            of our
            common stock. We expect that obtaining additional financing on acceptable
            terms
            would be difficult, at best. If adequate funds are not available or are
            not
            available on acceptable terms, we may be unable to pay our debts as they
            become
            due, develop our products, take advantage of future opportunities or
            respond to
            competitive pressures or unanticipated requirements, which could have
            a material
            adverse effect on our business, financial condition and future operating
            results.
 
 ***We
            are dependent on direct sales personnel and third-party distribution
            channels to
            achieve revenue growth.***
  To
            date,
            we have sold our products primarily through our direct sales force. Our
            ability
            to achieve significant revenue growth in the future largely will depend
            on our
            success in recruiting, training and retaining sufficient direct sales
            personnel
            and establishing and maintaining relationships with distributors, resellers
            and
            systems integrators. Our products and services require a sophisticated
            sales
            effort targeted at the senior management of our prospective customers.
            New hires
            as well as employees of our distributors, resellers and systems integrators
            require training and may take a significant amount of time before achieving
            full productivity. Our recent hires may not become as productive as necessary,
            and we may be unable to hire and retain sufficient numbers of qualified
            individuals in the future. We have entered into strategic alliance agreements
            with partners, under which partners have agreed to resell and support
            our
            current BroadVision product suite. These contracts are generally terminable
            by
            either party upon 30 days' notice of an uncured material breach or for
            convenience upon 90 days' notice prior to the end of any annual term.
            Termination of any of these alliances could harm our expected revenues.
            We may
            be unable to expand our other distribution channels, and any expansion
            may not
            result in revenue increases. If we fail to maintain and expand our direct
            sales
            force or other distribution channels, our revenues may not grow or they
            may
            decline. Revenue generated from third-party distributors in recent years
            has not
            been significant.
 ~25~
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  ***Failure
            to maintain relationships with third-party systems integrators could
            harm our
            ability to achieve our business plan.***
  Our
            relationships with third-party systems integrators who deploy our products
            have
            been a key factor in our overall business strategy, particularly because
            many of
            our current and prospective customers rely on integrators to develop,
            deploy and
            manage their online marketplaces. Our efforts to manage our relationships
            with
            systems integrators may not succeed, which could harm our ability to
            achieve our
            business plan due to a variety of factors, including:
  •
                  Systems
                      integrators may not view their relationships with us as valuable
                      to their
                      own businesses. The related arrangements typically may be terminated
                      by
                      either party with limited notice and in some cases are not
                      covered by a
                      formal agreement.•
                  Under
                      our business model, we often rely on our system integrators'
                      employees to
                      perform implementations. If we fail to work together effectively,
                      or if
                      these parties perform poorly, our reputation may be harmed
                      and deployment
                      of our products may be delayed or inadequate.•
                  Systems
                      integrators may attempt to market their own products and services
                      rather
                      than ours.•
                  Our
                      competitors may have stronger relationships with our systems
                      integrators
                      than us and, as a result, these integrators may recommend a
                      competitor's
                      products and services over ours.•
                  If
                      we lose our relationships with our systems integrators, we
                      will not have
                      the personnel necessary to deploy our products effectively,
                      and we will
                      need to commit significant additional sales and marketing resources
                      in an
                      effort to reach the markets and customers served by these
                      parties.
 
 ***We
            may be unable to manage or grow our international operations and assets,
            which
            could impair our overall growth or financial
            position.***
  We
            derive
            a significant portion of our revenue from our operations outside North
            America.
            In the twelve months ended December 31, 2006, approximately 40% of our
            revenues were derived from international sales. In the nine months ended
            September 30, 2007, approximately 35% of our revenue was derived from
            international sales. If we are unable to manage or grow our existing
            international operations, we may not generate sufficient revenue required
            to
            establish and maintain these operations, which could slow our overall
            growth and
            impair our operating margins.
  As
            we
            rely materially on our operations outside of North America, we are subject
            to
            significant risks of doing business internationally, including:
 
 •
                  difficulties
                      in staffing and managing foreign operations and safeguarding
                      foreign
                      assets;•
                  unexpected
                      changes in regulatory requirements;•
                  export
                      controls relating to encryption technology and other export
                      restrictions;•
                  tariffs
                      and other trade barriers;•
                  difficulties
                      in staffing and managing foreign operations;•
                  political
                      and economic instability;•
                  fluctuations
                      in currency exchange rates;•
                  reduced
                      protection for intellectual property rights in some
                      countries;•
                  cultural
                      barriers;•
                  seasonal
                      reductions in business activity during the summer months in
                      Europe and
                      certain other parts of the world; and•
                  potentially
                      adverse tax consequences.
 
