<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10 - Q

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       OR

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

                        Commission File Number 000-26881

                                 E.PIPHANY, INC.
                                ----------------
               (Exact Name as Registrant specified in its charter)


<TABLE>
<S>                                      <C>
           DELAWARE                                       77-0443392
           --------                                       ----------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)
</TABLE>


                      1900 SOUTH NORFOLK STREET, SUITE 310
                           SAN MATEO, CALIFORNIA 94403
                           ---------------------------
                    (Address of principal executive offices)

                                 (650) 356-3800
                                 --------------
              (Registrant's telephone number, including area code)


       Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]

       The number of shares outstanding of the registrant's common stock, par
value $0.0001 per share, as of April 30, 2001, was 70,572,128.


<PAGE>   2

                                 E.PIPHANY, INC.

                          QUARTERLY REPORT ON FORM 10-Q
                          QUARTER ENDED MARCH 31, 2001

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          PAGE NO.
<S>                                                                          <C>
PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

        Condensed Consolidated Balance Sheets - ......................       3
           As of December 31, 2000 and March 31, 2001

        Condensed Consolidated Statements of Operations - ............       4
           Three months ended March 31, 2000 and 2001

        Condensed Consolidated Statements of Cash Flows - ............       5
           Three months ended March 31, 2000 and 2001

        Notes to Condensed Consolidated Financial Statements .........       6

Item 2. Management's Discussion and Analysis of ......................       9
        Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk ...      26


PART II OTHER INFORMATION

Item 1. Legal Proceedings ............................................      27

Item 2. Changes in Securities and Use of Proceeds ....................      27

Item 3. Defaults Upon Senior Securities ..............................      27

Item 4. Submission of Matters to a Vote of Securities Holders ........      27

Item 5. Other Information ............................................      27

Item 6. Exhibits and reports on Form 8-K .............................      27

SIGNATURES ...........................................................      28
</TABLE>

<PAGE>   3

                          PART I: FINANCIAL INFORMATION

ITEM 1:  FINANCIAL STATEMENTS

                                 E.PIPHANY, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                            DECEMBER 31,       MARCH 31,
                                                               2000               2001
                                                            -----------       -----------
                                                                              (UNAUDITED)
<S>                                                         <C>               <C>
ASSETS
Current assets:
  Cash and cash equivalents ..........................      $   319,634       $   272,140
  Short-term investments .............................           77,339            95,836
  Accounts receivable, net ...........................           27,592            27,652
  Prepaid expenses and other assets ..................            5,152             6,406
                                                            -----------       -----------
     Total current assets ............................          429,717           402,034
Property and equipment, net ..........................           21,789            25,599
Goodwill and purchased intangibles ...................        2,541,245         2,281,133
Other assets .........................................            2,323             2,248
                                                            -----------       -----------
     Total assets ....................................      $ 2,995,074       $ 2,711,014
                                                            ===========       ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of capital lease obligations .......      $       658       $       620
  Trade accounts payable .............................            2,191             2,963
  Accrued compensation ...............................           12,715            16,049
  Accrued other ......................................           17,289            13,452
  Deferred revenue ...................................           23,412            20,639
                                                            -----------       -----------
     Total current liabilities .......................           56,265            53,723
Capital lease obligations, net of current portion ....              618               481
                                                            -----------       -----------
     Total liabilities ...............................           56,883            54,204
Stockholders' equity:
  Common stock .......................................                6                 6
  Additional paid-in capital .........................        3,746,759         3,759,187
  Notes receivable ...................................           (2,668)           (1,645)
  Accumulated other comprehensive loss ...............             (550)             (261)
  Deferred compensation ..............................           (1,009)             (735)
  Accumulated deficit ................................         (804,347)       (1,099,742)
                                                            -----------       -----------
     Total stockholders' equity ......................        2,938,191         2,656,810
                                                            -----------       -----------
     Total liabilities and stockholders' equity ......      $ 2,995,074       $ 2,711,014
                                                            ===========       ===========
</TABLE>

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

                                       3
<PAGE>   4
                                 E.PIPHANY, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                               MARCH 31,
                                                                         2000            2001
                                                                       ---------       ---------
<S>                                                                    <C>             <C>
Revenues:
  Product license ...............................................      $   8,268       $  22,432
  Services ......................................................          6,147          15,645
                                                                       ---------       ---------
     Total revenues .............................................         14,415          38,077
                                                                       ---------       ---------
Cost of revenues:
  Product license ...............................................            109             744
  Services ......................................................          6,020          21,507
                                                                       ---------       ---------
     Total cost of revenues .....................................          6,129          22,251
                                                                       ---------       ---------
     Gross profit ...............................................          8,286          15,826
                                                                       ---------       ---------
Operating expenses:
  Research and development ......................................          3,758          11,419
  Sales and marketing ...........................................         11,212          23,978
  General and administrative ....................................          2,257           8,639
  In-process research and development charge ....................         22,000            --
  Amortization of goodwill and purchased intangibles ............         39,943         270,436
  Stock-based compensation ......................................            477             290
                                                                       ---------       ---------
     Total operating expenses ...................................         79,647         314,762
                                                                       ---------       ---------
     Loss from operations .......................................        (71,361)       (298,936)
Other income (expense), net .....................................          4,393           3,541
                                                                       ---------       ---------
     Net loss ...................................................      $ (66,968)      $(295,395)
                                                                       =========       =========
Basic and diluted net loss per share ............................      $   (1.57)      $   (4.48)
                                                                       =========       =========
Shares used in computing basic and diluted net loss per .........         42,678          65,943
                                                                       =========       =========
</TABLE>

