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|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 52-2303761                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    identification no.)






























|                                                                                                                                                                                                                                                                                                                                       |  |           |     | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | --- | 
|Document Description                                                                                                                                                                                                                                                                                                                   |  | 10-K Part |    
|                                                                                                                                                                                                                                                                                                                                       | 
|Portions of the definitive Proxy Statement for the Annual
    Meeting of Stockholders (the Proxy Statement) to be
    held on May 20, 2005, and to be filed pursuant to
    Regulation 14A within 120 days after registrants
    fiscal year ended December 31, 2004 are incorporated by
    reference into Part III of this Report |  |           | III | 



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plumtree
software  2004 annual report









TABLE OF CONTENTS


|              |  |                                                                                                                      |    |        |    | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | ------ | -- | 
|              |  |                                                                                                                      |    | Page   |   
|              |  |                                                                                                                      |    | Number |   
|              | 
|PART I.       |  |                                                                                                                      |    |       
|ITEM 1.       |  | BUSINESS                                                                                                             |    |        | 2  | 
|ITEM 2.       |  | PROPERTIES                                                                                                           |    |        | 8  | 
|ITEM 3.       |  | LEGAL PROCEEDINGS                                                                                                    |    |        | 8  | 
|ITEM 4.       |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                                              |    |        | 8  | 
|PART II.      |  |                                                                                                                      |    |       
|ITEM 5.       |  | MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES |    |        | 9  | 
|ITEM 6.       |  | SELECTED FINANCIAL DATA                                                                                              |    |        | 10 | 
|ITEM 7.       |  | MANAGEMENTS DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                            |    |        | 10 | 
|ITEM 7A.      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES
    ABOUT MARKET RISK                                                       |    |        | 37 | 
|ITEM 8.       |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA                                                                      |    |        | 37 | 
|ITEM 9.       |  | CHANGES IN AND DISAGREEMENTS WITH
    ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                             |    |        | 37 | 
|ITEM 9A.      |  | CONTROLS AND PROCEDURES                                                                                              |    |        | 37 | 
|ITEM 9B.      |  | OTHER INFORMATION                                                                                                    |    |        | 38 | 
|PART III.     |  |                                                                                                                      |    |       
|ITEM 10.      |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE
    REGISTRANT                                                               |    |        | 38 | 
|ITEM 11.      |  | EXECUTIVE COMPENSATION                                                                                               |    |        | 39 | 
|ITEM 12.      |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT                                                   |    |        | 39 | 
|ITEM 13.      |  | CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS                                                                   |    |        | 39 | 
|ITEM 14.      |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                               |    |        | 39 | 
|PART IV.      |  |                                                                                                                      |    |       
|ITEM 15.      |  | EXHIBITS                                                                                                             |    |        | 39 | 
|SIGNATURES    |  |                                                                                                                      | 66 |       
|EXHIBIT 10.23
|EXHIBIT 10.24
|EXHIBIT 23.1 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32.1 
|EXHIBIT 32.2 





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plumtree
software  2004 annual report




Forward-Looking Statements







part i





Item 1. Business


Overview








Strategy






|  |                                                                                                                                                                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | True Openness: a philosophy for integrating systems,
    technologies, platforms and languages from every major vendor,
    and with an equal commitment to both Java and .Net, giving
    developers the ultimate level of flexibility to build value on
    our platform;
| 
| | Service-Oriented Applications: offering in one
    cohesive suite, a complete solution for assembling, managing and
    delivering Web applications, including portal, collaboration,
    content publishing, search, workflow and integration; and                        
| 
| | Enterprise Productivity: building on our strength in
    knowledge management and collaboration, creating a work
    environment that the entire extended enterprise can use to find
    information, manage projects, share documents and publish
    content.            

Integrated Activity Management






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plumtree
software  2004 annual report








Products








|  |                                                                                                                                                                                                                                                                           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Plumtree Corporate Portal: a portal and applications
    management framework for assembling and conjoining into new
    composite applications elements from existing systems with new
    features for collaboration, search and publishing                             
| 
| | Plumtree Integration Products: used to integrate for
    the portal and application framework important resources from
    existing systems that new applications are built with, including
    users, user profiles, content, search engines and application
    services



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software  2004 annual report






|  |                                                                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Plumtree Server Products: provide the core features,
    as integrated services, that are a common foundation for new Web
    applications  search, collaboration, content
    publishing and workflow  assembled by the application
    framework.

Plumtree Corporate Portal








|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Personalized pages: an individual users
    personalized view of content and applications assembled by the
    portal. The page typically shows a user key services from a wide
    range of complex systems, such as call center queues from a
    customer support application or expense report requests from a
    Human Resources system.                                                                                                                                                                                                                             
| 
| | Knowledge directory: an enterprise-wide taxonomy for
    organizing content from a multitude of disparate content
    systems, including Web sites, document databases, email and
    GroupWare, applications like Microsoft Exchange and
    Lotus Notes, and file systems, as well as other resources within
    the portal such as portlets, communities and users. Without such
    a directory, all the applications and content created within the
    portal often results in sprawl, where resources are rarely
    re-used and information is impossible to find.
| 
| | Communities: a framework for assembling content and
    services shared by a group of users, used to create online
    workspaces and package services as applications. Customers often
    use communities to bring teams of users together to collaborate
    on a project or replace a departmental Intranet. Communities are
    built using services drawn from otherwise silo-ed enterprise
    systems, are assembled using portlets, and can be created from
    templates that control the communitys functionality and
    appearance.                           

Plumtree Integration Products








|  |                                                                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Plumtree Portlets: for integrating enterprise
    applications and delivering new services to the portal;                                                                                                              
| 
| | Crawler Web Services: for discovering content in
    corporate repositories to be indexed and categorized in the
    portals knowledge management system and presented in new
    applications;                       
| 
| | Authentication Web Services: for synchronizing user
    membership and security from traditional systems of record,
    including Lightweight Directory Access Protocol and Windows
    domains;                       
| 
| | Profile Web Services: for gathering attributes about
    users from different systems they use, including LDAP,
    PeopleSoft and SAP, and using this information to build a master
    composite profile of the user;
| 
| | Search Web Services: for sending searches from the
    portal to other indexes and third-party search engines.                                                                                                         



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plumtree
software  2004 annual report


Plumtree Server Products




| |                                  
| | ---------------------------------
| | Plumtree Collaboration
    Server





| |                            
| | ---------------------------
| | Plumtree Content
    Server





| |                       
| | ----------------------
| | Plumtree Search Server





| |                       
| | ----------------------
| | Plumtree Studio Server



Services






| |                      
| | ---------------------
| | Professional Services





| |                       
| | ----------------------
| | Customer Care Services





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software  2004 annual report








| |                  
| | -----------------
| | Training Services



Customers




Sales and Marketing






Research and Development




Competition








|  |                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------
| | Product features, quality and performance;                                                                 
| 
| | Interoperability of our solution with existing applications,
    content repositories and security systems;



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software  2004 annual report




|  |                                                                        
|- | -----------------------------------------------------------------------
| | Range of applications that customers can build on our
    solution; and
| 
| | Strength of sales and service channels                                 





Employees




International Operations








Investor Information






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software  2004 annual report















|        |           
|------- | ----------
|Item 2. | Properties








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders






part ii







|        |                                                                                                                 
|------- | ----------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities





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plumtree
software  2004 annual report




|     |                |                |   |      |                 |  |   |      | 
|---- | -------------- | -------------- | - | ---- | --------------- |  | - | ---- | 
|     |                | Low Sale Price |   |      | High Sale Price | 
|     |               
|2004 |                |                |   |      |                 |  |   |     
|     | Fourth Quarter |                | $ | 3.17 |                 |  | $ | 4.52 | 
|     | Third Quarter  |                |   | 2.95 |                 |  |   | 3.58 | 
|     | Second Quarter |                |   | 3.14 |                 |  |   | 4.21 | 
|     | First Quarter  |                |   | 3.93 |                 |  |   | 5.61 | 
|2003 |                |                |   |      |                 |  |   |     
|     | Fourth Quarter |                | $ | 4.08 |                 |  | $ | 5.67 | 
|     | Third Quarter  |                |   | 3.63 |                 |  |   | 4.65 | 
|     | Second Quarter |                |   | 3.09 |                 |  |   | 4.51 | 
|     | First Quarter  |                |   | 2.63 |                 |  |   | 4.50 | 

Dividend Policy






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plumtree
software  2004 annual report









|        |                                     
|------- | ------------------------------------
|Item 6. | Selected Consolidated Financial Data



|                                                     |  |                                       |          |  |      |   |         |      |  |   |        |  |  |      |         |  |  |   |          | 
|---------------------------------------------------- |  | ------------------------------------- | -------- |  | ---- | - | ------- | ---- |  | - | ------ |  |  | ---- | ------- |  |  | - | -------- | 
|                                                     |  | Years Ended December 31,              |         
|                                                     |  |                                       |         
|                                                     |  | 2004                                  |          |  | 2003 |   |         | 2002 |  |   | 2001   |  |  | 2000 |        
|                                                     | 
|                                                     |  | (In thousands, except per share data) |         
|Revenue                                              |  | $                                     | 84,148   |  |      | $ | 71,452  |      |  | $ | 82,919 |  |  | $    | 81,473  |  |  | $ | 35,111   | 
|Gross margin                                         |  |                                       | 62,151   |  |      |   | 57,673  |      |  |   | 64,761 |  |  |      | 62,350  |  |  |   | 20,758   | 
|Income (loss) from operations                        |  |                                       | (10,328) |  |      |   | (2,068) |      |  |   | 2,852  |  |  |      | (7,132) |  |  |   | (22,046) | 
|Net income (loss)                                    |  |                                       | (9,626)  |  |      |   | (1,467) |      |  |   | 2,390  |  |  |      | (7,805) |  |  |   | (21,683) | 
|Net income (loss) per share, basic                   |  |                                       | (0.30)   |  |      |   | (0.05)  |      |  |   | 0.12   |  |  |      | (1.21)  |  |  |   | (3.97)   | 
|Net income (loss) per share, diluted                 |  |                                       | (0.30)   |  |      |   | (0.05)  |      |  |   | 0.08   |  |  |      | (1.21)  |  |  |   | (3.97)   | 
|Cash and cash equivalents and short-term investments |  |                                       | 65,034   |  |      |   | 67,689  |      |  |   | 65,322 |  |  |      | 24,040  |  |  |   | 13,098   | 
|Working capital                                      |  |                                       | 50,310   |  |      |   | 55,177  |      |  |   | 49,185 |  |  |      | 3,769   |  |  |   | 5,102    | 
|Total assets                                         |  |                                       | 90,811   |  |      |   | 90,762  |      |  |   | 90,722 |  |  |      | 51,260  |  |  |   | 38,001   | 
|Long-term liabilities                                |  |                                       | 2,216    |  |      |   | 1,109   |      |  |   | 454    |  |  |      | 437     |  |  |   | 368      | 
|Total stockholders equity                           |  |                                       | 51,006   |  |      |   | 57,891  |      |  |   | 55,352 |  |  |      | 11,443  |  |  |   | 10,362   | 






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

The following discussion of our financial condition and
results of operations should be read in conjunction with our
Consolidated Financial Statements and the related Notes to
Consolidated Financial Statements in Item 15, in this
Annual Report on Form 10-K. This discussion contains
forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. Our
actual results could differ materially from those projected in
the forward-looking statements as a result of a number of
factors, risks and uncertainties, including the risk factors set
forth in this discussion, especially under the caption
Risk Factors that May Affect our Future Results and the
Market Price of our Stock, and elsewhere in this
Form  10-K. Generally, the words may,
will, could, would,
anticipate, expect, intend,
believe, continue, or the negatives of
such terms, or other comparable terminology and similar
expressions identify forward-looking statements. The information
included in this Form 10-K is as of the filing date with
the Securities and Exchange Commission and future events or
circumstances could differ significantly from the
forward-looking statements included herein. Accordingly, you
should not place undue reliance on these forward-looking
statements, which reflect our opinions only as of the date of
this Annual Report. We undertake no obligation to publicly
release any revisions to the forward-looking statements after
the date of this document. You should carefully review the risk
factors described in other documents we file from time to time
with the Securities and Exchange Commission, including the
Quarterly Reports on Form 10-Q to be filed in 2005.


Overview and Executive Summary


The following is a summary of the discussion of our financial
condition and results of operations and is qualified in its
entirety by the more complete discussion contained in this
Item 7. This summary should be read in conjunction with
Part I, Item 1, Business and is qualified
in its entirety by the risk factors set forth in Item 7 as
described below under Risk Factors that May Affect Our
Future Results and the Market Price of Our Stock.




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software  2004 annual report












|  |                                                                                       
|- | --------------------------------------------------------------------------------------
| | Revenue by category (license, maintenance and professional
    services and training):



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | License. Our license revenue for the year ended
    December 31, 2004 was $35.7 million, a 4.9% increase
    over the year ended December 31, 2003, resulting primarily
    from positive contributions made by new management personnel
    added in 2004, strong public sector sales, as well as the
    adoption of the newly released Java and .Net versions of our
    product. In 2005, we plan to invest in the development of
    additional products as well as international and channel sales
    in an effort to increase our license revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Maintenance, professional services and training. We offer
    (i) professional services to deploy the Plumtree Corporate
    Portal and other products at customer sites, and to train
    alliance members, including technology vendors and systems
    integrators; (ii) maintenance and customer care through
    technical support and assigned account managers; and
    (iii) training classes designed to provide our customers
    and alliance members with the knowledge and tools necessary to
    deploy, administer and expand the portal within the enterprise.
    Revenue from maintenance and technical support in 2004 increased
    $3.1 million, or 13.8%, from 2003 to $25.5 million,
    primarily as a result of an increase in maintenance revenue from
    our new customers as well as from renewals of maintenance
    contracts by our installed base of customers. Revenue
    attributable to professional services increased
    $6.6 million, or 54.8%, from 2003 to $18.5 million in
    2004. This increase was primarily the result of increased
    headcount within the professional services department from 59
    consultants in 2003 to 65 consultants in 2004 and an increase in
    utilization from 65% in 2003 to 72% in 2004. We also used more
    subcontractors to perform professional services in 2004.
    Training revenue increased in 2004 by approximately
    $1.1 million or 62.2% from 2003. We expect our maintenance,
    professional services and training revenue in general to
    increase in 2005, primarily due to increased maintenance revenue
    from both new customers as well as renewals from our installed
    customer base.