 Management
            of international operations presents special challenges, particularly
            at our
            reduced staffing levels. For example, in December 2005, an inappropriate
            transfer of approximately $60,000 was made from our bank account in Japan
            to a
            consulting services provider affiliated with two officers of our Japan
            subsidiary without the approvals required under our internal control
            policies.
            Although this transfer was later detected, the funds were recaptured
            and the
            services of the Japan subsidiary officers involved were terminated, we
            face the
            risk that other similar misappropriations of assets may occur in the
            future.
 ~26~
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  During
            the second quarter of 2007, we recorded, for the first time, modest subscription
            and consulting revenues related to our new CHRM(TM) on-demand
            solution, which we officially launched in Beijing on August 2,
            2007.  Our international sales growth could be limited if we are
            unable to establish additional foreign operations, expand international
            sales
            channel management and support, hire additional personnel, customize
            products
            for local markets and develop relationships with international service
            providers, distributors and system integrators. Even if we are able to
            successfully expand our international operations, we may not succeed
            in
            maintaining or expanding international market demand for our
            products.
 
 ***Our
            success and competitive position will depend on our ability to protect
            our
            proprietary technology.***
  Our
            success and ability to compete are dependent to a significant degree
            on our
            proprietary technology. We hold a U.S. patent, issued in January 1998,
            on
            elements of the BroadVision platform, which covers electronic commerce
            operations common in today's web business. We also hold a U.S. patent,
            issued in November 1996, acquired as part of the Interleaf acquisition
            on the
            elements of the extensible electronic document processing system for
            creating
            new classes of active documents. Although we hold these patents, they
            may not
            provide an adequate level of intellectual property protection. In addition,
            litigation may be necessary in the future to enforce our intellectual
            property
            rights, to protect our trade secrets, or to determine the validity and
            scope of
            the proprietary rights of others. It is also possible that third parties
            may
            claim we have infringed their patent, trademark, copyright or other proprietary
            rights. Claims may be made for indemnification resulting from allegations
            of
            infringement. Intellectual property infringement claims may be asserted
            against
            us as a result of the use by third parties of our products. Claims or
            litigation, with or without merit, could result in substantial costs
            and
            diversions of resources, either of which could harm our business.
  We
            also
            rely on copyright, trademark, service mark, trade secret laws and contractual
            restrictions to protect our proprietary rights in products and services.
            We have
            registered "BroadVision", "iGuide", "BroadVision Self-Service Suite",
            "BroadVision Process", "BroadVision Commerce", "BroadVision Portal",
            "BroadVision Content", "BroadVision 8.1" and "Interleaf" as trademarks
            in the
            United States and in other countries. It is possible that our competitors
            or
            other companies will adopt product names similar to these trademarks,
            impeding
            our ability to build brand identity and possibly confusing
            customers.
  As
            a
            matter of company policy, we enter into confidentiality and assignment
            agreements with our employees, consultants and vendors. We also control
            access
            to and distribution of our software, documents and other proprietary
            information. Notwithstanding these precautions, it may be possible for
            an
            unauthorized third party to copy or otherwise obtain and use our software
            or
            other proprietary information or to develop similar software independently.
            Policing unauthorized use of our products will be difficult, particularly
            because the global nature of the Internet makes it difficult to control
            the
            ultimate destination or security of software and other transmitted data.
            The
            laws of other countries may afford us little or no effective protection