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

                                       4

<PAGE>   5

                                 E.PIPHANY, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                               MARCH 31,
                                                                         2000             2001
                                                                       ---------       ---------
<S>                                                                    <C>             <C>
Cash flows from operating activities:
  Net loss ......................................................      $ (66,968)      $(295,395)
  Adjustments to reconcile net loss to net cash used for
     operating activities:
     Depreciation and amortization ..............................            467             852
     Allowance for doubtful accounts ............................            250           2,000
     Noncash compensation expense ...............................            477             290
     In-process research and development charge .................         22,000            --
     Amortization of goodwill and purchased intangibles .........         39,943         270,436
     Changes in operating assets and liabilities, net of
       effect of acquisitions:
       Accounts receivable ......................................         (2,652)         (2,061)
       Prepaid expenses and other assets ........................           (416)         (1,179)
       Trade accounts payable ...................................         (5,002)            772
       Accrued liabilities ......................................          8,373             205
       Deferred revenue .........................................           (680)         (2,773)
                                                                       ---------       ---------
          Net cash used in operating activities .................         (4,208)        (26,853)
                                                                       ---------       ---------
Cash flows from investing activities:
  Purchases of property and equipment ...........................         (2,414)         (4,662)
  Cash acquired in acquisitions .................................          1,613            --
  Direct costs of purchase transactions .........................           --               (75)
  Purchases and sales of investments, net .......................           (491)        (18,434)
                                                                       ---------       ---------
          Net cash used in investing activities .................         (1,292)        (23,171)
                                                                       ---------       ---------
Cash flows from financing activities:

  Repayments on line of credit ..................................         (8,319)           --
  Principal payments on capital lease obligations ...............            (68)           (175)
  Proceeds from secondary offering, net .........................        356,361            --
  Repayments on notes receivable ................................            185           1,023
  Proceeds from sale of common stock, net of repurchases ........            525           1,456
                                                                       ---------       ---------
          Net cash provided by financing activities .............        348,684           2,304
                                                                       ---------       ---------
Effect of foreign exchange rates on cash and cash equivalents ...           --               226
                                                                       ---------       ---------
Net increase (decrease) in cash and cash equivalents ............        343,184         (47,494)
Cash and cash equivalents at beginning of period ................         58,084         319,634
                                                                       ---------       ---------
Cash and cash equivalents at end of period ......................      $ 401,268       $ 272,140
                                                                       =========       =========
</TABLE>

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

                                       5

<PAGE>   6

                                 E.PIPHANY, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. BASIS OF PRESENTATION

     The condensed consolidated financial statements included herein have been
prepared by E.piphany, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, E.piphany believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in E.piphany's Annual Report
on Form 10-K for the fiscal year ended December 31, 2000.

     The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) which
are, in the opinion of management, necessary to state fairly the results for the
three months ended March 31, 2001. The results for the three months ended March
31, 2001 are not necessarily indicative of the results expected for the full
fiscal year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

     The accompanying condensed consolidated financial statements include the
accounts of E.piphany and its wholly owned subsidiaries. All intercompany
accounts and transactions have been eliminated.

FOREIGN CURRENCY TRANSLATION

     The functional currency of our foreign subsidiaries is the local currency.
The Company translates the assets and liabilities of international non-U.S.
functional currency subsidiaries into dollars at the current rates of exchange
in effect during each period. Revenues and expenses are translated using rates
that approximate those in effect during the period. Gains and losses from
translation adjustments are included in stockholders' equity in the consolidated
balance sheet caption "Accumulated other comprehensive loss." Currency
transaction gains or losses, derived on monetary assets and liabilities stated
in a currency other than the functional currency, are recognized in current
operations and have not been significant to the Company's operating results in
any period. The effect of foreign currency rate changes on cash and cash
equivalents has not been significant in any period.

IMPAIRMENT OF LONG-LIVED ASSETS AND IDENTIFIABLE INTANGIBLE ASSETS

     The Company evaluates long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds its fair market value.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"),
which provides a comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. As amended, this statement is
effective for fiscal years beginning after June 15, 2000. E.piphany applied the
new rules prospectively to transactions beginning in the first quarter of 2001.
The adoption did not have a material effect on its financial position or results
of operations.


                                       6
<PAGE>   7

     In March 2000, the FASB issued Financial Standards Board Interpretation
("FIN") No. 44, "Accounting for Certain Transactions Involving Stock
Compensation an Interpretation of APB Opinion No. 25." FIN No. 44 addresses the
application of APB No. 25 to clarify, among other issues (a) the definition of
"employee" for purposes of applying APB No. 25, (b) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (c) the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and (d) the accounting for an exchange of stock compensation
awards in a business combination. FIN No. 44 is effective July 1, 2000, but
certain conclusions cover specific events that occurred after either December
15, 1998 or January 12, 2000, but before the effective date of July 1, 2000, the
effects of applying the interpretation have been recognized on a prospective
basis from July 1, 2000. E.piphany adopted FIN No. 44 in July 2000. The adoption
did not have a material effect on its financial position or results of
operations.

3. STOCKHOLDERS' EQUITY

STOCK-BASED COMPENSATION

     In connection with the grant of certain stock options to employees during
the years ended December 31, 1998 and 1999, the Company recorded deferred
compensation of approximately $5.8 million, representing the difference between
the deemed value of the common stock for accounting purposes and the option
exercise price or stock sale price at the date of the option grant or stock
sale. Such amount is presented as a reduction of stockholders' equity and
amortized over the vesting period of the applicable options in a manner
consistent with FASB Interpretation No. 28. Total stock-based compensation
expensed was approximately $0.5 million and $0.3 million during the three months
ended March 31, 2000 and 2001, respectively. Compensation expense is decreased
in the period of forfeiture for any accrued but unvested compensation arising
from the early termination of an option holder's services.

COMPREHENSIVE INCOME (LOSS)

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which E.piphany adopted beginning on January 1, 1998. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. The objective
of SFAS No. 130 is to report a measure of all changes in equity of an enterprise
that results from transactions and other economic events of the period other
than transactions with stockholders ("comprehensive income"). Comprehensive
income is the total of net income and all other non-owner changes in equity. For
the three months ended March 31, 2000, and the three months ended March 31,
2001, E.piphany's comprehensive income (loss) did not differ materially from
reported net loss.

4. COMPUTATION OF BASIC AND DILUTED NET LOSS PER SHARE

     Basic and diluted net loss per common share are presented in conformity
with SFAS No. 128, "Earnings Per Share," for all periods presented. In
accordance with SFAS No. 128, basic net loss per common share has been computed
using the weighted average number of shares of common stock outstanding during
the period, less shares subject to repurchase.