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software  2004 annual report






|  |                           
|- | --------------------------
| | Deferred revenue balances:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our total deferred revenue balance at December 31, 2004 was
    $22.7 million, of which $692,000 relates to deferred
    license revenue, $20.6 million relates to deferred
    maintenance revenue and $1.4 million relates to deferred
    professional services and training revenue. This compares to
    total deferred revenue of $19.0 million at
    December 31, 2003. The increase in deferred revenue during
    2004 was driven by an increase in deferred maintenance revenue
    of $4.0 million and an increase in deferred professional
    services and training revenue of $138,000, offset by a decrease
    in deferred license revenue of $506,000. In general, we enter
    into maintenance contracts with customers that span a 12-month
    period and are renewable on an annual basis. As a result of
    increased maintenance contracts that span over multiple terms,
    we have classified $1.9 million and $661,000 as long-term
    deferred revenue as of December 31, 2004 and
    December 31, 2003, respectively.
|
| |  | Deferred license revenue decreased $506,000 in 2004 as compared
    to 2003 due primarily to the recognition of revenue on customer
    contracts for which revenue recognition criteria were not met in
    2003, but were met in 2004. These contracts include certain
    third party subscription agreements that are resold by us as
    well as contracts that include extended payment terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Deferred maintenance revenue increased $4.0 million in 2004
    as compared to 2003, primarily as a result of an increase in
    deferred maintenance revenue from new customers as well as
    renewals of maintenance contracts by our installed base of
    customers. In addition, more contracts in 2004 included
    maintenance contracts that span over multiple terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Deferred professional services and training revenue increased
    $138,000 in 2004 as compared to 2003 as more of our customers at
    the end of 2004 prepaid for services and training than in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The number of license revenue transactions and breakdown of new
    customers versus repeat customers: During 2004, we closed 309
    license transactions, including 127 new customers or 41% of our
    total license transactions and 182 renewal orders or 59% of our
    total license transactions. Since our inception, the total
    number of customers is over 700. During 2003, we closed 322
    license transactions, including 128 new customers or 40% of our
    total license transactions and 194 renewal orders or 60% of our
    total license transactions.
| 
| | Revenue by geographic region: We operate our business in two
    geographic regions: the United States and international, which
    consists of Europe, Middle East and Africa (EMEA),
    Japan and Asia-Pacific (APAC) and Canada. In 2004,
    72% of our revenue was generated within the United States, with
    international revenue accounting for 28% of our revenue.
    International revenues increased 57% from $14.8 million in
    2003 to $23.3 million in 2004.                                                                                            
| 
| | Cash and cash equivalents and short-term investments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | At December 31, 2004, our cash, cash equivalents and
    short-term investments were $65 million, down 4% from
    $67.7 million at December 31, 2003. We invested
    heavily in the business and products during 2004. We expect that
    our primary utilization of cash in 2005 will continue to be
    salaries, commissions, bonuses and other payroll related costs.                                                                                                                
|
| |  | Net cash used in operations in the year ended December 31,
    2004 was $1.8 million compared to net cash provided by
    operations of $862,000 for the year ended December 31,
    2003. The decrease in net cash flows from operations was driven
    primarily by managements focus on investing money in the
    business to facilitate current and future growth. This
    contributed to a net loss of $9.6 million for 2004 as
    compared to a net loss of $1.5 million in 2003.



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plumtree
software  2004 annual report


Critical Accounting Policies






|  |                                                                           
|- | --------------------------------------------------------------------------
| | Software revenue recognition;                                             
| 
| | allowance for doubtful accounts;                                          
| 
| | income taxes; and                                                         
| 
| | determination of the fair value of stock options granted to
    employees.

Software Revenue Recognition






|  |                                                                                                                                                                                                                                                                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Evidence of an arrangement: We consider a non-cancelable
    agreement signed by us and the customer to be evidence of an
    arrangement.                                                                                                                                                      
| 
| | Delivery: Delivery is considered to occur when media containing
    the licensed programs is provided to a common carrier or, in the
    case of electronic delivery, the customer is given access to the
    licensed programs.                                                                
| 
| | Acceptance: Our typical end user license agreement does not
    include customer acceptance provisions. If the arrangement
    specifies acceptance provisions, we defer the revenue until the
    earlier of written acceptance by the customer or the
    customers acceptance rights expire.



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software  2004 annual report






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Fixed or determinable fee: We consider the fee to be fixed or
    determinable if the fee is not subject to refund or adjustment
    and is on standard payment terms. If the arrangement fee is not
    fixed or determinable, we recognize the revenue as amounts
    become due and payable.                                                                                                                                                           
| 
| | Collection is deemed probable: We conduct reviews for all
    significant transactions at the time of the arrangement to
    determine the credit worthiness of the customer. Collection is
    deemed probable if we expect that the customer will be able to
    pay amounts under the arrangement as payments become due. If we
    determine that collection is not probable, we defer the revenue
    and recognize the revenue upon cash collection.



Allowance for Doubtful Accounts








Income Taxes




Determination of Fair Value of Options Granted to
Employees






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plumtree
software  2004 annual report


Accounting for Stock Issued to Employees. Accounting for
Stock Based Compensation, Accounting for Stock-Based
Compensation-Transition and Disclosure,


|                                                                                                              |                          |                          |          |        |      |   |         |        |  |   |         |        | 
|------------------------------------------------------------------------------------------------------------- | ------------------------ | ------------------------ | -------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                                                                                              |                          | Years Ended December 31, |         
|                                                                                                              |                          |                          |         
|                                                                                                              |                          | 2004                     |          |        | 2003 |   |         | 2002   | 
|                                                                                                              |                         
|Net income (loss) as reported                                                                                 |                          | $                        | (9,626)  |        |      | $ | (1,467) |        |  | $ | 2,390   |       
|Add: Stock-based employee compensation expense included in net
    income (loss)                              |                          |                          | 480      |        |      |   | 1,363   |        |  |   | 3,500   |       
|Deduct: Stock-based employee compensation expense determined
    under fair value based method for all awards |                          |                          | (6,864)  |        |      |   | (8,429) |        |  |   | (6,377) |       
|                                                                                                              |                          |                         
|Pro forma net loss under SFAS 123                                                                             |                          | $                        | (16,010) |        |      | $ | (8,533) |        |  | $ | (487)   |       
|                                                                                                              |                          |                         
|Net income (loss) per common sharebasic:                                                                     |                          |                          |          |        |      |   |         |        |  |   |         |       
|As reported under APB 25                                                                                      |                          | $                        | (0.30)   |        |      | $ | (0.05)  |        |  | $ | 0.12    |       
|Pro forma under SFAS 123                                                                                      |                          | $                        | (0.50)   |        |      | $ | (0.28)  |        |  | $ | (0.02)  |       
|Net income (loss) per common sharediluted:                                                                   |                          |                          |          |        |      |   |         |        |  |   |         |       
|                                                                                                              | As reported under APB 25 |                          | $        | (0.30) |      |   | $       | (0.05) |  |   | $       | 0.08   | 
|                                                                                                              | Pro forma under SFAS 123 |                          | $        | (0.50) |      |   | $       | (0.28) |  |   | $       | (0.02) | 



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plumtree
software  2004 annual report




Results of Operations




|                                  |                                                                  |                          |        |      |       |  |       |      |       |  |      |       |       | 
|--------------------------------- | ---------------------------------------------------------------- | ------------------------ | ------ | ---- | ----- |  | ----- | ---- | ----- |  | ---- | ----- | ----- | 
|                                  |                                                                  | Years Ended              |       
|                                  |                                                                  | December 31,             |       
|                                  |                                                                  |                          |       
|                                  |                                                                  | 2004                     |        |      | 2003  |  |       | 2002 |      
|                                  |                                                                 
|Revenue:                          |                                                                  |                          |        |      |       |  |       |      |       |  |      |      
|                                  | Licenses                                                         |                          |        | 42.5 | %     |  |       | 47.6 | %     |  |      | 59.8  | %    
|                                  | Services and maintenance                                         |                          |        | 57.5 |       |  |       | 52.4 |       |  |      | 40.2  |      
|                                  |                                                                  |                         
|                                  |                                                                  | Total revenue            |        |      | 100.0 |  |       |      | 100.0 |  |      |       | 100.0 | 
|Cost of revenue:                  |                                                                  |                          |        |      |       |  |       |      |       |  |      |      
|                                  | Cost of licenses                                                 |                          |        | 1.6  |       |  |       | 0.9  |       |  |      | 3.8   |      
|                                  | Cost of services and maintenance                                 |                          |        | 22.6 |       |  |       | 15.9 |       |  |      | 15.3  |      
|                                  | Amortization of stock-based compensation and acquired technology |                          |        | 1.9  |       |  |       | 2.5  |       |  |      | 2.8   |      
|                                  |                                                                  |                         
|                                  |                                                                  | Total cost of revenue    |        |      | 26.1  |  |       |      | 19.3  |  |      |       | 21.9  | 
|                                  |                                                                  |                         
|Gross margin                      |                                                                  |                          | 73.9   |      |       |  | 80.7  |      |       |  | 78.1 |      
|Operating expenses:               |                                                                  |                          |        |      |       |  |       |      |       |  |      |      
|                                  | Research and development                                         |                          |        | 29.1 |       |  |       | 28.9 |       |  |      | 21.9  |      
|                                  | Sales and marketing                                              |                          |        | 43.3 |       |  |       | 42.8 |       |  |      | 40.1  |      
|                                  | General and administrative                                       |                          |        | 12.9 |       |  |       | 9.6  |       |  |      | 8.7   |      
|                                  | Restructuring charge                                             |                          |        | 0.4  |       |  |       | 0.7  |       |  |      | 0.5   |      
|                                  | Amortization of stock-based compensation                         |                          |        | 0.4  |       |  |       | 1.6  |       |  |      | 3.4   |      
|                                  |                                                                  |                         
|                                  |                                                                  | Total operating expenses |        |      | 86.1  |  |       |      | 83.6  |  |      |       | 74.6  | 
|                                  |                                                                  |                         
|Operating income (loss)           |                                                                  |                          | (12.2) |      |       |  | (2.9) |      |       |  | 3.5  |      
|Other income (expense):           |                                                                  |                          |        |      |       |  |       |      |       |  |      |      
|                                  | Interest income, net                                             |                          |        | 1.3  |       |  |       | 1.4  |       |  |      | 0.9   |      
|                                  | Other income (expense)                                           |                          |        | 0.2  |       |  |       | 0.6  |       |  |      | (0.1) |      
|                                  |                                                                  |                         
|                                  |                                                                  | Other income, net        |        |      | 1.5   |  |       |      | 2.0   |  |      |       | 0.8   | 
|                                  |                                                                  |                         
|Income (loss) before income taxes |                                                                  |                          | (10.7) |      |       |  | (0.9) |      |       |  | 4.3  |      
|Provision for income taxes        |                                                                  |                          | 0.7    |      |       |  | 1.2   |      |       |  | 1.4  |      
|                                  |                                                                  |                         
|Net income (loss)                 |                                                                  |                          | (11.4) | %    |       |  | (2.1) | %    |       |  | 2.9  | %    
|                                  |                                                                  |                         

Year Ended December 31, 2004 and 2003


Revenue






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plumtree
software  2004 annual report


Licenses.


Services and Maintenance.




Cost of Revenue


Licenses.


Services and Maintenance.


Amortization of Stock-Based Compensation and Acquired
Technology.


Operating Expenses


Research and Development.




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plumtree
software  2004 annual report






Sales and Marketing.


General and Administrative.


Restructuring Charge.


Amortization of Stock-Based Compensation. FASB
Interpretation (FIN) No. 28 Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award
Plans.


Other Income, Net






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plumtree
software  2004 annual report


Provision for Income Taxes




Year Ended December 31, 2003 and 2002


Revenue




Licenses.


Services and Maintenance.


Cost of Revenue


Licenses.


Services and Maintenance.


Amortization of Stock-Based Compensation and Acquired
Technology.


Operating Expenses


Research and Development.


Sales and Marketing.




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software  2004 annual report




General and Administrative.


Restructuring Charge.


Amortization of Stock-Based Compensation.


Other Income (Expense), Net




Provision for Income Taxes




Liquidity and Capital Resources














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software  2004 annual report






Contractual Obligations




|                                              |       |       |        |                        |        |   |        |        |  |     |       |           |         |   |   |   |  |   |   |   | 
|--------------------------------------------- | ----- | ----- | ------ | ---------------------- | ------ | - | ------ | ------ |  | --- | ----- | --------- | ------- | - | - | - |  | - | - | - | 
|                                              |       |       |        | Payments Due by Period
|                                              |       |       |        |                       
|                                              |       |       |        | Less than              |        |   | 1-3    |        |  | 3-5 |       | More Than
|Contractual Obligations                       |       | Total |        |                        | 1 Year |   |        | Years  |  |     | Years |           | 5 Years
|                                             
|Operating Lease Obligations                   |       | $     | 6,089  |                        |        | $ | 3,537  |        |  | $   | 2,552 |           |         | $ |  |   |  | $ |  |  
|Liabilities reflected on the balance sheet(1) |       |       | 16,785 |                        |        |   | 16,785 |        |  |     |      |           |         |   |  |   |  |   |  |  
|                                              |       |      
|                                              | Total |       | $      | 22,874                 |        |   | $      | 20,322 |  |     | $     | 2,552     |         |   | $ |  |  |   | $ |  | 
|                                              |       |      






|    |                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------
|(1) | Includes only expected cash payments and therefore excludes
    deferred revenue as well as deferred rent.

Off-Balance Sheet Arrangements




Recent Accounting Pronouncements




Risk Factors that May Affect Our Future Results and the
Market Price of Our Stock


Risks Relating to Our Business




| |                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our efforts to establish and
    maintain the Enterprise Web Suite and related products as an
    enterprise-wide platform or to develop and market Integrated
    Activity Management products and services may fail and, as a
    result, our revenue may decrease and our ability to compete
    successfully may be impaired.





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software  2004 annual report










|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We will likely face new competitors, and some of our current
    system integrators and technology partners with whom we work
    closely may come to view our new products and services as
    competitive with their own products and services.                                                                                                                                                                                                                                 
| 
| | Our Enterprise Web Suite is designed to be open and integrate
    existing data and processes from enterprises systems. To
    remain competitive, we must increase the number of systems and
    applications that can be integrated into and built with our
    portal platform as Web services. These activities have strained
    and will increasingly strain our development and support
    infrastructure and may require us to add significant additional
    personnel.
| 
| | The IAM market is new. We may expend significant time,
    engineering, marketing and other resources in attempting to
    enter into and develop products for the IAM market, which may
    not develop in the near-term or at all. Our efforts to address
    the IAM market may also detract from our Enterprise Web Suite
    focus and historic Plumtree Corporate Portal business or result
    in customer or market confusion regarding our strategy.                     
| 
| | The industry may develop and adopt technology standards
    different from the standards presently incorporated in our
    products resulting in our products failing to achieve market
    acceptance or becoming less competitive.                                                                                                                                                                                                                                              



| |                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have a history of losses, and
    given expected increases in operating expenditures, we may never
    sustain profitability on a quarterly or annual basis, which
    would have a harmful effect on our business and the value of our
    common stock.







| |                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because our quarterly operating
    results are volatile and difficult to predict, our operating
    results in one or more future periods are likely to fluctuate
    significantly, and if we fail to meet the expectations of
    securities analysts or investors, our stock price could decline
    significantly.