            of our
            intellectual property.
  ***A
            breach of the encryption technology that we use could expose us to liability
            and
            harm our reputation, causing a loss of
            customers.***
  If
            any
            breach of the security technology embedded in our products were to occur,
            we
            would be exposed to liability and our reputation could be harmed, which
            could
            cause us to lose customers. A significant barrier to online commerce
            and
            communication is the secure exchange of valuable and confidential information
            over public networks. We rely on encryption and authentication technology,
            including Open SSL and public key cryptography technology featuring the
            major
            encryption algorithms RC2 and MDS, to provide the security and authentication
            necessary to affect the secure exchange of confidential information.
            Advances in
            computer capabilities, new discoveries in the field of cryptography or
            other
            events or developments could cause a breach of the RSA or other algorithms
            that
            we use to protect customer transaction data.
 ~27~
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                of Contents
 ***The
              loss or malfunction of technology licensed from third parties could
              delay the
              introduction of our products and
              services.***
  We
            rely
            in part on technology that we license from third parties, including relational
            database management systems from Oracle and Sybase, Informix object request
            broker software from IONA Technologies PLC, and database access technology
            from
            Rogue Wave Software. The loss or malfunction of any of these technology
            licenses
            could harm our business. We integrate or sublicense this technology with
            internally developed software to perform key functions. For example,
            our
            products and services incorporate data encryption and authentication
            technology
            licensed from Open SSL. Third-party technology licenses might not continue
            to be
            available to us on commercially reasonable terms, or at all. Moreover,
            the
            licensed technology may contain defects that we cannot control. Problems
            with
            our technology licenses could cause delays in introducing our products
            or
            services until equivalent technology, if available, is identified, licensed
            and
            integrated. Delays in introducing our products and services could adversely
            affect our results of operations.
  ***Our
            officers, key employees and highly skilled technical and managerial personnel
            are critical to our business, and they may not remain with us in the
            future.***
  Our
            performance substantially depends on the performance of our officers
            and key
            employees. We also rely on our ability to retain and motivate qualified
            personnel, especially our management and highly skilled development teams.
            The
            loss of the services of any of our officers or key employees, particularly
            our
            founder, Chief Executive Officer and interim Chief Financial Officer,
            Dr. Pehong Chen, could cause us to incur increased operating expenses and
            divert senior management resources in searching for replacements. The
            loss of
            their services also could harm our reputation if our customers were to
            become
            concerned about our future operations. We do not carry "key person" life
            insurance policies on any of our employees. Our future success also depends
            on
            our continuing ability to identify, hire, train and retain other highly
            qualified technical and managerial personnel. Competition for these personnel
            is
            intense, especially in the Internet industry. We have in the past experienced,
            and may continue to experience, difficulty in hiring and retaining sufficient
            numbers of highly skilled employees. The significant downturn in our
            business
            and the uncertainty created by the execution and subsequent termination
            of our
            merger agreement with an affiliate of Vector Capital Corporation has
            had and may
            continue to have a negative impact on our operations. We have restructured
            our
            operations by reducing our workforce and implementing other cost containment
            activities. These actions could lead to disruptions in our business,
            reduced
            employee morale and productivity, increased attrition, and problems with
            retaining existing and recruiting future employees.
 