     The following table presents the calculation of basic net loss per share
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                               MARCH 31,
                                                                         2000            2001
                                                                      ---------       ---------
<S>                                                                   <C>             <C>
Net loss .......................................................      $ (66,968)      $(295,395)
                                                                      =========       =========
  Basic and diluted:
  Weighted average shares of common stock outstanding ..........         47,594          68,594
Less: Weighted average shares subject to repurchase ............         (4,916)         (2,651)
                                                                      ---------       ---------
Weighted average shares used in computing basic and diluted
  net loss per common share ....................................         42,678          65,943
                                                                      =========       =========
  Basic and diluted net loss per common share ..................      $   (1.57)      $   (4.48)
                                                                      =========       =========
  Net loss .....................................................      $ (66,968)      $(295,395)
                                                                      =========       =========
</TABLE>


                                       7
<PAGE>   8

     E.piphany has excluded all outstanding stock options and shares subject to
repurchase from the calculation of diluted net loss per common share because all
such securities are antidilutive for all periods presented. The total number of
shares excluded from the calculations of basic and diluted net loss per share
were 11,084,000 and 3,824,000 for the three months ended March 31, 2000 and
2001, respectively.

5. COMMITMENTS

LETTERS OF CREDIT

     In February 2001, the Company entered into four secured letters of credit
totaling $3,915,000 with a bank. These letters of credit, which expire in
February 2002, collateralize the Company's obligation to third parties for lease
payments. In November 2000, the Company entered into a $3,303,000 secured letter
of credit with a bank. This letter of credit, which expires in November 2001,
collateralizes the Company's obligation to a third party for lease payments. In
October 2000, the Company entered into an $835,000 secured letter of credit with
a bank. This letter of credit, which expires in October 2001, collateralizes the
Company's obligation to a third party for lease payments. In July 2000, the
Company entered into two secured letters of credit totaling $1,191,000 with a
bank. These letters of credit, which expire in July 2001, collateralize the
Company's obligation to a third party for lease payments. The letters of credit
are secured by cash, cash equivalents and short-term investments.

6. SEGMENT INFORMATION

     During 1998, E.piphany adopted SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 requires a new basis of
determining reportable business segments (i.e., the management approach). This
approach requires that business segment information used by management to assess
performance and manage company resources be the source for segment information
disclosure. On this basis, E.piphany is organized and operates as one business
segment, the design, development, and marketing of software solutions. The
Company markets its products in the United States and in foreign countries
through its sales personnel and its subsidiaries.

     Information regarding geographic areas is as follows (in thousands):

<TABLE>
<CAPTION>
                        THREE MONTHS ENDED MARCH 31,
                        ----------------------------
                             2000         2001
                            -------      -------
<S>                         <C>          <C>
Revenues:
  North America ......      $14,287      $29,039
  International ......          128        9,038
                            -------      -------
          Total ......      $14,415      $38,077
                            =======      =======
</TABLE>


7. ACQUISITIONS

     On January 29, 2001, E.piphany acquired the intellectual property assets of
Radnet, Inc. Under the terms of the asset purchase agreement, E.piphany issued
238,032 shares of common stock in exchange for the assets. This transaction will
add to E.piphany's strategic intellectual property and complement its current
product development plan. The total purchase price was approximately $10.3
million, and is being amortized on a straight-line basis over a useful life of
three years. Accumulated amortization was approximately $0.6 million at March
31, 2001.

8. SUBSEQUENT EVENT

     On April 12, 2001, E.piphany acquired Moss Software, Inc. through a merger
of a wholly-owned subsidiary of E.piphany with and into Moss Software, Inc. Moss
Software, Inc. is a provider of customer relationship management products that
resolve its customer sales automation challenges and better manage their sales
cycles. Under the terms of the Reorganization Agreement, E.piphany issued
1,547,050 shares of common stock in return for all of the outstanding shares of
common stock and options to purchase shares of common stock of Moss Software,
Inc.

                                       8
<PAGE>   9



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

     The statements contained in this Quarterly Report on Form 10-Q that are not
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including
statements regarding E.piphany's expectations, beliefs, intentions or strategies
regarding the future. Forward-looking statements include, without limitation,
statements regarding the extent and timing of future revenues and expenses and
customer demand, statements regarding the deployment of E.piphany's products,
and statements regarding reliance on third parties. All forward-looking
statements included in this document are based on information available to
E.piphany as of the date hereof, and E.piphany assumes no obligation to update
any such forward-looking statement. It is important to note that E.piphany's
actual results could differ materially from those in such forward-looking
statements. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those discussed under the heading "Risk
Factors" and the risks discussed in our other Securities Exchange Commission
("SEC") filings.

OVERVIEW

     E.piphany develops, markets and sells the E.piphany E.5 System, an
integrated suite of customer relationship management (CRM) software solutions.
These CRM solutions provide capabilities for the analysis of customer data, the
creation of inbound and outbound marketing campaigns, and the execution of sales
and service customer interactions. Companies can implement the E.piphany E.5
System to gain insight into their customers' characteristics and preferences,
and then take action on that insight to better and more profitably serve those
customers. To gain insight into their customers, companies use our analytic CRM
solutions, which collect customer data from existing software systems or other
E.piphany solutions, as well as third party data providers. To take action on
this insight, companies use our operational CRM solutions to more efficiently
interact with their customers across a variety of communication and distribution
channels.

     E.piphany was founded in November 1996. From E.piphany's founding through
the end of 1997, E.piphany primarily engaged in research activities, developing
products and building business infrastructure. E.piphany began shipping its
first software product and first generated revenues from software license fees,
implementation and consulting fees, and maintenance fees in early 1998. Despite
our revenue growth, E.piphany has incurred significant costs to develop its
technology and products, for the recruitment of research and development
personnel, to build a direct sales force and a professional services
organization, and to expand its general and administrative infrastructure.
E.piphany's total headcount has increased from 279 employees at December 31,
1999 to 978 employees at March 31, 2001.