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software  2004 annual report








|  |                                                                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | introduction of products and services and enhancements by us and
    our competitors;                                                                                                                     
| 
| | competitive factors that affect our pricing;                                                                                                                                                              
| 
| | the timing and magnitude of our capital expenditures, including
    costs relating to the management and expansion of our operations
    within the United States and internationally;                    
| 
| | increase in the amount of third party products and services that
    we use in our products or resell with royalties attached;                                                                            
| 
| | the size and timing of customer orders and deployments,
    particularly large orders and deployments, some of which may
    represent more than 10% of total revenue during a particular
    quarter; and
| 
| | costs associated with litigation, regulatory compliance and
    other corporate events such as operational reorganizations.                                                                               





| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | If we do not expand our customer
    base, we may be unable to increase our revenue and our stock
    price will likely decline.





|  |                                                                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | withstand downturns in general economic conditions or conditions
    that slow corporate spending on software products, such as the
    downturn we are currently experiencing in the overall software
    market;
| 
| | enhance our products to meet changing customer demand;                                                                                                                                                            
| 
| | effectively market the Enterprise Web Suite and related products
    and services;                                                                                                                                
| 
| | hire, train and retain a sufficient number of qualified,
    engineering, sales and marketing personnel;                                                                                                          
| 
| | provide high-quality and reliable customer support for our
    products;                                                                                                                                          



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software  2004 annual report






|  |                                                                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | distribute and price our products and services to be more
    appealing to customers than those of our competitors or of our
    customers internally-developed solutions; and                              
| 
| | develop and maintain a favorable reputation among our customers,
    potential customers and participants in the software industry
    who can serve as reference accounts for our products and
    services.





| |                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because our quarterly results
    often depend on a small number of large orders, if we were
    unable to complete one or more of these orders during any future
    period, our quarterly operating results and the trading price of
    our stock could be harmed.





| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We typically do substantial
    business with the United States government and other domestic
    and international public entities, and our ability to sell to
    governments is susceptible to unpredictable budgetary and policy
    changes and involves specific risks that could harm our
    business.





| |                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business currently depends
    on revenue related to our flagship product suite, the Enterprise
    Web Suite, and if the market does not increasingly accept this
    product and related products and services, our revenue may
    decline.





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software  2004 annual report






| |                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our sales and implementation
    cycles are long, unpredictable and subject to seasonal
    fluctuations, making it difficult to accurately forecast our
    revenue and causing it to fluctuate, which could harm our
    operating results.





| |                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Efforts taken to improve our
    sales focus and shorten our sales cycle, may not be effective
    and the expected benefits may not be realized when expected or
    at all.





| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on technology licensed
    from third-party software developers to build and enhance our
    products, and our ability to develop and sell our products and
    services could be delayed or impaired if we fail to maintain
    these license arrangements.





| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on our direct sales
    force to sell our products, and if we fail to hire and train new
    sales personnel, our future growth will be impaired.





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software  2004 annual report








| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to establish
    and maintain relationships with systems integrators and
    resellers, our ability to market, sell and deploy our products
    and services will be harmed.





|  |                                                                                                                                                                                                                                                                                                                               
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Systems integrators and resellers may not view their
    relationships with us as valuable or significant 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 co-deployment model, we often rely on our system
    integrators and resellers 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 these
    parties and, as a result, these systems integrators and
    resellers may recommend a competitors products and
    services over ours.                                                                                                                        
| 
| | If we lose our relationships with our systems integrators and
    resellers, 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.



| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | If our alliances with technology
    and content providers are discontinued, our future growth will
    be impaired.





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software  2004 annual report






| |                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our software or software we furnish contains errors, our
    ability to develop and market our products and services will be
    harmed and we may lose customers or experience reduced market
    acceptance of our products.







|  |                                                                                                                                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Some of our customers may require enhanced modifications or
    fixes of our software for their specific needs which will divert
    the attention of our engineering team away from new product
    development and upgrades of existing products.
| 
| | Some of our customers may make increasingly frequent and
    disproportionate demands on our support personnel, which could
    result in impaired technical support response times to all of
    our installed base.                              
| 
| | Our professional services consultants may be required to assist
    in the implementation of software modifications and corrections
    of errors or defects, thereby reducing their ability to perform
    revenue-generating services.           
| 
| | Frequent modifications intended to correct errors may increase
    the likelihood of undetected defects or errors and may further
    drain our engineering, customer care and consulting services
    resources.                                  
| 
| | We may lose customers, customers may not implement our products
    more broadly within their organization, customers may choose not
    to renew their maintenance contracts with us or they may choose
    to abandon their projects.            
| 
| | We may lose valuable customer references and our reputation in
    the industry may diminish, making our sales and marketing
    efforts more difficult.                                                                                           
| 
| | We may experience reduced demand for our products, reduced
    market acceptance of our products and loss of overall
    competitiveness.                                                                                                          
| 
| | We may be subject to product liability or warranty claims by our
    customers.                                                                                                                                                                    



| |                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to develop products that are compatible and
    can be integrated with a large variety of hardware, software,
    database and networking systems, our ability to attract and
    retain customers will be harmed.





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software  2004 annual report








| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Some of our customers are in the preliminary phase of
    implementing our products and this implementation may not
    proceed on a timely basis or at all.





| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | If we fail to adequately address our customer support
    demands, our ability to attract and retain customers will
    suffer.





| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | Security breaches with our software may lead to unexpected
    capital expenditures and cause a loss in revenue and
    reputation.





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software  2004 annual report




| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Capacity restrictions of our software could reduce the demand
    for and use of our products, which may limit our ability to
    generate license revenue.





| |                                                                          
| | -------------------------------------------------------------------------
| | If we are unable to retain key personnel, our growth will be
    limited.





| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | If we are unable to recruit and train new personnel, our
    operations will be disrupted and our growth impaired.





| |                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managing the breadth of our operations will continue to
    strain managerial, operational and financial resources, and if
    we are unable to do so our business and operating results could
    be harmed.





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software  2004 annual report








|  |                                                                                                                                                                                                                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | build and train our sales and marketing staff to create an
    effective presence in the evolving corporate portal market, and
    keep them sufficiently trained over time regarding the technical
    features, issues and key selling points of our product;                                                                                           
| 
| | attract and retain qualified technical personnel in order to
    continue to develop reliable and scalable products and services
    that address evolving customer needs;                                                                                                                                                                                
| 
| | develop and improve our customer support capacity, especially if
    sales of our products increase, so that we can provide customer
    support without diverting resources from product development
    efforts; and                                                                                                                                    
| 
| | Maintain and expand our internal management, legal and financial
    controls significantly, so that we can maintain control over our
    operations and provide support to other functional areas within
    Plumtree and ensure compliance with increasing government
    regulation, and changing accounting standards applied to public
    companies.



We may be unable to manage or
grow our international operations, which could impair our
overall growth.










|  |                                                                                                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | costs of modifying our products for foreign countries;                                                                                                                       
| 
| | compliance with multiple, conflicting and changing foreign
    governmental laws and regulations, including taxes, intellectual
    property, securities and employment laws;
| 
| | increased reliance on systems integrators and resellers abroad;                                                                                                              
| 
| | longer sales cycles;                                                                                                                                                         
| 
| | import and export restrictions and tariffs;                                                                                                                                  
| 
| | fluctuations in foreign currency exchange rates;                                                                                                                             
| 
| | difficulties in staffing and managing international operations;                                                                                                              
| 
| | greater difficulty in enforcing our intellectual property
    rights; and                                                                                                    
| 
| | greater difficulty or delay in accounts receivable collection.                                                                                                               



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software  2004 annual report




Product liability claims
could divert managements attention and be costly to
defend.




If we are unable to
effectively protect our proprietary rights, our competitors may
be able to copy important aspects of our products or product
presentations, which would undermine the relative appeal of our
products to customers and reduce our sales.












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software  2004 annual report




If our products employ
technology that infringes the proprietary rights of others, we
may be subject to infringement claims, forced to pay high prices
to license technology or required to stop selling our
products.






|  |                                                                                                                                      
|- | -------------------------------------------------------------------------------------------------------------------------------------
| | be time-consuming to defend;                                                                                                         
| 
| | result in costly litigation;                                                                                                         
| 
| | divert our managements attention and resources;                                                                                     
| 
| | require us to indemnify technology vendors, system integrators
    or customers;                                                     
| 
| | require us to refund license fees;                                                                                                   
| 
| | cause product shipment delays;                                                                                                       
| 
| | require us to enter into royalty or licensing agreements, which
    may not be available on terms acceptable to us, if at
    all; or
| 
| | result in court orders limiting our ability to license our
    products.                                                             







We may be subject to
misappropriation and other claims by former employers of our
personnel, which could be costly and disruptive to our
business.






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software  2004 annual report




Acquisitions of companies or
technologies may result in disruptions to our business and
management due to difficulties in assimilating personnel,
acquired products and technology and operations and may dilute
stockholder value.




If we are required to raise
additional funds, we may be unable to obtain these funds on
terms acceptable to us or at all.






We may incur losses
associated with currency fluctuations and may not be able to
effectively hedge our exposure.






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software  2004 annual report






Changes in, or
interpretations of, accounting rules and regulations, such as
expensing of stock options, could result in unfavorable
accounting charges.






|  |                                    
|- | -----------------------------------
| | software revenue recognition       
| 
| | accounting for share-based payments
| 
| | accounting for income taxes        



Compliance with changing
regulation of corporate governance and public disclosure may
result in additional expenses.






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software  2004 annual report


Risks Relating to Our Industry




| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | Intense competition and
    consolidation in our industry could limit our ability to attract
    and retain customers.





| |                                                                           
| | --------------------------------------------------------------------------
| | Downturns in the software market
    may decrease our revenue and margins.





| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | Our failure to introduce new
    products and enhancements in a timely manner will make market
    acceptance of our products less likely.





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software  2004 annual report








| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | If we fail to manage
    technological change, demand for our products and services will
    drop and our revenue will decline.





|  |                                                                                                                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | our technology or systems may become obsolete upon the
    introduction of alternative technologies;                                                                                                                                                         
| 
| | the technological life cycles of our products may end abruptly
    and, in any event, are difficult to estimate;                                                                                                                                             
| 
| | we may not have sufficient resources to develop or acquire new
    technologies or to introduce new services capable of competing
    with future technologies or service offerings; and                                                                     
| 
| | the price of the products and services we provide may decline as
    rapidly as, or more rapidly than, the price of any competitive
    alternatives, particularly if the unique features of our
    products become widely adopted through new technologies.





| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Terrorist activities and
    resulting military and other actions could harm our
    business





| |                                                               
| | --------------------------------------------------------------
| | Business disruptions in the
    event of a catastrophic event.





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software  2004 annual report









|         |                                                           
|-------- | ----------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
















|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes In and Disagreements with Accountants on Accounting
    and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures




Managements Report on Internal Control over Financial
Reporting


Internal
Control Integrated Framework




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software  2004 annual report






Changes in Internal Control over Financial Reporting




Limitations on the Effectiveness of Controls







Item 9B. Other Information










Annual Retainer Schedule


|                                |  |      |        |  |      |   |        |      |  |   |        | 
|------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                |  | 2003 |        |  | 2004 |   |        | 2005 | 
|Category                        |  |      |        |  |      |   |        |      | 
|                                |  |      |        |  |      |  
|Board Retainer                  |  | $    | 15,000 |  |      | $ | 20,000 |      |  | $ | 30,000 | 
|Chairman Retainer               |  |      |       |  |      |   | 20,000 |      |  |   | 25,000 | 
|Audit Committee Chairman        |  |      | 20,000 |  |      |   | 20,000 |      |  |   | 25,000 | 
|Audit Committee Member          |  |      | 10,000 |  |      |   | 10,000 |      |  |   | 10,000 | 
|Compensation Committee Chairman |  |      |       |  |      |   | 10,000 |      |  |   | 15,000 | 
|Compensation Committee Member   |  |      |       |  |      |   | 7,500  |      |  |   | 10,000 | 
|Nominating Committee Chairman   |  |      |       |  |      |   | 10,000 |      |  |   | 10,000 | 
|Nominating Committee Member     |  |      |       |  |      |   | 7,500  |      |  |   | 7,500  | 



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software  2004 annual report











|         |                                         
|-------- | ----------------------------------------
|Item 10. | Directors and Officers of the Registrant







Section 16(a) Beneficial Ownership Reporting
Compliance









|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management






Item 13. Certain Relationships and Related
Transactions







Item 14. Principal Accountant Fees and Services






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software  2004 annual report







Item 15. Exhibits


(a) 1. Financial Statements




|                                                         |                                                                                                                             |      |    |    | 
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ---- | -- | -- | 
|                                                         |                                                                                                                             | Page |   
|                                                         |                                                                                                                             |      |   
|Reports of Independent Registered Public Accounting Firm |                                                                                                                             |      | 42 |   
|Consolidated Financial Statements:                       |                                                                                                                             |      |    |   
|                                                         | Balance Sheets as of December 31, 2004 and 2003                                                                             |      |    | 44 | 
|                                                         | Statements of Operations for the years ended December 31,
    2004, 2003 and 2002                                           |      |    | 45 | 
|                                                         | Statements of Stockholders Equity and Comprehensive Income
    (Loss) for the years ended December 31, 2004, 2003 and 2002 |      |    | 46 | 
|                                                         | Statements of Cash Flows for the years ended December 31,
    2004, 2003 and 2002                                           |      |    | 47 | 
|                                                         | Notes to Consolidated Financial Statements                                                                                  |      |    | 48 | 