 ***Limitations
            on the online collection of profile information could impair the effectiveness
            of our products.***
  Online
            users' resistance to providing personal data, and laws and regulations
            prohibiting use of personal data gathered online without express consent
            or
            requiring businesses to notify their web site visitors of the possible
            dissemination of their personal data, could limit the effectiveness of
            our
            products. This in turn could adversely affect our sales and results of
            operations.
  One
            of
            the principal features of our products is the ability to develop and
            maintain
            profiles of online users to assist business managers in determining the
            nature
            of the content to be provided to these online users. Typically, profile
            information is captured when consumers, business customers and employees
            visit a
            web site and volunteer information in response to survey questions concerning
            their backgrounds, interests and preferences. Profiles can be augmented
            over
            time through the subsequent collection of usage data. Although our products
            are
            designed to enable the development of applications that permit web site
            visitors
            to prevent the distribution of any of their personal data beyond that
            specific
            web site, privacy concerns may nevertheless cause visitors to resist
            providing
            the personal data necessary to support this profiling capability. The
            mere
            perception by prospective customers that substantial security and privacy
            concerns exist among online users, whether or not valid, may indirectly
            inhibit
            market acceptance of our products.
 
 In
            addition, new laws and regulations could heighten privacy concerns by
            requiring
            businesses to notify web site users that the data captured from them
            while
            online may be used by marketing entities to direct product messages to
            them. We
            are subject to increasing regulation at the federal and state levels
            relating to
            online privacy and the use of personal user information. Several states
            have
            proposed legislation that would limit the uses of personal user information
            gathered online or require online services to establish privacy policies.
            In
            addition, the U.S. Federal Trade Commission, or FTC, has urged Congress to
            adopt legislation regarding the collection and use of personal identifying
            information obtained from individuals when accessing web sites. The FTC
            has
            settled several proceedings resulting in consent decrees in which Internet
            companies have been required to establish programs regarding the manner
            in which
            personal information is collected from users and provided to third parties.
            We
            could become a party to a similar enforcement proceeding. These regulatory
            and
            enforcement efforts could also harm our customers' ability to collect
            demographic and personal information from users, which could impair the
            effectiveness of our products.
 ~28~
 Table
                of Contents
 
 ***We
            may not have adequate back-up systems, and natural or manmade disasters
            could
            damage our operations, reduce our revenue and lead to a loss of
            customers.***
  We
            do not
            have fully redundant systems for service at an alternate site. A disaster
            could
            severely harm our business because our service could be interrupted for
            an
            indeterminate length of time. Our operations depend upon our ability
            to maintain
            and protect our computer systems at our facility in Redwood City, California,
            which reside on or near known earthquake fault zones. Although these
            systems are
            designed to be fault tolerant, they are vulnerable to damage from fire,
            floods,
            earthquakes, power loss, acts of terrorism, telecommunications failures
            and
            similar events. In addition, our facilities in California could be subject
            to
            electrical blackouts if California faces another power shortage similar
            to that
            of 2001. Although we do have a backup generator that would maintain critical
            operations, this generator could fail. We also have significantly reduced
            our
            workforce in a short period of time, which has placed different requirements
            on
            our systems and has caused us to lose personnel knowledgeable about our
            systems,
            both of which could make it more difficult to quickly resolve system
            disruptions. Disruptions in our internal business operations could harm
            our
            business by resulting in delays, disruption of our customers' business,
            loss of
            data, and loss of customer confidence.
  **Risks
            related to BroadVision common stock**
 
 ***One
            stockholder beneficially owns a substantial portion of the outstanding
            BroadVision common stock, and as a result exerts substantial control
            over the
            company.***
 
 As
            of
            October 31, 2007, Dr. Pehong Chen, our Chairman, CEO and interim CFO,
            beneficially owned approximately 42.0 million shares of our common stock,
            which
            represents approximately 39% of the outstanding common stock as of such
            date. As
            a result, Dr. Chen exerts substantial control over all matters coming
            to a vote
            of our stockholders, including with respect to:
 
 •
                  the
                      composition of our board of directors and, through it, any
                      determination
                      with respect to our business direction and policies, including
                      the
                      appointment and removal of officers;•
                  any
                      determinations with respect to mergers and other business
                      combinations;•
                  our
                      acquisition or disposition of assets;•
                  our
                      financing activities; and•
                  the
                      payment of dividends on our capital
                      stock.
 
 This
            control by Dr. Chen could depress the market price of our common stock
            or delay
            or prevent a change in control of BroadVision.
  ***Our
            stock price has been highly volatile.***
  The
            trading price of BroadVision common stock has been highly volatile. For
            example,
            the trading price of BroadVision common stock has ranged from $0.32 per
            share to $9.05 per share between January 1, 2004 and November 1, 2007.
            On November 1, 2007 the closing price of BroadVision common stock was
            $2.47 per
            share. Our stock price is subject to wide fluctuations in response to
            a variety
            of factors, including:
  •
                  quarterly
                      variations in operating results;•
                  announcements
                      of technological innovations;•
                  announcements
                      of new software or services by us or our competitors;•
                  changes
                      in financial estimates by securities analysts;•
                  general
                      economic conditions; or•
                  other
                      events or factors that are beyond our
                      control.
  In
            addition, the stock market has experienced significant price and volume
            fluctuations that have particularly affected the trading prices of equity
            securities of many technology companies. These fluctuations have often
            been
            unrelated or disproportionate to the operating performance of these companies.
            Any negative change in the public's perception of the prospects of Internet
            or
            electronic commerce companies could further depress our stock price regardless
            of our results. Other broad market fluctuations may decrease the trading
            price
            of BroadVision common stock. In the past, following declines in the market
            price
            of a company's securities, securities class action litigation, such as the class
            action lawsuits filed against us and certain of our officers and directors
            in
            early 2001, has often been instituted against that company. Litigation
            could
            result in substantial costs and a diversion of management's attention
            and
            resources.
 ~29~
 Table
                of Contents
  **Item 2.
            Unregistered Sales of Equity Securities and Use of
            Proceeds**
  Not
            applicable.
  **Item 3.
            Defaults Upon Senior
            Securities**
  Not
            applicable.
  **Item 4.
            Submission of Matters to a Vote of Security
            Holders**
  Not
            applicable.
  **Item 5.
          Other Information**
  Not
          applicable.