RECENT EVENTS

ACQUISITIONS

     On January 29, 2001, E.piphany acquired the intellectual property assets of
Radnet, Inc. Under the terms of the asset purchase agreement, E.piphany issued
238,032 shares of common stock in exchange for the assets. This transaction will
add to E.piphany's strategic intellectual property and complement its current
product development plan. The total purchase price was approximately $10.3
million, and is being amortized on a straight-line basis over a useful life of
three years. Accumulated amortization was approximately $0.6 million at March
31, 2001.

     On April 12, 2001, E.piphany acquired Moss Software, Inc. through a merger
of a wholly-owned subsidiary of E.piphany with and into Moss Software, Inc. Moss
Software, Inc. is a provider of customer relationship management products that
resolve its customer sales automation challenges and better manage their sales
cycles. Under the terms of the Reorganization Agreement, E.piphany issued
1,547,050 shares of common stock in return for all of the outstanding shares of
common stock and options to purchase shares of common stock of Moss Software,
Inc.

                                       9
<PAGE>   10

STOCK OPTION EXCHANGE PROGRAM

     On April 2, 2001, E.piphany announced a voluntary stock option exchange
program for our employees. Under the program, our employees are being given the
opportunity to elect to cancel outstanding stock options held by them in
exchange for an equal number of new options to be granted at a future date.
These elections needed to be made by May 1, 2001 and must include all options
granted during the prior six months. A total of 614 employees elected to
participate in the exchange program. Those 614 employees tendered a total of
5,849,237 options to purchase our common stock in return for promises to grant
new options on the grant date of November 5, 2001. The exercise price of the new
options will be equal to the fair market value of the Company's common stock on
the date of grant. The exchange program is not available to our executives,
outside directors, consultants, former employees or any of our employees who are
residents of the Netherlands, Switzerland, Spain or Brazil or are employed by
our subsidiaries located in those countries.

SOURCE OF REVENUES AND REVENUE RECOGNITION POLICY

     E.piphany generates revenues principally from licensing its software
products directly to customers and providing related professional services
including implementation, consulting, support and training. Through March 31,
2001, substantially all of E.piphany's revenues have been derived from sales
through E.piphany's direct sales force. E.piphany's license agreements generally
provide that customers pay a software license fee to use one or more software
solutions in perpetuity (a perpetual license) for a specified number of users.
The amount of the license fee varies based on which software solution is
purchased, the number of software solutions purchased and the number of users
licensed. Customers can subsequently pay additional license fees to allow
additional users to use previously purchased software solutions or to purchase
additional software solutions. Each software solution included in the E.piphany
E.5 System contains the same core technology, allowing for easy integration of
additional software solutions as they are purchased from E.piphany. Customers
that purchase software solutions receive the software on compact disc or via
Internet delivery.

     Customers generally require consulting and implementation services which
include evaluating their business needs, identifying the data sources necessary
to meet these needs and installing the software solution in a manner which
fulfills their needs. Customers can purchase these services directly from
E.piphany through E.piphany's internal professional services organization on
either a fixed fee or a time and expense basis or they can purchase these
services directly from third party consulting organizations, such as KPMG and
PricewaterhouseCoopers. E.piphany has also historically supplemented the
capacity of its internal professional services organization by subcontracting
some of these services to these third party consulting organizations. We intend
to increasingly encourage customers to purchase services directly from these
consulting organizations. We believe that this would increase the number of
consultants who can provide consulting and implementation services related to
our software products and that it would increase our overall gross margins by
increasing our percentage of license revenue, which has substantially higher
gross margins than services revenue, as a percentage of total revenue. We also
believe that it will encourage these consulting organizations to generate sales
leads within their customer base.

     Fees from licenses are recognized as revenue upon contract execution,
provided all shipment obligations have been met, fees are fixed or determinable,
collection is probable, and vendor specific objective evidence exists to
allocate the total fee between all delivered and undelivered elements of the
arrangement. If vendor specific objective evidence does not exist to allocate
the total fee to all delivered and undelivered elements of the arrangement,
revenue is deferred until the earlier of a) such evidence does exist for the
undelivered elements, or b) all elements are delivered. Fees from license
agreements which include the right to receive unspecified future products are
recognized over the term of the arrangement or, if not specified, the estimated
economic life of the product.

     When licenses are sold together with consulting and implementation
services, license fees are recognized upon shipment, provided that (1) the above
criteria have been met, (2) payment of the license fees is not dependent upon
the performance of the consulting services, and (3) the services do not include
significant alterations to the features and functionality of the software. To
date, services have been essential to the functionality of the software products
for substantially all license agreements entered into which included
implementation services. For these arrangements and other arrangements which
don't meet the above criteria, both the product license revenues and services
revenues are recognized in accordance with the provisions of Statement of
Position ("SOP") 81-1, "Accounting for Performance of Construction Type and
Certain Production Type Contracts." When reliable estimates are available


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<PAGE>   11

for the costs and efforts necessary to complete the implementation services, we
account for the arrangements under the percentage of completion contract method
pursuant to SOP 81-1. When such estimates are not available, the completed
contract method is utilized.

     We provide for sales returns based on historical rates of return which, to
date, have not been material.

     Maintenance agreements generally call for us to provide technical support
and software updates to customers. Revenue on technical support and software
update rights is recognized ratably over the term of the maintenance agreement
and is included in services revenue in the accompanying consolidated statements
of operations.

     We provide consulting, implementation and training services to our
customers. Revenue from such services, when not sold in conjunction with product
licenses, is generally recognized as the services are performed.

COST OF REVENUES AND OPERATING EXPENSES

     Our cost of license revenues primarily consist of license fees due to third
parties for integrated technology. Our cost of services revenues include
salaries and related expenses for our implementation, consulting support and
training organizations, costs of subcontracting to consulting organizations to
provide consulting services to customers and an allocation of facilities,
communications and depreciation expenses. Our operating expenses are classified
into three general categories: sales and marketing, research and development,
and general and administrative. We classify all charges to these operating
expense categories based on the nature of the expenditures. We allocate the
costs for overhead and facilities to each of the functional areas that use the
overhead and facilities services based on their headcount. These allocated
charges include facility rent for corporate offices, communication charges and
depreciation expenses for office furniture and equipment.