(a) 2. Financial Statement Schedules




(a) 3. Exhibits


Exhibit Index


|        |        |  |             |                                                                                                                                         
|------- | ------ |  | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |  | Description
|        |        |  |            
|        | 3.1    |  |             | Amended and Restated Certificate of Incorporation of the
    Registrant(1)                                                              
|        | 3.2    |  |             | Bylaws of the Registrant(1)                                                                                                             
|        | 4.1    |  |             | Specimen common stock certificate(1)                                                                                                    
|        | 4.2    |  |             | Warrant to purchase Common Stock, dated May 31, 2000,
    issued to WXI/SAN Realty, L.L.C.(1)                                           
|        | 4.3    |  |             | Warrant to purchase Common Stock, dated Sept. 20, 2000,
    issued to WXI/SAN Realty, L.L.C.(1)                                         
|        | 10.1*  |  |             | Form of Indemnification Agreement between the Registrant and
    each of its directors, officers and certain other key
    employees(1) 
|        | 10.2*  |  |             | 1997 Equity Incentive Plan, as amended, and form of agreements
    thereunder(1)                                                        
|        | 10.3*  |  |             | 2002 Stock Plan, as amended, and form of agreements thereunder(1)                                                                       
|        | 10.4*  |  |             | 2002 Employee Stock Purchase Plan, and form of agreements
    thereunder(3)                                                             
|        | 10.5*  |  |             | 2002 Director Option Plan, and form of agreements
    thereunder(1)                                                                     
|        | 10.6   |  |             | Loan and Security Agreement, dated March 14, 2001, between
    the Registrant and Silicon Valley Bank(1)                                
|        | 10.7   |  |             | Office Lease for 500 Sansome Street, dated April 7,
    1999, between the Registrant and BPG Sansome, L.L.C.(1)                         
|        | 10.8   |  |             | First Amendment to Lease for 500 Sansome Street, dated
    May 3, 2000, between the Registrant and WXI/SAN Realty,
    L.L.C.(1)        
|        | 10.9*  |  |             | Offer letter between the Registrant and John H. Kunze(1)                                                                                
|        | 10.10* |  |             | Offer letter between the Registrant and Eric Borrmann(1)                                                                                
|        | 10.11  |  |             | Second Amendment to Lease for 500 Sansome Street, dated
    September 20, 2000, between the Registrant and WXI/SAN
    Realty, L.L.C.(1)
|        | 10.12  |  |             | Third Amendment to Lease for 500 Sansome Street, dated
    November 22, 2000, between the Registrant and WXI/SAN
    Realty, L.L.C.(1)  
|        | 10.13  |  |             | Fourth Amendment to Lease for 500 Sansome Street, dated
    July 31, 2002, between the Registrant and WXI/SAN Realty,
    L.L.C.(2)     



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software  2004 annual report


|        |        |  |             |                                                                                                                                               
|------- | ------ |  | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |  | Description
|        |        |  |            
|        | 10.14  |  |             | Fifth Amendment to Lease for 500 Sansome Street, dated
    July 21, 2003, between the Registrant and WXI/SAN Realty,
    L.L.C.(2)            
|        | 10.15* |  |             | Offer letter between Registrant and Eric Zocher(2)                                                                                            
|        | 10.16* |  |             | 2004 Bonus Plan(3)                                                                                                                            
|        | 10.17* |  |             | 2004 Outside Director Stock in Lieu of Fees Plan(3)                                                                                           
|        | 10.18* |  |             | Employment Agreement between the Registrant and Paul Ciandrini(4)                                                                             
|        | 10.19* |  |             | Employment Agreement between the Registrant and Ira Pollack(4)                                                                                
|        | 10.20* |  |             | Offer Letter between the Registrant and Adriana Chiocchi(4)                                                                                   
|        | 10.21  |  |             | Office Lease for 505 Sansome Street, dated October 22,
    2004, between Registrant and Transamerica Realty Investment
    Properties, LLC.(5)
|        | 10.22  |  |             | Revolving Line of Credit Amendment, dated October 25, 2004,
    between Registrant and Silicon Valley Bank(5)                                 
|        | 10.23* |  |             | 2005 Bonus Plan                                                                                                                               
|        | 10.24* |  |             | 2005 Independent Director Cash Compensation Plan                                                                                              
|        | 23.1   |  |             | Consent of Independent Registered Public Accounting Firm                                                                                      
|        | 31.1   |  |             | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes Oxley Act of 2002
    (S-O Act)                        
|        | 31.2   |  |             | Certification of Chief Financial Officer pursuant to
    Section 302 of the S-O Act                                                           
|        | 32.1   |  |             | Certification of Chief Executive Officer pursuant to
    Section 906 of the S-O Act                                                           
|        | 32.2   |  |             | Certification of Chief Financial Officer pursuant to
    Section 906 of the S-O Act                                                           






|  |                                                         
|- | --------------------------------------------------------
|* | Management contract or compensatory plan or arrangement.



|    |                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to Exhibits filed with Registration
    Statement No. 333-45950, as amended, which became effective
    on June 3, 2002.                                               
|   
|(2) | Incorporated by reference to Exhibits filed with the
    Registrants Form 10-Q for the quarter ended
    September 30, 2003 and filed with the SEC on
    November 3, 2003 (File No. 001-31344).
|   
|(3) | Incorporated by reference to Exhibits filed with the
    Registrants Form 10-K for the year ended
    December 31, 2003 and filed with the SEC on March 12,
    2004 (File No. 001-31344).      
|   
|(4) | Incorporated by reference to Exhibits Filed with
    Registrants Form 10-Q for the quarter ended June 30,
    2004 and filed with the SEC on August 6, 2004 (File No.
    001-31344).           
|   
|(5) | Incorporated by reference to Exhibits filed with Registrants
    Form 10-Q for the quarter ended September 30, 2004 and
    filed with SEC on November 5, 2004 (File No. 001-31344).             



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##### Table of Contents



plumtree
software  2004 annual report




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Internal Control Integrated
Framework








Internal Control Integrated Framework Internal Control Integrated
Framework




KPMG LLP








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##### Table of Contents





plumtree
software  2004 annual report


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM










Internal Control Integrated
Framework


KPMG LLP








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##### Table of Contents



plumtree
software  2004 annual report




|                                         |                                                                                   |                                                                                                             |       |          |        |  |       |          |        | 
|---------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ----- | -------- | ------ |  | ----- | -------- | ------ | 
|                                         |                                                                                   | As of December 31,                                                                                          |      
|(In thousands, except per share amounts) |                                                                                   | 2004                                                                                                        |       |          | 2003   | 
|                                         |                                                                                  
|CONSOLIDATED BALANCE SHEETS              |                                                                                   |                                                                                                             |       |          |        |  |       |         
|Assets                                   |                                                                                   |                                                                                                             |       |          |        |  |       |         
|Current assets:                          |                                                                                   |                                                                                                             |       |          |        |  |       |         
|                                         | Cash and cash equivalents                                                         |                                                                                                             | $     | 23,136   |        |  | $     | 20,434   |       
|                                         | Short-term investments                                                            |                                                                                                             |       | 41,898   |        |  |       | 47,255   |       
|                                         | Accounts receivable (net of allowance for doubtful accounts of
    $787 and $522) |                                                                                                             |       | 20,552   |        |  |       | 17,171   |       
|                                         | Prepaid and other current assets                                                  |                                                                                                             |       | 2,313    |        |  |       | 2,079    |       
|                                         |                                                                                   |                                                                                                            
|                                         |                                                                                   | Total current assets                                                                                        |       |          | 87,899 |  |       |          | 86,939 | 
|Property and equipment, net              |                                                                                   |                                                                                                             | 2,532 |          |        |  | 1,798 |         
|Other assets                             |                                                                                   |                                                                                                             | 380   |          |        |  | 2,025 |         
|                                         |                                                                                   |                                                                                                            
|                                         |                                                                                   | Total assets                                                                                                |       | $        | 90,811 |  |       | $        | 90,762 | 
|                                         |                                                                                   |                                                                                                            
|Liabilities and Stockholders Equity     |                                                                                   |                                                                                                             |       |          |        |  |       |         
|Current liabilities:                     |                                                                                   |                                                                                                             |       |          |        |  |       |         
|                                         | Accounts payable                                                                  |                                                                                                             | $     | 1,841    |        |  | $     | 1,312    |       
|                                         | Accrued and other current liabilities                                             |                                                                                                             |       | 14,944   |        |  |       | 12,084   |       
|                                         | Current portion of deferred revenue                                               |                                                                                                             |       | 20,804   |        |  |       | 18,366   |       
|                                         |                                                                                   |                                                                                                            
|                                         |                                                                                   | Total current liabilities                                                                                   |       |          | 37,589 |  |       |          | 31,762 | 
|Deferred revenue, less current portion   |                                                                                   |                                                                                                             | 1,856 |          |        |  | 661   |         
|Deferred rent                            |                                                                                   |                                                                                                             | 360   |          |        |  | 448   |         
|                                         |                                                                                   |                                                                                                            
|                                         |                                                                                   | Total liabilities                                                                                           |       |          | 39,805 |  |       |          | 32,871 | 
|                                         |                                                                                   |                                                                                                            
|Stockholders equity:                    |                                                                                   |                                                                                                             |       |          |        |  |       |         
|                                         | Convertible preferred stock, $0.001 par value:                                    |                                                                                                             |       |          |        |  |       |          |       
|                                         |                                                                                   | Authorized20,000 shares; Issued and
    OutstandingNone                                                   |       |          |       |  |       |          |       | 
|                                         | Common stock, $0.001 par value:                                                   |                                                                                                             |       |          |        |  |       |          |       
|                                         |                                                                                   | Authorized100,000 shares, Issued and
    Outstanding 32,397 shares and 31,265 shares in
    2004 and 2003 |       |          | 32     |  |       |          | 31     | 
|                                         | Additional paid in capital                                                        |                                                                                                             |       | 102,104  |        |  |       | 99,747   |       
|                                         | Deferred stock-based compensation                                                 |                                                                                                             |       | (165)    |        |  |       | (868)    |       
|                                         | Accumulated other comprehensive loss                                              |                                                                                                             |       | (412)    |        |  |       | (92)     |       
|                                         | Accumulated deficit                                                               |                                                                                                             |       | (50,553) |        |  |       | (40,927) |       
|                                         |                                                                                   |                                                                                                            
|                                         |                                                                                   | Total stockholders equity                                                                                  |       |          | 51,006 |  |       |          | 57,891 | 
|                                         |                                                                                   |                                                                                                            
|                                         |                                                                                   | Total liabilities and stockholders equity                                                                  |       | $        | 90,811 |  |       | $        | 90,762 | 
|                                         |                                                                                   |                                                                                                            





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plumtree
software  2004 annual report


|                                         |                                                                  |                                   |         |        |          |   |         |        |         |   |       |        |        | 
|---------------------------------------- | ---------------------------------------------------------------- | --------------------------------- | ------- | ------ | -------- | - | ------- | ------ | ------- | - | ----- | ------ | ------ | 
|                                         |                                                                  | For the Years Ended December 31,  |        
|                                         |                                                                  |                                   |        
|(In thousands, except per share amounts) |                                                                  | 2004                              |         |        | 2003     |   |         | 2002   |        
|                                         |                                                                 
|CONSOLIDATED STATEMENTS OF OPERATIONS    |                                                                  |                                   |         |        |          |   |         |        |         |   |       |       
|Revenue:                                 |                                                                  |                                   |         |        |          |   |         |        |         |   |       |       
|                                         | Licenses                                                         |                                   | $       | 35,727 |          |   | $       | 34,044 |         |   | $     | 49,581 |       
|                                         | Services and maintenance                                         |                                   |         | 48,421 |          |   |         | 37,408 |         |   |       | 33,338 |       
|                                         |                                                                  |                                  
|                                         |                                                                  | Total revenue                     |         |        | 84,148   |   |         |        | 71,452  |   |       |        | 82,919 | 
|                                         |                                                                  |                                  
|Cost of revenue:                         |                                                                  |                                   |         |        |          |   |         |        |         |   |       |       
|                                         | Licenses                                                         |                                   |         | 1,369  |          |   |         | 625    |         |   |       | 3,181  |       
|                                         | Services and maintenance                                         |                                   |         | 19,036 |          |   |         | 11,331 |         |   |       | 12,685 |       
|                                         | Amortization of stock-based compensation and acquired technology |                                   |         | 1,592  |          |   |         | 1,823  |         |   |       | 2,292  |       
|                                         |                                                                  |                                  
|                                         |                                                                  | Total cost of revenue             |         |        | 21,997   |   |         |        | 13,779  |   |       |        | 18,158 | 
|                                         |                                                                  |                                  
|                                         |                                                                  | Gross margin                      |         |        | 62,151   |   |         |        | 57,673  |   |       |        | 64,761 | 
|                                         |                                                                  |                                  
|Operating expenses:                      |                                                                  |                                   |         |        |          |   |         |        |         |   |       |       
|                                         | Research and development                                         |                                   |         | 24,495 |          |   |         | 20,667 |         |   |       | 18,140 |       
|                                         | Sales and marketing                                              |                                   |         | 36,416 |          |   |         | 30,637 |         |   |       | 33,281 |       
|                                         | General and administrative                                       |                                   |         | 10,889 |          |   |         | 6,845  |         |   |       | 7,241  |       
|                                         | Restructuring charges                                            |                                   |         | 307    |          |   |         | 475    |         |   |       | 441    |       
|                                         | Amortization of stock-based compensation                         |                                   |         | 372    |          |   |         | 1,117  |         |   |       | 2,806  |       
|                                         |                                                                  |                                  
|                                         |                                                                  | Total operating expenses          |         |        | 72,479   |   |         |        | 59,741  |   |       |        | 61,909 | 
|                                         |                                                                  |                                  
|                                         |                                                                  | Income (loss) from operations     |         |        | (10,328) |   |         |        | (2,068) |   |       |        | 2,852  | 
|Other income (expense):                  |                                                                  |                                   |         |        |          |   |         |        |         |   |       |       
|                                         | Interest income, net                                             |                                   |         | 1,089  |          |   |         | 970    |         |   |       | 773    |       
|                                         | Other income (expense)                                           |                                   |         | 194    |          |   |         | 455    |         |   |       | (55)   |       
|                                         |                                                                  |                                  
|                                         |                                                                  | Other income, net                 |         |        | 1,283    |   |         |        | 1,425   |   |       |        | 718    | 
|                                         |                                                                  |                                  
|                                         |                                                                  | Income (loss) before income taxes |         |        | (9,045)  |   |         |        | (643)   |   |       |        | 3,570  | 
|                                         |                                                                  | Provision for income taxes        |         |        | 581      |   |         |        | 824     |   |       |        | 1,180  | 
|                                         |                                                                  |                                  
|Net income (loss)                        |                                                                  | $                                 | (9,626) |        |          | $ | (1,467) |        |         | $ | 2,390 |       
|                                         |                                                                  |                                  
|Net income (loss) per share:             |                                                                  |                                   |         |        |          |   |         |        |         |   |       |       
|                                         | Basic                                                            |                                   | $       | (0.30) |          |   | $       | (0.05) |         |   | $     | 0.12   |       
|                                         |                                                                  |                                  
|                                         | Diluted                                                          |                                   | $       | (0.30) |          |   | $       | (0.05) |         |   | $     | 0.08   |       
|                                         |                                                                  |                                  
|                                         | Shares used in per share calculations:                           |                                   |         |        |          |   |         |        |         |   |       |        |       
|                                         | Basic                                                            |                                   |         | 32,039 |          |   |         | 30,640 |         |   |       | 19,861 |       
|                                         |                                                                  |                                  
|                                         | Diluted                                                          |                                   |         | 32,039 |          |   |         | 30,640 |         |   |       | 30,267 |       
|                                         |                                                                  |                                  