~30~
 Table
          of Contents




**Item 6.
      Exhibits**


**Exhibits**
                  
                  **Description**3.1(1)
                  
                  Amended
                      and Restated Certificate of Incorporation.3.2(2)
                  
                  Certificate
                      of Amendment of Certificate of Incorporation.3.3(4)
                  
                  Certificate
                      of Amendment of Certificate of Incorporation.3.4(3)
                  
                  Amended
                      and Restated Bylaws.4.1(1)
                  
                  References
                      are hereby made to Exhibits 3.1 to 3.3.10.1(5)
                  
                  Employee
                    Stock Purchase Plan Offering (Subsequent Offering)(a)31.1
                  
                  Certification
                      of the Chief Executive Officer and Chief Financial Officer
                      of
                      BroadVision.32.1
                  
                  Certification
                      of the Chief Executive Officer and Chief Financial Officer
                      of BroadVision
                      pursuant to Section 906 of the Sarbanes-Oxley Act of
                      2002.
 (1)
                  
                  Incorporated
                      by reference to the Company's Registration Statement on Form
                      S-1 filed on
                      April 19, 1996 as amended by Amendment No. 1 filed on May 9,
                      1996, Amendment No. 2 filed on May 29, 1996 and Amendment
                      No. 3 filed on June 17, 1996.(2)
                  
                  Incorporated
                      by reference to the Company's Proxy Statement filed on May 14,
                      2002.(3)
                  
                  Incorporated
                      by reference to the Company's Current Report on Form 8-K filed
                      on December
                      22, 2005.(4)
                  
                  Incorporated
                      by reference to the Company's Form 10-K for the fiscal year
                      ended December
                      31, 2006 filed on March 26, 2007.(5)
                  
                  Incorporated
                    by reference to the Company's Registration Statement on Form
                    S-8 filed on
                    August 29, 2007.(a)
                  
                  Represents
                    a management contract or Compensatory plan or
                    arrangement.
 
 ~31~
 Table
                  of Contents
  **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:
                  November 05, 2007
              
              By:
              
              */s/
                  Pehong Chen*Pehong
                  ChenChairman
                  of the Board, President, Chief Executive Officer and Interim Chief
                  Financial Officer
 ~32~
 Table
            of Contents
  **EXHIBIT INDEX**
  **Exhibits**
                
                **Description**3.1(1)
                
                Amended
                    and Restated Certificate of Incorporation.3.2(2)
                
                Certificate
                    of Amendment of Certificate of Incorporation.3.3(4)
                
                Certificate
                    of Amendment of Certificate of Incorporation.3.4(3)
                
                Amended
                    and Restated Bylaws.4.1(1)
                
                References
                    are hereby made to Exhibits 3.1 to 3.3.10.1(5)
                
                Employee
                  Stock Purchase Plan Offering (Subsequent Offering)(a)31.1
                
                Certification
                    of the Chief Executive Officer and Chief Financial Officer of
                    BroadVision.32.1
                
                Certification
                    of the Chief Executive Officer and Chief Financial Officer of
                    BroadVision
                    pursuant to Section 906 of the Sarbanes-Oxley Act of
                    2002.
 (1)
                
                Incorporated
                    by reference to the Company's Registration Statement on Form
                    S-1 filed on
                    April 19, 1996 as amended by Amendment No. 1 filed on May 9,
                    1996, Amendment No. 2 filed on May 29, 1996 and Amendment
                    No. 3 filed on June 17, 1996.(2)
                
                Incorporated
                    by reference to the Company's Proxy Statement filed on May 14,
                    2002.(3)
                
                Incorporated
                    by reference to the Company's Current Report on Form 8-K filed
                    on December
                    22, 2005.(4)
                
                Incorporated
                    by reference to the Company's Form 10-K for the fiscal year ended
                    December
                    31, 2006 filed on March 26, 2007.(5)
                
                Incorporated
                  by reference to the Company's Registration Statement on Form S-8
                  filed on
                  August 29, 2007.(a)
                
                Represents
                  a management contract or Compensatory plan or
                  arrangement.


~33~