     Software development costs incurred prior to the establishment of
technological feasibility are included in research and development costs as
incurred. Since license revenues from our software solutions are not recognized
until after technological feasibility has been established, software development
costs are not generally expensed in the same period in which license revenues
for the developed products are recognized.

RESULTS OF OPERATIONS

REVENUES

     Total revenues increased to $38.1 million for the three months ended March
31, 2001, from $14.4 million for the three months ended March 31, 2000. The
rapid growth in revenues reflected our relatively early stage of development,
and we do not expect revenues to increase at the same rate in the future. The
increase was also due to expansion of our business outside the United States.

     Product license revenues increased to $22.4 million, or 59% of total
revenue, for the three months ended March 31, 2001 from $8.3 million, or 57% of
total revenue, for the three months ended March 31, 2000. The increase in dollar
amount of product license revenues was due, in part, to an increase in the
average size of the license fees per transaction, which resulted primarily from
the growth of E.piphany's direct sales force and the introduction and shipment
of new products.

     Services revenues increased to $15.6 million, or 41% of total revenues, for
the three months ended March 31, 2001 from $6.1 million, or 43% of revenues, for
the three months ended March 31, 2000. The increase in dollar amount of services
revenues was primarily attributable to increased implementation and consulting
services performed in connection with increased license sales and to maintenance
contracts sold to E.piphany's new customers.

     The relative amount of services revenues as compared to license revenues
has varied based on the extent to which consulting organizations provide
services directly to customers, the solution which has been licensed, the
complexity of the customers' information technology environment, the resources
directed by customers to their implementation projects and the number of users
licensed. Services revenues have substantially lower margins relative to product
license revenues. This is especially true when we are required to subcontract
with consulting organizations to supplement our internal professional services
organization. It generally costs us more to subcontract with third party
consulting


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<PAGE>   12

organizations to provide these services than to provide these services
ourselves. To offset the effect that providing services ourselves or through
subcontractors has on our gross margins, we intend to further encourage
customers to contract directly with third party consulting organizations for
implementation and consulting services. Encouraging direct contracts between our
customers and consulting organizations may also increase the overall
professional services resources available to customers and generate sales leads.
We do not receive any services revenues when customers contract directly with
third party consulting organizations for implementation and consulting services.
To the extent that services revenues become a greater percentage of our total
revenues and services margins do not increase, our overall gross margins will
decline.

COST OF REVENUES

     Total cost of revenues increased to $22.3 million for the three months
ended March 31, 2001 from $6.1 million for the three months ended March 31,
2000. Cost of product license revenues consists primarily of license fees paid
to third parties under technology license arrangements and have not been
significant to date. Cost of services revenues consists primarily of the costs
of consulting and customer service and support. Cost of services revenues
increased to $21.5 million, or 137% of services revenues, for the three months
ended March 31, 2001 from $6.0 million, or 98% of services revenues, for the
three months ended March 31, 2000. The increase in cost of services revenues in
absolute dollars resulted primarily from the hiring of additional employees and
the subcontracting of consulting services to third party consulting
organizations to support increased customer demand for consulting services. The
increase was also due to the decision to have customers contract directly with
consulting organizations even though the company had unutilized internal
resources. This decision was made in conjunction with our overall strategy to
strengthen our alliances with our system integrators, and increase the number
and quality of our relationships with system integrators that recommend and
implement our software on customers' computer systems. Cost of services revenues
has exceeded services revenues due to the rapid growth of our services
organization and our investment in experienced management in anticipation of
future revenue growth. Cost of services revenues may continue to exceed services
revenues in future periods as we continue to transition our services capacity to
have a greater reliance on system integrators or if services revenues decrease
in future periods.

OPERATING EXPENSES

     Research and Development

     Research and development expenses consist primarily of personnel and
related costs associated with our product development efforts. Research and
development expenses increased to $11.4 million for the three months ended March
31, 2001 from $3.8 million for three months ended March 31, 2000. The increase
in absolute dollars was primarily due to an increase in the number of employees
engaged in research and development from our internal growth and acquisitions,
and fees paid to outside contractors for the internationalization of our
products. Research and development expenses as a percentage of total revenues
increased to 30% for the three months ended March 31, 2001 from 26% for the
three months ended March 31, 2000. We believe that investments in product
development are essential to our future success and expect that the absolute
dollar amount of research and development expenses may increase in future
periods.

     Sales and Marketing

     Sales and marketing expenses consist primarily of employee salaries,
benefits and commissions, and the costs of trade shows, seminars, promotional
materials and other sales and marketing programs. Sales and marketing expenses
increased to $24.0 million for the three months ended March 31, 2001 from $11.2
million for the three months ended March 31, 2000. Sales and marketing expenses
as a percentage of total revenues decreased to 63% for the three months ended
March 31, 2001 from 78% for the three months ended March 31, 2000. The increase
in sales and marketing expenses in absolute dollars was primarily attributable
to an increase in the number of sales and marketing employees resulting from
internal growth and acquisitions, and the establishment of sales offices in
additional domestic and international locations including Europe and Asia. We
expect that the absolute dollar amount of sales and marketing expenses may
decrease in future periods due to a decrease in advertising, marketing, and
promotional activities.



                                       12
<PAGE>   13


     General and Administrative

     General and administrative expenses consist primarily of employee salaries
and related expenses for executive, finance and administrative personnel.
General and administrative expenses increased to $8.6 million for the three
months ended March 31, 2001 from $2.3 million for the three months ended March
31, 2000. The increase in general and administrative expenses in absolute
dollars was primarily attributable to an increase in the number of executive,
finance and administrative employees from our internal growth and acquisitions
necessary to support our expanding operations. General and administrative
expenses as a percentage of total revenues increased to 23% for the three months
ended March 31, 2001 from 16% for the three months ended March 31, 2000. We
expect general and administrative expenses to decrease in absolute dollars in
future periods due to the Company's focus on reducing general and administrative
expenses.

     In-Process Research and Development Charge

     In connection with the acquisition of RightPoint Software, Inc., we
recorded a charge of $22.0 million in the quarter ended March 31, 2000. There
was no in-process research and development charge incurred during the three
months ended March 31, 2001.