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plumtree
software  2004 annual report




|                                                                                    |                                                                                            |                 |        |          |              |   |    |            |  |  |        |        |  |         |    |    |  |   |         |         | 
|----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | --------------- | ------ | -------- | ------------ | - | -- | ---------- |  |  | ------ | ------ |  | ------- | -- | -- |  | - | ------- | ------- | 
|                                                                                    |                                                                                            | Convertible     |        |          |              |   |   
|                                                                                    |                                                                                            | Preferred Stock |        |          | Common Stock |   |    | Additional | 
|                                                                                    |                                                                                            |                 |        |          |              |   |    | Paid in    | 
|(In thousands)                                                                      |                                                                                            | Shares          |        |          | Amount       |   |    | Shares     |  |  | Amount |        |  | Capital |   
|                                                                                    |                                                                                           
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
    COMPREHENSIVE INCOME (LOSS) |                                                                                            |                 |        |          |              |   |    |            |  |  |        |        |  |         |    |    |  |   |         |        
|Balance at December 31, 2001                                                        |                                                                                            |                 | 16,581 |          |              | $ | 17 |            |  |  | 7,650  |        |  | $       | 8  |    |  | $ | 62,277  |        
|                                                                                    | Issuance of common stock from initial public offering, net of
    issuance costs of $4,555 |                 |        |         |              |   |    |           |  |  |        | 5,000  |  |         |    | 5  |  |   |         | 37,940  | 
|                                                                                    | Conversion of preferred stock to common stock                                              |                 |        | (16,581) |              |   |    | (17)       |  |  |        | 16,629 |  |         |    | 17 |  |   |         |        | 
|                                                                                    | Repurchase of common stock                                                                 |                 |        |         |              |   |    |           |  |  |        | (75)   |  |         |    |   |  |   |         | (56)    | 
|                                                                                    | Exercise of warrants                                                                       |                 |        |         |              |   |    |           |  |  |        | 187    |  |         |    |   |  |   |         |        | 
|                                                                                    | Exercise of stock options                                                                  |                 |        |         |              |   |    |           |  |  |        | 48     |  |         |    |   |  |   |         | 73      | 
|                                                                                    | Amortization of stock-based compensation                                                   |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Cancellation of unvested options                                                           |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         | (1,850) | 
|                                                                                    | Unrealized gain on investments                                                             |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Translation adjustment                                                                     |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Net income                                                                                 |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    |                                                                                            |                
|Balance at December 31, 2002                                                        |                                                                                            |                 |       |          |              | $ |   |            |  |  | 29,439 |        |  | $       | 30 |    |  | $ | 98,384  |        
|                                                                                    | Issuance of common stock from ESPP                                                         |                 |        |         |              |   |    |           |  |  |        | 462    |  |         |    |   |  |   |         | 1,272   | 
|                                                                                    | Exercise of stock options                                                                  |                 |        |         |              |   |    |           |  |  |        | 1,377  |  |         |    | 1  |  |   |         | 823     | 
|                                                                                    | Repurchase of common stock                                                                 |                 |        |         |              |   |    |           |  |  |        | (13)   |  |         |    |   |  |   |         | (12)    | 
|                                                                                    | Repayment of notes receivable from stockholders                                            |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Amortization of stock-based compensation                                                   |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Cancellation of unvested options                                                           |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         | (720)   | 
|                                                                                    | Unrealized loss on investments                                                             |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Translation adjustment                                                                     |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Net loss                                                                                   |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    |                                                                                            |                
|Balance at December 31, 2003                                                        |                                                                                            |                 |       |          |              | $ |   |            |  |  | 31,265 |        |  | $       | 31 |    |  | $ | 99,747  |        
|                                                                                    |                                                                                            |                
|                                                                                    | Exercise of stock options                                                                  |                 |        |         |              |   |    |           |  |  |        | 549    |  |         |    |   |  |   |         | 931     | 
|                                                                                    | Issuance of common stock from ESPP                                                         |                 |        |         |              |   |    |           |  |  |        | 583    |  |         |    | 1  |  |   |         | 1,618   | 
|                                                                                    | Issuance of options to non-employee                                                        |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         | 30      | 
|                                                                                    | Amortization of stock-based compensation                                                   |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Cancellation of unvested options                                                           |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         | (222)   | 
|                                                                                    | Unrealized loss on investments                                                             |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Translation adjustment                                                                     |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    | Net loss                                                                                   |                 |        |         |              |   |    |           |  |  |        |       |  |         |    |   |  |   |         |        | 
|                                                                                    |                                                                                            |                
|Balance at December 31, 2004                                                        |                                                                                            |                 |       |          |              | $ |   |            |  |  | 32,397 |        |  | $       | 32 |    |  | $ | 102,104 |        
|                                                                                    |                                                                                            |                

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                    |                                                                                            |              |       |     |              |             |         |               |  |   |             |       |       |               |          |         |               |   |        |         |  |   |         |         | 
|----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------ | ----- | --- | ------------ | ----------- | ------- | ------------- |  | - | ----------- | ----- | ----- | ------------- | -------- | ------- | ------------- | - | ------ | ------- |  | - | ------- | ------- | 
|                                                                                    |                                                                                            |              |       |     |              | Accumulated |         |               |  |   |             |       |      
|                                                                                    |                                                                                            | Notes        |       |     |              |             | Other   |               |  |   |             |       |       |              
|                                                                                    |                                                                                            | Receivable   |       |     | Deferred     |             |         | Comprehensive |  |   |             |       | Total |               |          |        
|                                                                                    |                                                                                            | from         |       |     | Stock-based  |             |         | Income        |  |   | Accumulated |       |       | Stockholders |          |         | Comprehensive |  
|(In thousands)                                                                      |                                                                                            | Stockholders |       |     | Compensation |             |         | (Loss)        |  |   | Deficit     |       |       | Equity        |          |         | Income (Loss) |  
|                                                                                    |                                                                                            |              |      
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
    COMPREHENSIVE INCOME (LOSS) |                                                                                            |              |       |     |              |             |         |               |  |   |             |       |       |               |          |         |               |   |        |         |  |   |         |        
|Balance at December 31, 2001                                                        |                                                                                            | $            | (674) |     |              | $           | (8,301) |               |  | $ | (34)        |       |       | $             | (41,850) |         |               | $ | 11,443 |         |  | $ | (7,822) |        
|                                                                                    | Issuance of common stock from initial public offering, net of
    issuance costs of $4,555 |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | 37,945  |  |   |         |         | 
|                                                                                    | Conversion of preferred stock to common stock                                              |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        |        |  |   |         |         | 
|                                                                                    | Repurchase of common stock                                                                 |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | (56)    |  |   |         |         | 
|                                                                                    | Exercise of warrants                                                                       |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        |        |  |   |         |         | 
|                                                                                    | Exercise of stock options                                                                  |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | 73      |  |   |         |         | 
|                                                                                    | Amortization of stock-based compensation                                                   |              |       |    |              |             |         | 3,500         |  |   |             |      |       |               |          |        |               |   |        | 3,500   |  |   |         |         | 
|                                                                                    | Cancellation of unvested options                                                           |              |       |    |              |             |         | 1,850         |  |   |             |      |       |               |          |        |               |   |        |        |  |   |         |         | 
|                                                                                    | Unrealized gain on investments                                                             |              |       |    |              |             |         |              |  |   |             | 229   |       |               |          |        |               |   |        | 229     |  |   |         | 229     | 
|                                                                                    | Translation adjustment                                                                     |              |       |    |              |             |         |              |  |   |             | (172) |       |               |          |        |               |   |        | (172)   |  |   |         | (172)   | 
|                                                                                    | Net income                                                                                 |              |       |    |              |             |         |              |  |   |             |      |       |               |          | 2,390   |               |   |        | 2,390   |  |   |         | 2,390   | 
|                                                                                    |                                                                                            |             
|Balance at December 31, 2002                                                        |                                                                                            | $            | (674) |     |              | $           | (2,951) |               |  | $ | 23          |       |       | $             | (39,460) |         |               | $ | 55,352 |         |  | $ | 2,447   |        
|                                                                                    |                                                                                            |              |       |     |              |             |         |               |  |   |             |       |       |               |          |         |               |  
|                                                                                    | Issuance of common stock from ESPP                                                         |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | 1,272   |  |   |         |         | 
|                                                                                    | Exercise of stock options                                                                  |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | 824     |  |   |         |         | 
|                                                                                    | Repurchase of common stock                                                                 |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | (12)    |  |   |         |         | 
|                                                                                    | Repayment of notes receivable from stockholders                                            |              |       | 674 |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | 674     |  |   |         |         | 
|                                                                                    | Amortization of stock-based compensation                                                   |              |       |    |              |             |         | 1,363         |  |   |             |      |       |               |          |        |               |   |        | 1,363   |  |   |         |         | 
|                                                                                    | Cancellation of unvested options                                                           |              |       |    |              |             |         | 720           |  |   |             |      |       |               |          |        |               |   |        |        |  |   |         |         | 
|                                                                                    | Unrealized loss on investments                                                             |              |       |    |              |             |         |              |  |   |             | (103) |       |               |          |        |               |   |        | (103)   |  |   |         | (103)   | 
|                                                                                    | Translation adjustment                                                                     |              |       |    |              |             |         |              |  |   |             | (12)  |       |               |          |        |               |   |        | (12)    |  |   |         | (12)    | 
|                                                                                    | Net loss                                                                                   |              |       |    |              |             |         |              |  |   |             |      |       |               |          | (1,467) |               |   |        | (1,467) |  |   |         | (1,467) | 
|                                                                                    |                                                                                            |             
|Balance at December 31, 2003                                                        |                                                                                            | $            |      |     |              | $           | (868)   |               |  | $ | (92)        |       |       | $             | (40,927) |         |               | $ | 57,891 |         |  | $ | (1,582) |        
|                                                                                    |                                                                                            |             
|                                                                                    | Exercise of stock options                                                                  |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | 931     |  |   |         |         | 
|                                                                                    | Issuance of common stock from ESPP                                                         |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | 1,619   |  |   |         |         | 
|                                                                                    | Issuance of options to non-employee                                                        |              |       |    |              |             |         |              |  |   |             |      |       |               |          |        |               |   |        | 30      |  |   |         |         | 
|                                                                                    | Amortization of stock-based compensation                                                   |              |       |    |              |             |         | 481           |  |   |             |      |       |               |          |        |               |   |        | 481     |  |   |         |         | 
|                                                                                    | Cancellation of unvested options                                                           |              |       |    |              |             |         | 222           |  |   |             |      |       |               |          |        |               |   |        |        |  |   |         |         | 
|                                                                                    | Unrealized loss on investments                                                             |              |       |    |              |             |         |              |  |   |             | (390) |       |               |          |        |               |   |        | (390)   |  |   |         | (390)   | 
|                                                                                    | Translation adjustment                                                                     |              |       |    |              |             |         |              |  |   |             | 70    |       |               |          |        |               |   |        | 70      |  |   |         | 70      | 
|                                                                                    | Net loss                                                                                   |              |       |    |              |             |         |              |  |   |             |      |       |               |          | (9,626) |               |   |        | (9,626) |  |   |         | (9,626) | 
|                                                                                    |                                                                                            |             
|Balance at December 31, 2004                                                        |                                                                                            | $            |      |     |              | $           | (165)   |               |  | $ | (412)       |       |       | $             | (50,553) |         |               | $ | 51,006 |         |  | $ | (9,946) |        
|                                                                                    |                                                                                            |             





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plumtree
software  2004 annual report


|                                                                |                                                                                                        |                                              |                                                     |          |       |         |        |          |       |         |         |          |       |          | 
|--------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | -------------------------------------------- | --------------------------------------------------- | -------- | ----- | ------- | ------ | -------- | ----- | ------- | ------- | -------- | ----- | -------- | 
|                                                                |                                                                                                        | For the Years Ended December 31,             |                                                    
|                                                                |                                                                                                        |                                              |                                                    
|(In thousands)                                                  |                                                                                                        | 2004                                         |                                                     |          | 2003  |         |        | 2002     |      
|                                                                |                                                                                                       
|CONSOLIDATED STATEMENTS OF CASH FLOWS                           |                                                                                                        |                                              |                                                     |          |       |         |        |          |       |         |         |         
|Cash flows from operating activities:                           |                                                                                                        |                                              |                                                     |          |       |         |        |          |       |         |         |         
|                                                                | Net income (loss)                                                                                      |                                              | $                                                   | (9,626)  |       |         | $      | (1,467)  |       |         | $       | 2,390    |      
|                                                                | Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities: |                                              |                                                     |          |       |         |        |          |       |         |         |          |      
|                                                                |                                                                                                        | Provision for doubtful accounts              |                                                     |          | 265   |         |        |          | (111) |         |         |          | 505   |         
|                                                                |                                                                                                        | Depreciation and amortization                |                                                     |          | 1,487 |         |        |          | 1,722 |         |         |          | 1,846 |         
|                                                                |                                                                                                        | Loss on disposal of property & equipment     |                                                     |          |      |         |        |          |      |         |         |          | 214   |         
|                                                                |                                                                                                        | Accretion of short-term investments          |                                                     |          | 822   |         |        |          | 716   |         |         |          |      |         
|                                                                |                                                                                                        | Gain on sale of investment                   |                                                     |          |      |         |        |          | (475) |         |         |          |      |         
|                                                                |                                                                                                        | Amortization of stock-based compensation     |                                                     |          | 480   |         |        |          | 1,363 |         |         |          | 3,500 |         
|                                                                |                                                                                                        | Amortization of acquired technology          |                                                     |          | 1,484 |         |        |          | 1,577 |         |         |          | 1,597 |         
|                                                                |                                                                                                        | Issuance of options to non-employee          |                                                     |          | 30    |         |        |          |      |         |         |          |      |         
|                                                                |                                                                                                        | Amortization of warrants issued for services |                                                     |          | 37    |         |        |          | 42    |         |         |          | 52    |         
|                                                                |                                                                                                        | Changes in assets and liabilities:           |                                                     |          |       |         |        |          |       |         |         |          |       |         
|                                                                |                                                                                                        |                                              | Accounts receivable                                 |          |       | (3,646) |        |          |       | (441)   |         |          |       | 733      | 
|                                                                |                                                                                                        |                                              | Prepaid and other current assets                    |          |       | (271)   |        |          |       | 68      |         |          |       | (908)    | 
|                                                                |                                                                                                        |                                              | Other assets                                        |          |       | 161     |        |          |       | 293     |         |          |       | (395)    | 
|                                                                |                                                                                                        |                                              | Accounts payable                                    |          |       | 529     |        |          |       | (318)   |         |          |       | 167      | 
|                                                                |                                                                                                        |                                              | Accrued and other current liabilities               |          |       | 2,860   |        |          |       | (2,589) |         |          |       | (791)    | 
|                                                                |                                                                                                        |                                              | Deferred revenue                                    |          |       | 3,633   |        |          |       | 488     |         |          |       | (2,060)  | 
|                                                                |                                                                                                        |                                              | Other long-term liabilities                         |          |       | (88)    |        |          |       | (6)     |         |          |       | 120      | 
|                                                                |                                                                                                        |                                             
|                                                                |                                                                                                        |                                              | Net cash provided (used in) by operating activities |          |       | (1,843) |        |          |       | 862     |         |          |       | 6,970    | 
|                                                                |                                                                                                        |                                             
|Cash flows from investing activities:                           |                                                                                                        |                                              |                                                     |          |       |         |        |          |       |         |         |         
|                                                                | Proceeds from sale of investment                                                                       |                                              |                                                     |         |       |         |        | 475      |       |         |         |         |      
|                                                                | Purchases of short-term investments                                                                    |                                              |                                                     | (35,939) |       |         |        | (41,267) |       |         |         | (46,141) |      
|                                                                | Maturities of short-term investments                                                                   |                                              |                                                     | 40,085   |       |         |        | 37,861   |       |         |         | 1,703    |      
|                                                                | Purchases of property and equipment                                                                    |                                              |                                                     | (2,221)  |       |         |        | (823)    |       |         |         | (1,824)  |      
|                                                                |                                                                                                        |                                             
|                                                                |                                                                                                        |                                              | Net cash provided by (used in) investing activities |          |       | 1,925   |        |          |       | (3,754) |         |          |       | (46,262) | 
|                                                                |                                                                                                        |                                             
|Cash flows from financing activities:                           |                                                                                                        |                                              |                                                     |          |       |         |        |          |       |         |         |         
|                                                                | Payments on capital lease obligations                                                                  |                                              |                                                     |         |       |         |        | (74)     |       |         |         | (283)    |      
|                                                                | Proceeds from short-term debt                                                                          |                                              |                                                     |         |       |         |        |         |       |         |         | 1,600    |      
|                                                                | Repayments on short-term debt                                                                          |                                              |                                                     |         |       |         |        |         |       |         |         | (3,200)  |      
|                                                                | Repayments of employee notes receivable                                                                |                                              |                                                     |         |       |         |        | 674      |       |         |         |         |      
|                                                                | Proceeds from initial public offering, net                                                             |                                              |                                                     |         |       |         |        |         |       |         |         | 37,945   |      
|                                                                | Proceeds from issuance of common stock                                                                 |                                              |                                                     | 2,550    |       |         |        | 2,096    |       |         |         | 73       |      
|                                                                | Repurchase of common stock                                                                             |                                              |                                                     |         |       |         |        | (12)     |       |         |         | (56)     |      
|                                                                |                                                                                                        |                                             
|                                                                |                                                                                                        |                                              | Net cash provided by financing activities           |          |       | 2,550   |        |          |       | 2,684   |         |          |       | 36,079   | 
|                                                                |                                                                                                        |                                             
|Effect of change in exchange rates on cash and cash equivalents |                                                                                                        |                                              | 70                                                  |          |       |         | (13)   |          |       |         | (172)   |         
|                                                                |                                                                                                        |                                             
|Net increase (decrease) in cash and cash equivalents            |                                                                                                        |                                              | 2,702                                               |          |       |         | (221)  |          |       |         | (3,385) |         
|Cash and cash equivalents at beginning of year                  |                                                                                                        |                                              | 20,434                                              |          |       |         | 20,655 |          |       |         | 24,040  |         
|                                                                |                                                                                                        |                                             
|Cash and cash equivalents at end of year                        |                                                                                                        | $                                            | 23,136                                              |          |       | $       | 20,434 |          |       | $       | 20,655  |         
|                                                                |                                                                                                        |                                             
|Supplemental disclosure of cash flow information:               |                                                                                                        |                                              |                                                     |          |       |         |        |          |       |         |         |         
|                                                                |                                                                                                        | Cash paid for income taxes                   |                                                     | $        | 145   |         |        | $        | 576   |         |         | $        | 814   |         
|                                                                |                                                                                                        |                                             
|                                                                |                                                                                                        | Cash paid for interest                       |                                                     | $        | 16    |         |        | $        | 155   |         |         | $        | 113   |         
|                                                                |                                                                                                        |                                             





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plumtree
software  2004 annual report




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                            
|-- | ---------------------------
|1. | ORGANIZATION OF THE COMPANY







|   |                                
|-- | -------------------------------
|2. | SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation




Foreign Currency Translation








|  |                                                                 
|- | ----------------------------------------------------------------
| | Completed the valuation of assets and liabilities of the entity 
| 
| | Developed a formal liquidation plan                             
| 
| | Prepared tax ruling documents                                   
| 
| | Obtained approval to repatriate all cash balances currently held





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plumtree
software  2004 annual report


Cash Equivalents and Short-Term Investments






|                                |       |                                |        |        |                         |   |       |                  |  |   |                   |        |  |                  |      |      |   |   |        |        | 
|------------------------------- | ----- | ------------------------------ | ------ | ------ | ----------------------- | - | ----- | ---------------- |  | - | ----------------- | ------ |  | ---------------- | ---- | ---- | - | - | ------ | ------ | 
|                                |       | Expected Maturity Date For the |        |        |                        
|                                |       | Years Ending December 31,      |        |        | As of December 31, 2004 |  
|                                |       |                                |        |        |                         |  
|                                |       | 2005                           |        |        | 2006                    |   |       | Total Book Value |  |   | Unrealized Losses |        |  | Total Fair Value |     
|                                |      
|Taxable auction rate securities |       | $                              | 2,000  |        |                         | $ |      |                  |  | $ | 2,000             |        |  | $                |     |      |   | $ | 2,000  |       
|US Government agencies          |       |                                | 12,903 |        |                         |   | 9,500 |                  |  |   | 22,403            |        |  |                  | (182 | )    |   |   | 22,221 |       
|Corporate notes                 |       |                                | 12,708 |        |                         |   | 5,050 |                  |  |   | 17,759            |        |  |                  | (82  | )    |   |   | 17,677 |       
|                                |       |                               
|                                | Total |                                | $      | 27,612 |                         |   | $     | 14,550           |  |   | $                 | 42,162 |  |                  | $    | (264 | ) |   | $      | 41,898 | 
|                                |       |                               







|                    |        |                     |        |            |                   |   |      |            |            |   |        |        |  |            |     |     |        |   |        |        |  |   |      |      |  
|------------------- | ------ | ------------------- | ------ | ---------- | ----------------- | - | ---- | ---------- | ---------- | - | ------ | ------ |  | ---------- | --- | --- | ------ | - | ------ | ------ |  | - | ---- | ---- | -
|                    |        | Less Than 12 Months |        |            | 12 Months or More |   |      | Total      |           
|                    |        |                     |        |            |                   |   |      |            |           
|                    |        |                     |        | Gross      |                   |   |      |            | Gross      |   |        |        |  | Gross      |    
|                    |        |                     |        | Unrealized |                   |   |      |            | Unrealized |   |        |        |  | Unrealized |    
|                    |        | Fair Value          |        |            | Losses            |   |      | Fair Value |            |   | Losses |        |  | Fair Value |     |     | Losses |  
|                    |       
|US Government Notes |        | $                   | 20,717 |            |                   | $ | (177 | )          |            | $ | 1,504  |        |  | $          | (5  | )   |        | $ | 22,221 |        |  | $ | (182 | )   
|Corporate Notes     |        |                     | 8,346  |            |                   |   | (27  | )          |            |   | 9,331  |        |  |            | (54 | )   |        |   | 17,677 |        |  |   | (81  | )   
|                    |        |                    
|                    | Total: |                     | $      | 29,063     |                   |   | $    | (204       | )          |   | $      | 10,835 |  |            | $   | (60 | )      |   | $      | 39,898 |  |   | $    | (264 | )
|                    |        |                    





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software  2004 annual report






| |                                 
| | --------------------------------
| | Concentration of Credit
    Risk







| |                   
| | ------------------
| | Valuation Accounts



|                             |  |           |       |  |           |   |       |            |        |   |         |  |  |   |     | 
|---------------------------- |  | --------- | ----- |  | --------- | - | ----- | ---------- | ------ | - | ------- |  |  | - | --- | 
|                             |  | Beginning |       |  |           |   |       |            | Ending |  
|                             |  | Balance   |       |  | Provision |   |       | Write-offs |        |   | Balance | 
|                             | 
|Year ended December 31, 2004 |  | $         | 522   |  |           | $ | 265   |            |        | $ |        |  |  | $ | 787 | 
|Year ended December 31, 2003 |  | $         | 754   |  |           | $ | (111) |            |        | $ | 121     |  |  | $ | 522 | 
|Year ended December 31, 2002 |  | $         | 1,184 |  |           | $ | 505   |            |        | $ | 935     |  |  | $ | 754 | 



| |                       
| | ----------------------
| | Property and Equipment





| |             
| | ------------
| | Income Taxes





| |            
| | -----------
| | Commissions



Stock-Based Compensation


Accounting
Principles Board Opinion No. 25 (APB 25), Accounting
for Stock Issued to Employees Statement of Financial Accounting Standards No. 123
(SFAS 123), Accounting for Stock-Based Compensation Statement of Financial Accounting Standards No. 148,
Accounting for Stock-Based Compensation-Transition and
Disclosure




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plumtree
software  2004 annual report


(SFAS 148)


|                            |  |                          |          |   |      |  |          |      |  |  |          |  
|--------------------------- |  | ------------------------ | -------- | - | ---- |  | -------- | ---- |  |  | -------- | -
|                            |  | Years Ended December 31, |         
|                            |  |                          |         
|                            |  | 2004                     |          |   | 2003 |  |          | 2002 | 
|                            | 
|Risk-free interest rate     |  |                          | 3.0      | % |      |  | 2.6      | %    |  |  | 3.6      | %
|Expected life of the option |  |                          | 4  years |   |      |  | 4  years |      |  |  | 4  years |  
|Dividend yield              |  |                          | 0        | % |      |  | 0        | %    |  |  | 0        | %
|Volatility                  |  |                          | 66       | % |      |  | 94       | %    |  |  | 105      | %





|                                                                                                              |                            |                          |          |        |      |   |         |        |  |   |         |        | 
|------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------ | -------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                                                                                              |                            | Years Ended December 31, |         
|                                                                                                              |                            |                          |         
|                                                                                                              |                            | 2004                     |          |        | 2003 |   |         | 2002   | 
|                                                                                                              |                           
|Net income (loss) as reported                                                                                 |                            | $                        | (9,626)  |        |      | $ | (1,467) |        |  | $ | 2,390   |       
|Add: Stock-based employee compensation expense included in net
    income (loss)                              |                            |                          | 480      |        |      |   | 1,363   |        |  |   | 3,500   |       
|Deduct: Stock-based employee compensation expense determined
    under fair value based method for all awards |                            |                          | (6,864)  |        |      |   | (8,429) |        |  |   | (6,377) |       
|Pro forma net loss under SFAS 123                                                                             |                            | $                        | (16,010) |        |      | $ | (8,533) |        |  | $ | (487)   |       
|                                                                                                              |                            |                         
|Net income (loss) per common share basic:                                                                    |                            |                          |          |        |      |   |         |        |  |   |         |       
|As reported under APB 25                                                                                      |                            | $                        | (0.30)   |        |      | $ | (0.05)  |        |  | $ | 0.12    |       
|As reported under SFAS 123                                                                                    |                            | $                        | (0.50)   |        |      | $ | (0.28)  |        |  | $ | (0.02)  |       
|Net income (loss) per common share diluted:                                                                  |                            |                          |          |        |      |   |         |        |  |   |         |       
|                                                                                                              | As reported under APB 25   |                          | $        | (0.30) |      |   | $       | (0.05) |  |   | $       | 0.08   | 
|                                                                                                              | As reported under SFAS 123 |                          | $        | (0.50) |      |   | $       | (0.28) |  |   | $       | (0.02) | 





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plumtree
software  2004 annual report






|                                                                             |                            |                                                               |                                |     |      |     |     |      |       |       |     |       |       |       | 
|---------------------------------------------------------------------------- | -------------------------- | ------------------------------------------------------------- | ------------------------------ | --- | ---- | --- | --- | ---- | ----- | ----- | --- | ----- | ----- | ----- | 
|                                                                             |                            | For the Years Ended                                           |                               
|                                                                             |                            | December 31,                                                  |                               
|                                                                             |                            |                                                               |                               
|                                                                             |                            | 2004                                                          |                                |     | 2003 |     |     | 2002 |      
|                                                                             |                           
|Amortization of stock-based compensation included in cost of
    revenue     |                            | $                                                             | 108                            |     |      | $   | 246 |      |       | $     | 694 |      
|                                                                             |                            |                                                              
|Amortization of stock-based compensation included in operating
    expenses: |                            |                                                               |                                |     |      |     |     |      |       |       |     |      
|                                                                             | Research and development   |                                                               | $                              | 170 |      |     | $   | 510  |       |       | $   | 1.247 |      
|                                                                             | Sales and marketing        |                                                               |                                | 165 |      |     |     | 494  |       |       |     | 1,281 |      
|                                                                             | General and administrative |                                                               |                                | 37  |      |     |     | 113  |       |       |     | 278   |      
|                                                                             |                            |                                                              
|                                                                             |                            | Total stock-based compensation included in operating expenses |                                |     | 372  |     |     |      | 1,117 |       |     |       | 2,806 |      
|                                                                             |                            |                                                              
|                                                                             |                            |                                                               | Total stock-based compensation |     | $    | 480 |     |      | $     | 1,363 |     |       | $     | 3,500 | 
|                                                                             |                            |                                                              

Restructuring Charges








Software Development Costs






Use of Estimates






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software  2004 annual report