     Amortization of Goodwill and Other Intangible Assets

     Our acquisitions of RightPoint Software Inc., iLeverage Corporation, eClass
Direct, Inc., Octane Software, Inc. and the intellectual property assets of
Radnet, Inc. were accounted for under the purchase method of accounting.
Accordingly, we recorded goodwill and other intangible assets representing the
excess of the purchase price paid over the fair value of net assets acquired.
The aggregate amortization of goodwill and these other intangible assets
increased to $270.4 million for the three months ended March 31, 2001 from $39.9
million for the three months ended March 31, 2000. The increase was due to the
timing of our acquisitions as we had only completed the RightPoint acquisition
as of March 31, 2000, however, amortization for all five of our acquisitions was
included in the three months ended March 31, 2001.

     We anticipate that future amortization of goodwill and other intangibles
associated with our acquisitions will continue to be amortized on a
straight-line basis over their expected useful lives of three years, and will
amount to approximately $0.8 billion for the remaining nine months of 2001, $1.1
billion in 2002, and $1.1 billion in 2003. It is likely we may continue to
expand our business through acquisitions and internal development. Any
additional acquisitions could result in additional merger and acquisition
related costs. From time to time we reevaluate the cost of our goodwill and
other intangible assets. If we determine that the cost, net of accumulated
amortization, exceeds the net realizable value of the assets, an acceleration of
the amortization of these assets may be necessary.

     Stock-Based Compensation

     Stock-based compensation consists of amortization of deferred compensation
in connection with stock option grants and sales of stock to employees at
exercise or sales prices below the deemed fair market value of E.piphany's
common stock and compensation related to equity instruments issued to
non-employees for services rendered. E.piphany has recorded aggregate deferred
compensation of $5.8 million related to stock-based compensation to employees.
As of March 31, 2001, deferred compensation remaining to be amortized totaled
$844,000. This amount is being amortized over the respective vesting periods of
these equity instruments in a manner consistent with Financial Accounting
Standards Board Interpretation No. 28. Total stock-based compensation was
$290,000 and $477,000 for the three months ended March 31, 2001 and 2000,
respectively. E.piphany expects amortization of approximately $407,000,
$303,000, and $25,000 for the remaining nine months of 2001, the year ended
December 31, 2002, and the first six months of 2003, respectively.

     OTHER INCOME (EXPENSE), NET

     Interest income, net of interest expense, decreased to $3.5 million for the
three months ended March 31, 2001 from $4.4 million for the three months ended
March 31, 2000. The decrease in interest income, net of interest expense, was
due to a $1.8 million recognized loss during the three months ended March 31,
2001. We held $7.5


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<PAGE>   14

million in commercial paper in a California public utility as of March 31, 2001.
The investment had a maturity date of February 15, 2001 and was not paid by the
public utility. As of March 31, 2001, we determined that the investment was
permanently impaired based on our evaluation and recognized a loss on the
investment. Subsequent to the date of the write-down, our investment advisor
agreed to repurchase our commercial paper at par value in the total sum of $7.5
million. As a result, we will recognize a $1,875,000 gain on this investment for
the three months ended June 30, 2001.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operating activities totaled $26.9 million and $4.2
million for the three months ended March 31, 2001 and 2000, respectively. Cash
used in operating activities for each period resulted from net losses in those
periods. Cash used in operating activities for the three months ended March 31,
2001 also resulted from an increase in accounts receivable and a decrease in
deferred revenue. These uses of cash were partially offset by an increase in
accrued liabilities.

     Net cash used in investing activities totaled $23.2 million for the three
months ended March 31, 2001 compared to $1.3 million used in investing
activities for the three months ended March 31, 2000. The increase primarily
resulted from the purchase of investments during the three months ended March
31, 2001.

     Net cash provided by financing activities totaled $2.3 million and $348.7
million for the three months ended March 31, 2001 and 2000, respectively. The
decrease was due primarily to the receipt of proceeds from E.piphany's secondary
offering completed during the first quarter of 2000.

     As of March 31, 2001, E.piphany's principal sources of liquidity included
$272.1 million of cash and cash equivalents and $95.8 million in short-term
investments. E.piphany anticipates a substantial increase in its capital
expenditures consistent with anticipated growth in operations, infrastructure
and personnel. E.piphany believes that its current cash and cash equivalents and
short-term investments will be sufficient to meet its anticipated liquidity
needs for working capital and capital expenditures for at least the next twelve
months. If E.piphany requires additional capital resources to grow its business
internally or to acquire complementary technologies and businesses at any time
in the future, E.piphany may seek to sell additional equity or debt securities
or secure an additional bank line of credit. The sale of additional equity or
convertible debt securities could result in additional dilution to E.piphany's
stockholders. E.piphany cannot assure you that any financing arrangements will
be available in amounts or on terms acceptable to it in the future.

RISK FACTORS

     An investment in our common stock is very risky. You should carefully
consider the risks described below, together with all of the other information
in this quarterly report, before making an investment decision. If any of the
following risks actually occur, our business, financial condition or results of
operations could be materially adversely affected, the trading price of our
common stock could decline, and you may lose all or part of your investment.

     This quarterly report also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including the risks faced by us described below and elsewhere in this quarterly
report.

E.PIPHANY HAS A HISTORY OF LOSSES, EXPECTS LOSSES IN THE FUTURE AND MAY NOT EVER
BECOME PROFITABLE.

     We incurred net losses of $295.4 million for the three months ended March
31, 2001, $768.5 million for the year ended December 31, 2000, $22.4 million for
the year ended December 31, 1999 and $10.3 million for the year ended December
31, 1998. We had an accumulated deficit of $1.1 billion as of March 31, 2001,
and $804.3 million as of December 31, 2000. We expect to continue to incur
losses before amortization charges for the foreseeable future. In addition, in
connection with the acquisitions of Octane Software, RightPoint Software, eClass
Direct, iLeverage and Moss Software, we are incurring significant accounting
charges for the amortization of intangible assets over the three years following
these mergers. These losses will be substantial, and we may not ever become


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<PAGE>   15

profitable. In addition, we expect to significantly increase our expenses in the
near term, especially research and development and sales and marketing expenses.
Therefore, our operating results will be harmed if our revenue does not keep
pace with our expected increase in expenses or is not sufficient for us to
achieve profitability. If we do achieve profitability in any period, it cannot
be certain that we will sustain or increase profitability on a quarterly or
annual basis.