Revenue Recognition












Net Income (Loss) Per Share






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software  2004 annual report






|                                                                                  |                                                                                                             |                                                     |         |   |      |   |         |      |      |   |        |       |       | 
|--------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------- | - | ---- | - | ------- | ---- | ---- | - | ------ | ----- | ----- | 
|                                                                                  |                                                                                                             | Years Ended December 31,                            |        
|                                                                                  |                                                                                                             |                                                     |        
|                                                                                  |                                                                                                             | 2004                                                |         |   | 2003 |   |         | 2002 |     
|                                                                                  |                                                                                                            
|Net income (loss)                                                                 |                                                                                                             | $                                                   | (9,626) |   |      | $ | (1,467) |      |      | $ | 2,390  |      
|                                                                                  |                                                                                                             |                                                    
|Basic:                                                                            |                                                                                                             |                                                     |         |   |      |   |         |      |      |   |        |      
|Weighted average shares of common stock outstanding                               |                                                                                                             |                                                     | 32,039  |   |      |   | 30,700  |      |      |   | 20,140 |      
|                                                                                  |                                                                                                             | Less: Weighted average shares subject to repurchase |         |   |     |   |         |      | (60) |   |        |       | (279) | 
|                                                                                  |                                                                                                             |                                                    
|Weighted average shares used in computing basic net income
    (loss) per share   |                                                                                                             |                                                     | 32,039  |   |      |   | 30,640  |      |      |   | 19,861 |      
|                                                                                  |                                                                                                             |                                                    
|Basic net income (loss) per share                                                 |                                                                                                             | $                                                   | (0.30)  |   |      | $ | (0.05)  |      |      | $ | 0.12   |      
|                                                                                  |                                                                                                             |                                                    
|Diluted:                                                                          |                                                                                                             |                                                     |         |   |      |   |         |      |      |   |        |      
|Weighted average shares used above                                                |                                                                                                             |                                                     | 32,039  |   |      |   | 30,640  |      |      |   | 19,861 |      
|                                                                                  | Add: Weighted average shares subject to repurchase                                                          |                                                     |         |  |      |   |         |     |      |   |        | 279   |      
|                                                                                  | Add: Weighted average adjustment to reflect the effect of the
    conversion of convertible preferred stock |                                                     |         |  |      |   |         |     |      |   |        | 6,996 |      
|                                                                                  | Add: Net additional shares related to assumed option and warrant
    exercises under the treasury method    |                                                     |         |  |      |   |         |     |      |   |        | 3,131 |      
|Weighted average shares used in computing diluted net Income
    (loss) per share |                                                                                                             |                                                     | 32,039  |   |      |   | 30,640  |      |      |   | 30,267 |      
|                                                                                  |                                                                                                             |                                                    
|Diluted net income (loss) per share                                               |                                                                                                             | $                                                   | (0.30)  |   |      | $ | (0.05)  |      |      | $ | 0.08   |      
|                                                                                  |                                                                                                             |                                                    



|                                   |       |                    |        |        |      |  |        |        | 
|---------------------------------- | ----- | ------------------ | ------ | ------ | ---- |  | ------ | ------ | 
|                                   |       | As of December 31, |       
|                                   |       |                    |       
|                                   |       | 2004               |        |        | 2003 | 
|                                   |      
|Common stock subject to repurchase |       |                    |       |        |      |  | 16     |       
|Options to purchase common stock   |       |                    | 11,777 |        |      |  | 10,366 |       
|Employee stock purchase plan       |       |                    | 273    |        |      |  | 224    |       
|Warrants                           |       |                    | 41     |        |      |  | 41     |       
|                                   |       |                   
|                                   | Total |                    |        | 12,091 |      |  |        | 10,647 | 
|                                   |       |                   



Comprehensive Income (Loss)






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software  2004 annual report


Recent Accounting Pronouncements






Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision




| |                  
| | -----------------
| | Reclassifications



3.    INITIAL PUBLIC OFFERING








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software  2004 annual report






4.    PROPERTY AND EQUIPMENT




|                                          |  |                    |         |  |      |   |         | 
|----------------------------------------- |  | ------------------ | ------- |  | ---- | - | ------- | 
|                                          |  | As of December 31, |        
|                                          |  |                    |        
|                                          |  | 2004               |         |  | 2003 |  
|                                          | 
|Software and computer equipment           |  | $                  | 4,607   |  |      | $ | 6,165   | 
|Furniture and fixtures                    |  |                    | 329     |  |      |   | 570     | 
|Leasehold improvements and other          |  |                    | 706     |  |      |   | 879     | 
|                                          |  |                   
|                                          |  |                    | 5,642   |  |      |   | 7,614   | 
|Accumulated depreciation and amortization |  |                    | (3,110) |  |      |   | (5,816) | 
|                                          |  |                   
|                                          |  | $                  | 2,532   |  |      | $ | 1,798   | 
|                                          |  |                   





5.    OTHER ASSETS




|                                                                                            |  |                    |     |  |      |   |       | 
|------------------------------------------------------------------------------------------- |  | ------------------ | --- |  | ---- | - | ----- | 
|                                                                                            |  | As of December 31, |    
|                                                                                            |  |                    |    
|                                                                                            |  | 2004               |     |  | 2003 |  
|                                                                                            | 
|Acquired technology, net of accumulated amortization of $4,796
    and $3,325, respectively |  | $                  |    |  |      | $ | 1,484 | 
|Prepaid royalties, net of current portion                                                   |  |                    | 46  |  |      |   | 163   | 
|Other                                                                                       |  |                    | 334 |  |      |   | 378   | 
|                                                                                            |  |                   
|                                                                                            |  | $                  | 380 |  |      | $ | 2,025 | 
|                                                                                            |  |                   





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software  2004 annual report




|   |                                      
|-- | -------------------------------------
|6. | ACCRUED AND OTHER CURRENT LIABILITIES



|                              |  |                    |        |  |      |   |        | 
|----------------------------- |  | ------------------ | ------ |  | ---- | - | ------ | 
|                              |  | As of December 31, |       
|                              |  |                    |       
|                              |  | 2004               |        |  | 2003 |  
|                              | 
|Accrued commissions and bonus |  | $                  | 3,602  |  |      | $ | 1,808  | 
|Accrued sales taxes           |  |                    | 1,536  |  |      |   | 1,328  | 
|Accrued vacation              |  |                    | 1,619  |  |      |   | 1,559  | 
|Accrued professional services |  |                    | 2,711  |  |      |   | 2,012  | 
|Accrued third party software  |  |                    | 425    |  |      |   | 787    | 
|Accrued ESPP                  |  |                    | 739    |  |      |   | 623    | 
|Accrued other                 |  |                    | 4,312  |  |      |   | 3,967  | 
|                              |  |                   
|                              |  | $                  | 14,944 |  |      | $ | 12,084 | 
|                              |  |                   



|   |                              
|-- | -----------------------------
|7. | COMMITMENTS AND CONTINGENCIES



| |                                
| | -------------------------------
| | Operating Lease
    Commitments



|                         |  |   |       | 
|------------------------ |  | - | ----- | 
|Years Ended December 31, |  |  
|                         | 
|2005                     |  | $ | 3,537 | 
|2006                     |  |   | 2,552 | 
|                         |  |   |      
|                         |  | $ | 6,089 | 
|                         |  |   |      







| |                                     
| | ------------------------------------
| | Notes Payable and Line of
    Credit





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software  2004 annual report






| |          
| | ---------
| | Royalties





| |           
| | ----------
| | Litigation











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software  2004 annual report


















8.    WARRANTS AND OPTIONS








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software  2004 annual report








9.    EMPLOYEE BENEFIT PLANS


Employee Savings and Retirement Plan




Employee Stock Purchase Plans




Stock Option Plans








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software  2004 annual report






|                             |                                                                   |               |           |             |             |  |            |                |  |         |       |      |  |  |   |      | 
|---------------------------- | ----------------------------------------------------------------- | ------------- | --------- | ----------- | ----------- |  | ---------- | -------------- |  | ------- | ----- | ---- |  |  | - | ---- | 
|                             |                                                                   |               |           |             |             |  |            | Weighted       | 
|                             |                                                                   | Shares        |           |             |             |  | Weighted   |                |  | Average |      
|                             |                                                                   | Available for |           |             | Options     |  |            | Average        |  |         | Fair  |     
|                             |                                                                   | Grant         |           |             | Outstanding |  |            | Exercise Price |  |         | Value |     
|                             |                                                                  
|Balance at December 31, 2001 |                                                                   |               | 1,163,380 |             |             |  | 8,330,998  |                |  | $       | 4.11  |      |  |  |   |     
|                             | Authorized                                                        |               |           | 7,700,000   |             |  |            |               |  |         |       |     |  |  |   |      | 
|                             | Granted with exercise prices equal to fair value at date of grant |               |           | (1,175,300) |             |  |            | 1,175,300      |  |         |       | 7.27 |  |  | $ | 2.88 | 
|                             |                                                                   |               |           |             |             |  |            |                |  |         |       |     
|                             | Exercised                                                         |               |           |            |             |  |            | (47,587)       |  |         |       | 1.54 |  |  |   |      | 
|                             | Repurchased                                                       |               |           | 74,841      |             |  |            |               |  |         |       | 0.74 |  |  |   |      | 
|                             | Cancelled                                                         |               |           | 1,167,558   |             |  |            | (1,167,558)    |  |         |       | 7.17 |  |  |   |      | 
|                             |                                                                   |              
|Balance at December 31, 2002 |                                                                   |               | 8,930,479 |             |             |  | 8,291,153  |                |  | $       | 4.08  |      |  |  |   |     
|                             |                                                                   |              
|                             | Authorized                                                        |               |           | 1,471,633   |             |  |            |               |  |         |       |     |  |  |   |      | 
|                             | Granted with exercise prices equal to fair value at date of grant |               |           | (5,258,900) |             |  |            | 5,258,900      |  |         | $     | 3.69 |  |  | $ | 2.42 | 
|                             |                                                                   |               |           |             |             |  |            |                |  |         |       |     
|                             | Exercised                                                         |               |           |            |             |  |            | (1,376,872)    |  |         | $     | 0.60 |  |  |   |      | 
|                             | Repurchased                                                       |               |           | 13,165      |             |  |            |               |  |         | $     | 0.97 |  |  |   |      | 
|                             | Cancelled                                                         |               |           | 1,806,716   |             |  |            | (1,806,716)    |  |         | $     | 4.54 |  |  |   |      | 
|                             |                                                                   |              
|Balance at December 31, 2003 |                                                                   |               | 6,963,093 |             |             |  | 10,366,465 |                |  | $       | 4.13  |      |  |  |   |     
|                             |                                                                   |              
|                             | Authorized                                                        |               |           | 1,563,236   |             |  |            |               |  |         |       |     |  |  |   |      | 
|                             | Granted with exercise prices equal to fair value at date of grant |               |           | (4,230,500) |             |  |            | 4,230,500      |  |         | $     | 3.80 |  |  | $ | 2.17 | 
|                             |                                                                   |               |           |             |             |  |            |                |  |         |       |     
|                             | Exercised                                                         |               |           |            |             |  |            | (551,818)      |  |         | $     | 1.71 |  |  |   |      | 
|                             | Cancelled                                                         |               |           | 2,268,252   |             |  |            | (2,268,252)    |  |         | $     | 3.97 |  |  |   |      | 
|                             |                                                                   |              
|Balance at December 31, 2004 |                                                                   |               | 6,564,081 |             |             |  | 11,776,895 |                |  | $       | 3.92  |      |  |  |   |     
|                             |                                                                   |              



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software  2004 annual report






|                |  |             |            |          |              |  |     |                  |  |           |             |  |                  |                     |           |  |  |   |       | 
|--------------- |  | ----------- | ---------- | -------- | ------------ |  | --- | ---------------- |  | --------- | ----------- |  | ---------------- | ------------------- | --------- |  |  | - | ----- | 
|                |  |             |            | Weighted |              |  |     |                  |  |           |            
|                |  |             |            | Average  |              |  |     |                  |  |           |            
|                |  | Number of   |            |          | Remaining    |  |     |                  |  | Number of |             |  | Weighted Average |                    
|Range of        |  | Options     |            |          | Contractual  |  |     | Weighted Average |  |           | Options     |  |                  | Exercise Price of   |          
|Exercise Prices |  | Outstanding |            |          | Life (Years) |  |     | Exercise Price   |  |           | Exercisable |  |                  | Exercisable Options |          
|                | 
|$ 0.06 - $ 0.32 |  |             | 1,100,635  |          |              |  | 3.7 |                  |  | $         | 0.10        |  |                  |                     | 1,100,635 |  |  | $ | 0.10  | 
|$ 2.00 - $ 2.83 |  |             | 1,659,070  |          |              |  | 6.3 |                  |  | $         | 2.51        |  |                  |                     | 1,268,919 |  |  | $ | 2.45  | 
|$ 3.00 - $ 3.92 |  |             | 3,325,847  |          |              |  | 9.0 |                  |  | $         | 3.41        |  |                  |                     | 675,823   |  |  | $ | 3.44  | 
|$ 4.05 - $ 4.69 |  |             | 2,969,334  |          |              |  | 8.9 |                  |  | $         | 4.18        |  |                  |                     | 496,406   |  |  | $ | 4.20  | 
|$ 5.00 - $ 5.44 |  |             | 1,700,434  |          |              |  | 7.2 |                  |  | $         | 5.06        |  |                  |                     | 1,184,033 |  |  | $ | 5.01  | 
|$ 6.00          |  |             | 88,750     |          |              |  | 5.6 |                  |  | $         | 6.00        |  |                  |                     | 88,750    |  |  | $ | 6.00  | 
|$ 7.18          |  |             | 129,432    |          |              |  | 7.0 |                  |  | $         | 7.18        |  |                  |                     | 83,422    |  |  | $ | 7.18  | 
|$ 9.00          |  |             | 579,643    |          |              |  | 6.1 |                  |  | $         | 9.00        |  |                  |                     | 555,870   |  |  | $ | 9.00  | 
|$12.60          |  |             | 223,750    |          |              |  | 6.3 |                  |  | $         | 12.60       |  |                  |                     | 193,500   |  |  | $ | 12.60 | 
|               
|$ 0.06 - $12.60 |  |             | 11,776,895 |          |              |  | 7.6 |                  |  | $         | 3.92        |  |                  |                     | 5,647,358 |  |  | $ | 3.92  | 
|               



|    |             
|--- | ------------
|10. | INCOME TAXES



|         |       |                          |          |         |      |   |         |       |  |   |         |       | 
|-------- | ----- | ------------------------ | -------- | ------- | ---- | - | ------- | ----- |  | - | ------- | ----- | 
|         |       | Years Ended December 31, |         
|         |       |                          |         
|         |       | 2004                     |          |         | 2003 |   |         | 2002  | 
|         |      
|Domestic |       | $                        | (14,636) |         |      | $ | 2,343   |       |  | $ | 6,202   |      
|Foreign  |       |                          | 5,591    |         |      |   | (2,986) |       |  |   | (2,632) |      
|        
|         | Total |                          | $        | (9,045) |      |   | $       | (643) |  |   | $       | 3,570 | 
|        



|         |         |                          |   |     |      |  |   |      |     |  |   |       |       | 
|-------- | ------- | ------------------------ | - | --- | ---- |  | - | ---- | --- |  | - | ----- | ----- | 
|         |         | Years Ended December 31, |  
|         |         |                          |  
|         |         | 2004                     |   |     | 2003 |  |   | 2002 |    
|         |        
|Current: |         |                          |   |     |      |  |   |      |     |  |   |      
|         | Federal |                          | $ |    |      |  | $ | 71   |     |  | $ |      |      
|         | State   |                          |   | 32  |      |  |   | 96   |     |  |   | 164   |      
|         | Foreign |                          |   | 549 |      |  |   | 657  |     |  |   | 1,016 |      
|        
|         |         | Total provision          |   | $   | 581  |  |   | $    | 824 |  |   | $     | 1,180 | 
|        