OUR LIMITED OPERATING HISTORY AND THE LIMITED OPERATING HISTORY OF THE COMPANIES
WE ACQUIRED MAKES FINANCIAL FORECASTING AND EVALUATION OF OUR BUSINESS
DIFFICULT.

     Our limited operating history and the limited operating history of the
companies that we acquired makes it difficult to forecast E.piphany's future
operating results. E.piphany was founded in November 1996 and began developing
products in 1997. Our revenue and income potential is unproven. We received our
first revenues from licensing our software and performing related services in
early 1998. Since neither we nor the companies we acquired have a long history
upon which to base forecasts of future operating results, any predictions about
our future revenues and expenses may not be as accurate as they would be if
E.piphany and the other companies we acquired had a longer business history.

OUR REVENUES MAY BE HARMED IF GENERAL ECONOMIC CONDITIONS CONTINUE TO WORSEN.

     Our revenues are dependent on the health of the economy and the growth of
our customers and potential future customers. If the economy remains stagnant,
our customers may continue to delay or reduce their spending on CRM software.
When economic conditions weaken, sales cycles for sales of software products
tend to lengthen and companies' information technology budgets tend to be
reduced. If that happens, our revenues could suffer and our stock price may
decline. Further, if the economic conditions in the United States worsen or if a
wider or global economic slowdown occurs, we may experience a material adverse
impact on our business, operating results, and financial condition.

VARIATIONS IN QUARTERLY OPERATING RESULTS DUE TO SUCH FACTORS AS CHANGES IN
DEMAND FOR OUR PRODUCTS AND CHANGES IN OUR MIX OF REVENUES MAY CAUSE OUR STOCK
PRICE TO DECLINE.

     We expect our quarterly operating results to fluctuate. We therefore
believe that quarter-to-quarter comparisons of our operating results may not be
a good indication of our future performance, and you should not rely on them to
predict our future performance or the future performance of our stock price. Our
short-term expense levels are relatively fixed and are based on our expectations
of future revenues. As a result, a reduction in revenues in a quarter may harm
our operating results for that quarter. Our quarterly revenues, expenses and
operating results could vary significantly from quarter-to-quarter. If our
operating results in future quarters fall below the expectations of market
analysts and investors, the trading price of our common stock will fall. Factors
that may cause our operating results to fluctuate on a quarterly basis are:

     o    varying size, timing and contractual terms of orders for our products,

     o    our ability to timely complete our service obligations related to
          product sales,

     o    changes in the mix of revenue attributable to higher-margin product
          license revenue as opposed to substantially lower-margin service
          revenue,

     o    customers' decisions to defer orders or implementations, particularly
          large orders or implementations, from one quarter to the next,

     o    changes in demand for our software or for enterprise software and real
          time marketing solutions generally,

     o    announcements or introductions of new products by our competitors,

     o    software defects and other product quality problems,

     o    our ability to integrate acquisitions,


                                       15
<PAGE>   16

     o    any increase in our need to supplement our professional services
          organization by subcontracting to more expensive consulting
          organizations to help provide implementation, support and training
          services when our own capacity is constrained, and

     o    our ability to hire, train and retain sufficient engineering,
          consulting, training and sales staff.

THE LOSS OF KEY PERSONNEL, OR ANY INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, COULD AFFECT OUR ABILITY TO SUCCESSFULLY GROW OUR BUSINESS.

     Our future success will depend in large part on our ability to hire and
retain a sufficient number of qualified personnel, particularly in sales,
marketing, research and development, service and support. If we are unable to do
so, this inability could affect our ability to grow our business. Competition
for qualified personnel in high technology is intense, particularly in the
Silicon Valley region of Northern California where our principal offices are
located. Our future success also depends upon the continued service of our
executive officers and other key sales, engineering and technical staff. The
loss of the services of our executive officers and other key personnel would
harm our operations. None of our officers or key personnel are bound by an
employment agreement and we do not maintain key person insurance on any of our
employees. We would also be harmed if one or more of our officers or key
employees decided to join a competitor or otherwise compete with us.

     The market price of our common stock has fluctuated substantially since our
initial public offering in September 1999. Consequently, potential employees may
perceive our equity incentives such as stock options as less attractive and
current employees whose options are no longer priced below market value may
choose not to remain employed by us. In that case, our ability to attract or
retain employees will be adversely affected.

IF CUSTOMERS DO NOT CONTRACT DIRECTLY WITH CONSULTING ORGANIZATIONS TO IMPLEMENT
AND SUPPORT OUR PRODUCTS, OUR REVENUES, PROFITABILITY AND MARGINS MAY BE HARMED.

     Our principal focus is providing software solutions rather than services.
As a result, we encourage our customers to purchase consulting, implementation,
maintenance and training services directly from consulting organizations instead
of purchasing these services from us. While we do not receive any fees directly
from these consulting organizations when they contract directly with our
customers, we believe that these consulting organizations increase market
awareness and acceptance of our software solutions and allow us to focus on
software development and licensing. If consulting organizations are unwilling or
unable to provide a sufficient level and quality of service directly to our
customers or if customers are unwilling to contract directly with these
consulting organizations, we may not realize these benefits and our revenues and
profitability may be harmed.

     Further, to the extent that consulting organizations do not provide
consulting, implementation, maintenance and training services directly to our
customers, we need to provide these services to our customers. We provide these
services to our customers either directly through our internal professional
services organization or indirectly through subcontractors we hire to perform
the services on our behalf. Because our margins on service revenues are less
than our margins on license revenues, our overall margins decline when we
provide these services to customers. This is particularly true if we hire
subcontractors to perform these services because it costs us more to hire
subcontractors to perform these services than to provide the services ourselves.