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software  2004 annual report




|                                                         |  |                    |          |  |      |   |         | 
|-------------------------------------------------------- |  | ------------------ | -------- |  | ---- | - | ------- | 
|                                                         |  | As of December 31, |         
|                                                         |  |                    |         
|                                                         |  | 2004               |          |  | 2003 |  
|                                                         | 
|Cumulative net operating loss carryforwards              |  | $                  | 9,866    |  |      | $ | 2,111   | 
|Research, development and other tax credit carryforwards |  |                    | 6,482    |  |      |   | 3,844   | 
|Alternative minimum tax credit                           |  |                    |         |  |      |   | 71      | 
|Cumulative temporary differences                         |  |                    | 3,127    |  |      |   | 1,288   | 
|                                                         |  |                   
|Total deferred tax assets                                |  |                    | 19,475   |  |      |   | 7,314   | 
|Valuation allowance                                      |  |                    | (19,475) |  |      |   | (7,314) | 
|                                                         |  |                   
|Net deferred tax assets                                  |  | $                  |         |  |      | $ |        | 
|                                                         |  |                   







|                                                            |  |                    |        |   |      |  |         |      |  |  |         |  
|----------------------------------------------------------- |  | ------------------ | ------ | - | ---- |  | ------- | ---- |  |  | ------- | -
|                                                            |  | As of December 31, |       
|                                                            |  |                    |       
|                                                            |  | 2004               |        |   | 2003 |  |         | 2002 | 
|                                                            | 
|Federal statutory rate                                      |  |                    | (34.0) | % |      |  | (34.0)  | %    |  |  | 34.0    | %
|State taxes net of federal benefit                          |  |                    | 0.4    |   |      |  | 15.0    |      |  |  | 4.6     |  
|Alternative minimum taxes                                   |  |                    |       |   |      |  | 11.1    |      |  |  |        |  
|Non-deductible compensation                                 |  |                    | 2.1    |   |      |  | 82.7    |      |  |  | 37.9    |  
|Federal and state credits                                   |  |                    | (25.6) |   |      |  | (177.6) |      |  |  | (36.1)  |  
|Other                                                       |  |                    | 2.2    |   |      |  |        |      |  |  |        |  
|Foreign taxes                                               |  |                    | 5.9    |   |      |  | 102.1   |      |  |  | 27.1    |  
|Change in valuation allowance                               |  |                    | 55.3   |   |      |  | (24.4)  |      |  |  | (215.1) |  
|Utilization of deferred tax assets not previously benefited |  |                    |       |   |      |  | 153.2   |      |  |  | 180.7   |  
|                                                            |  |                   
|                                                            |  |                    | 6.3    | % |      |  | 128.1   | %    |  |  | 33.1    | %
|                                                            |  |                   



|    |                  
|--- | -----------------
|11. | SEGMENT REPORTING





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software  2004 annual report










|          |                                    |                          |   |        |        |  |   |        |        |  |   |        |        | 
|--------- | ---------------------------------- | ------------------------ | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|          |                                    | Years Ended December 31, |  
|          |                                    |                          |  
|          |                                    | 2004                     |   |        | 2003   |  |   | 2002   |       
|          |                                   
|Revenues: |                                    |                          |   |        |        |  |   |        |        |  |   |       
|          | License                            |                          | $ | 35,727 |        |  | $ | 34,044 |        |  | $ | 49,581 |       
|          | Maintenance                        |                          |   | 25,542 |        |  |   | 22,451 |        |  |   | 18,462 |       
|          | Professional services and training |                          |   | 22,879 |        |  |   | 14,957 |        |  |   | 14,876 |       
|          |                                    |                         
|          |                                    | Total                    |   | $      | 84,148 |  |   | $      | 71,452 |  |   | $      | 82,919 | 
|          |                                    |                         



|                              |                          |                          |   |        |        |  |   |        |        |  |   |        |        | 
|----------------------------- | ------------------------ | ------------------------ | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                              |                          | Years Ended December 31, |  
|                              |                          |                          |  
|                              |                          | 2004                     |   |        | 2003   |  |   | 2002   |       
|                              |                         
|Revenue by geographic region: |                          |                          |   |        |        |  |   |        |        |  |   |       
|                              | United States of America |                          | $ | 60,884 |        |  | $ | 56,642 |        |  | $ | 67,263 |       
|                              | International            |                          |   | 23,264 |        |  |   | 14,810 |        |  |   | 15,656 |       
|                              |                          |                         
|                              |                          | Total                    |   | $      | 84,148 |  |   | $      | 71,452 |  |   | $      | 82,919 | 
|                              |                          |                         



|    |                         
|--- | ------------------------
|12. | FOREIGN EXCHANGE HEDGING





|    |                           
|--- | --------------------------
|13. | RELATED PARTY TRANSACTIONS







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software  2004 annual report




|    |                                              
|--- | ---------------------------------------------
|14. | SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)



|      |                                     |         |   |         |         |  |   |         |  |  |         |         |  |  |   |        | 
|----- | ----------------------------------- | ------- | - | ------- | ------- |  | - | ------- |  |  | ------- | ------- |  |  | - | ------ | 
|      |                                     | First   |   |         | Second  |  |   | Third   |  |  | Fourth  |        
|      |                                     | Quarter |   |         | Quarter |  |   | Quarter |  |  | Quarter |        
|      |                                    
|2003: |                                     |         |   |         |         |  |   |         |  |  |         |         |  |  |   |       
|      | Total revenue                       |         | $ | 17,169  |         |  | $ | 17,031  |  |  | $       | 18,480  |  |  | $ | 18,772 | 
|      | Gross margin                        |         |   | 14,109  |         |  |   | 13,527  |  |  |         | 14,901  |  |  |   | 15,135 | 
|      | Net income (loss)                   |         | $ | 529     |         |  | $ | (1,071) |  |  | $       | (373)   |  |  | $ | (552)  | 
|      |                                     |        
|      | Basic net income (loss) per share   |         | $ | 0.02    |         |  | $ | (0.04)  |  |  | $       | (0.01)  |  |  | $ | (0.02) | 
|      |                                     |        
|      | Diluted net income (loss) per share |         | $ | 0.02    |         |  | $ | (0.04)  |  |  | $       | (0.01)  |  |  | $ | (0.02) | 
|      |                                     |        
|2004: |                                     |         |   |         |         |  |   |         |  |  |         |         |  |  |   |       
|      | Total revenue                       |         | $ | 17,723  |         |  | $ | 19,468  |  |  | $       | 22,484  |  |  | $ | 24,473 | 
|      | Gross margin                        |         |   | 12,729  |         |  |   | 13,983  |  |  |         | 16,970  |  |  |   | 18,469 | 
|      | Net income (loss)                   |         | $ | (3,375) |         |  | $ | (3,687) |  |  | $       | (2,703) |  |  | $ | 139    | 
|      |                                     |        
|      | Basic net income (loss) per share   |         | $ | (0.11)  |         |  | $ | (0.12)  |  |  | $       | (0.08)  |  |  | $ | 0.00   | 
|      |                                     |        
|      | Diluted net income (loss) per share |         | $ | (0.11)  |         |  | $ | (0.12)  |  |  | $       | (0.08)  |  |  | $ | 0.00   | 
|      |                                     |        



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##### Table of Contents



plumtree
software  2004 annual report




SIGNATURES






| |                        
| | -----------------------
| | PLUMTREE SOFTWARE, INC.



| |     |               
| | --- | --------------
| | By: | /s/ John Kunze

| |                                                  
| | -------------------------------------------------
| |                                                  
| | John Kunze, President and Chief Executive Officer

POWER OF ATTORNEY




|                                         |  |                                                                                   |  |                |  | 
|---------------------------------------- |  | --------------------------------------------------------------------------------- |  | -------------- |  | 
|                                         |  | Title                                                                             |  | Date          
|Signature                                |  |                                                                                   |  |               
|                                         |  |                                                                                   |  |               
|                                        
|/s/ John KunzeJohn
    Kunze             |  | President, Chief Executive Officer and Director (Principal
    Executive Officer) |  | March 11, 2005
|                                        
|/s/ Eric BorrmannEric
    Borrmann       |  | Chief Financial Officer (Principal Financial and Accounting
    Officer)          |  | March 11, 2005
|                                        
|/s/ John DillonJohn
    Dillon           |  | Director                                                                          |  | March 11, 2005
|                                        
|/s/ Rupen DolasiaRupen
    Dolasia       |  | Director                                                                          |  | March 11, 2005
|                                        
|/s/ James RichardsonJames
    Richardson |  | Director                                                                          |  | March 11, 2005
|                                        
|/s/ Bernard WhitneyBernard
    Whitney   |  | Director                                                                          |  | March 11, 2005
|                                        
|/s/ David PrattDavid
    Pratt           |  | Director                                                                          |  | March 11, 2005



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plumtree
software  2004 annual report


exhibit index


|        |        |  |             |                                                                                                                                               
|------- | ------ |  | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |  | Description
|        |        |  |            
|        | 3.1    |  |             | Amended and Restated Certificate of Incorporation of the
    Registrant(1)                                                                    
|        | 3.2    |  |             | Bylaws of the Registrant(1)                                                                                                                   
|        | 4.1    |  |             | Specimen common stock certificate(1)                                                                                                          
|        | 4.2    |  |             | Warrant to purchase Common Stock, dated May 31, 2000,
    issued to WXI/SAN Realty, L.L.C.(1)                                                 
|        | 4.3    |  |             | Warrant to purchase Common Stock, dated Sept. 20, 2000,
    issued to WXI/SAN Realty, L.L.C.(1)                                               
|        | 10.1*  |  |             | Form of Indemnification Agreement between the Registrant and
    each of its directors, officers and certain other key
    employees(1)       
|        | 10.2*  |  |             | 1997 Equity Incentive Plan, as amended, and form of agreements
    thereunder(1)                                                              
|        | 10.3*  |  |             | 2002 Stock Plan, as amended, and form of agreements thereunder(1)                                                                             
|        | 10.4*  |  |             | 2002 Employee Stock Purchase Plan, and form of agreements
    thereunder(3)                                                                   
|        | 10.5*  |  |             | 2002 Director Option Plan, and form of agreements
    thereunder(1)                                                                           
|        | 10.6   |  |             | Loan and Security Agreement, dated March 14, 2001, between
    the Registrant and Silicon Valley Bank(1)                                      
|        | 10.7   |  |             | Office Lease for 500 Sansome Street, dated April 7,
    1999, between the Registrant and BPG Sansome, L.L.C.(1)                               
|        | 10.8   |  |             | First Amendment to Lease for 500 Sansome Street, dated
    May 3, 2000, between the Registrant and WXI/SAN Realty,
    L.L.C.(1)              
|        | 10.9*  |  |             | Offer letter between the Registrant and John H. Kunze(1)                                                                                      
|        | 10.10* |  |             | Offer letter between the Registrant and Eric Borrmann(1)                                                                                      
|        | 10.11  |  |             | Second Amendment to Lease for 500 Sansome Street, dated
    September 20, 2000, between the Registrant and WXI/SAN
    Realty, L.L.C.(1)      
|        | 10.12  |  |             | Third Amendment to Lease for 500 Sansome Street, dated
    November 22, 2000, between the Registrant and WXI/SAN
    Realty, L.L.C.(1)        
|        | 10.13  |  |             | Fourth Amendment to Lease for 500 Sansome Street, dated
    July 31, 2002, between the Registrant and WXI/SAN
    Realty, L.L.C.(2)           
|        | 10.14  |  |             | Fifth Amendment to Lease for 500 Sansome Street, dated
    July 21, 2003, between the Registrant and WXI/SAN
    Realty, L.L.C.(2)            
|        | 10.15* |  |             | Offer letter between Registrant and Eric Zocher(2)                                                                                            
|        | 10.16* |  |             | 2004 Bonus Plan(3)                                                                                                                            
|        | 10.17* |  |             | 2004 Outside Director Stock in Lieu of Fees Plan(3)                                                                                           
|        | 10.18* |  |             | Employment Agreement between the Registrant and Paul Ciandrini(4)                                                                             
|        | 10.19* |  |             | Employment Agreement between the Registrant and Ira Pollack(4)                                                                                
|        | 10.20* |  |             | Offer Letter between the Registrant and Adriana Chiocchi(4)                                                                                   
|        | 10.21  |  |             | Office Lease for 505 Sansome Street, dated October 22,
    2004, between Registrant and Transamerica Realty Investment
    Properties, LLC.(5)
|        | 10.22  |  |             | Revolving Line of Credit Amendment, dated October 25, 2004,
    between Registrant and Silicon Valley Bank(5)                                 
|        | 10.23* |  |             | 2005 Bonus Plan                                                                                                                               
|        | 10.24* |  |             | 2005 Independent Director Cash Compensation Plan                                                                                              
|        | 23.1   |  |             | Consent of Independent Registered Public Accounting Firm                                                                                      
|        | 31.1   |  |             | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes Oxley Act of 2002
    (S-O Act)                        
|        | 31.2   |  |             | Certification of Chief Financial Officer pursuant to
    Section 302 of the S-O Act                                                           
|        | 32.1   |  |             | Certification of Chief Executive Officer pursuant to
    Section 906 of the S-O Act                                                           
|        | 32.2   |  |             | Certification of Chief Financial Officer pursuant to
    Section 906 of the S-O Act                                                           



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##### Table of Contents



plumtree
software  2004 annual report









| |   |                                                         
| | - | --------------------------------------------------------
| | * | Management contract or compensatory plan or arrangement.



|    |                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to Exhibits filed with Registration
    Statement No. 333-45950, as amended, which became effective
    on June 3, 2002.                                               
|   
|(2) | Incorporated by reference to Exhibits filed with the
    Registrants Form 10-Q for the quarter ended
    September 30, 2003 and filed with the SEC on
    November 3, 2003 (File No. 001-31344).
|   
|(3) | Incorporated by reference to Exhibits filed with
    Registrants Form 10-K for the year ended December 31,
    2003 and filed with the SEC on March 12, 2004 (File No.
    001-31344).          
|   
|(4) | Incorporated by reference to Exhibits filed with
    Registrants Form 10-Q for the quarter ended
    June 30, 2004 and filed with the SEC on August 6, 2004
    (File No. 001-31344).           
|   
|(5) | Incorporated by reference to Exhibits filed with
    Registrants Form 10-Q for the quarter ended
    September 30, 2004 and filed with SEC on November 5,
    2004 (Filed No. 001-31344).