                                       16
<PAGE>   17

IF OUR INTERNAL PROFESSIONAL SERVICES ORGANIZATION DOES NOT PROVIDE
IMPLEMENTATION SERVICES EFFECTIVELY AND ACCORDING TO SCHEDULE, OUR REVENUES AND
PROFITABILITY WOULD BE HARMED.

     Customers that license our products typically require consulting,
implementation, maintenance and training services and obtain them from our
internal professional services, customer support and training organizations, or
from outside consulting organizations. When we provide these services, we
generally recognize revenue from the licensing of our software products as the
implementation services are performed. If our internal professional services
organization does not effectively implement and support our products or if we
are unable to expand our internal professional services organization as needed
to meet our customers' needs, our ability to sell software, and accordingly our
revenues, will be harmed. If we are unable to expand our internal professional
services organization to keep pace with sales, we will be required to increase
our use of subcontractors to help meet our implementation and service
obligations, which will result in lower gross margins. In addition, we may be
unable to negotiate agreements with subcontractors to provide a sufficient level
and quality of services. If we fail to retain sufficient subcontractors, our
ability to sell software for which these services are required will be harmed
and our revenues will suffer.

OUR SERVICE REVENUES HAVE A SUBSTANTIALLY LOWER MARGIN THAN OUR PRODUCT
REVENUES, AND AN INCREASE IN SERVICE REVENUES RELATIVE TO LICENSE REVENUES COULD
HARM OUR GROSS MARGINS.

     Our service revenues, which includes fees for consulting, implementation,
maintenance and training, were 41% of our revenues for the three months ended
March 31, 2001, 42% of our revenues for the year ended December 31, 2000, 47% of
our revenues for the year ended December 31, 1999 and 34% of our revenues for
the year ended December 31, 1998. Our service revenues have substantially lower
gross margins than license revenues. Our cost of service revenues for the three
months ended March 31, 2001 and the years ended December 31, 2000, 1999 and 1998
was 137%, 101%, 102% and 120%, respectively, of our service revenues. An
increase in the percentage of total revenues represented by services revenues
could adversely affect our overall gross margins.

     Service revenues as a percentage of total revenues and cost of service
revenues as a percentage of total revenues have varied significantly from
quarter to quarter due to our relatively early stage of development. The
relative amount of service revenues as compared to license revenues has varied
based on the volume of software solution orders compared to the volume of
additional user orders. In addition, the amount and profitability of services
can depend in large part on:

     o    the software solution which has been licensed,

     o    the complexity of the customer's information technology environment,

     o    the resources directed by customers to their implementation projects,

     o    the number of users licensed, and

     o    the extent to which outside consulting organizations provide services
          directly to customers.

NEW PRODUCT INTRODUCTIONS AND PRICING STRATEGIES BY OUR COMPETITORS COULD
ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND COULD RESULT IN PRESSURE
TO PRICE OUR PRODUCTS IN A MANNER THAT REDUCES OUR MARGINS.

     Competitive pressures could prevent us from growing, reduce our market
share or require us to reduce prices on our products and services, any of which
could harm our business. We compete principally with vendors of:

     o    data management and data analysis software tools such as Broadbase,
          Microstrategy and Oracle,

     o    enterprise application software such as PeopleSoft, SAP and Siebel
          Systems,

     o    marketing campaign management software tools such as Exchange
          Applications, Prime Response and Recognition Systems,

                                       17
<PAGE>   18

     o    software that recommends products to customers in real time based on
          simple analytics such as Net Perceptions, and

     o    web-based contact center software tools such as Kana Software.

     Many of these companies have significantly greater financial, technical,
marketing, service and other resources than we do. Many of these companies also
have a larger installed base of users, have been in business longer or have
greater name recognition than we do. In addition, some large companies may
attempt to build capabilities into their products that are similar to the
capabilities of our products. Some of our competitors' products may be more
effective than our products at performing particular functions or be more
customized for particular needs. Even if these functions are more limited than
those provided by our products, our competitors' software products could
discourage potential customers from purchasing our products. For example, our
competitors' software products may incorporate other capabilities, such as
recording accounting transactions, customer orders or inventory management data.
A software product that performs these functions, as well as some of the
functions of our software solutions, may be appealing to some customers because
it would reduce the number of different types of software necessary to
effectively run their business. Further, our competitors may be able to respond
more quickly than we can to changes in customer requirements.

     In addition, our products must integrate with software solutions provided
by a number of our existing or potential competitors. These competitors could
alter their products so that our products no longer integrate well with them, or
they could deny or delay access by us to advance software releases that allow us
to timely adapt our products to integrate with their products.

     Our competitors have made and may also continue to make strategic
acquisitions or establish cooperative relationships among themselves or with
other software vendors. This may increase the ability of their products to
address the need for software solutions such as ours, which provide both the
ability to collect data from multiple sources and analyze that data to profile
customer characteristics and preferences. Our competitors may also establish or
strengthen cooperative relationships with our current or future distributors or
other parties with whom we have relationships, thereby limiting our ability to
sell through these channels, reducing promotion of our products and limiting the
number of consultants available to implement our software.

OUR REVENUES MIGHT BE HARMED BY RESISTANCE TO ADOPTION OF E.PIPHANY'S SOFTWARE
BY INFORMATION TECHNOLOGY DEPARTMENTS.

     Some businesses may have already made a substantial investment in other
third party or internally developed software designed to integrate data from
disparate sources and analyze this data or manage marketing campaigns. These
companies may be reluctant to abandon these investments in favor of our
software. In addition, information technology departments of potential customers
may resist purchasing our software solutions for a variety of other reasons,
particularly the potential displacement of their historical role in creating and
running software and concerns that packaged software products are not
sufficiently customizable for their enterprises. If the market for our products
does not grow for any of these reasons, our revenues will be harmed.

IF THE MARKET IN WHICH WE SELL OUR PRODUCTS AND SERVICES DOES NOT GROW AS WE
ANTICIPATE, OUR REVENUES WILL BE REDUCED.

     If the market for software that enables companies to establish, manage,
maintain and continually improve customer relationships by collecting and
analyzing data to design and manage marketing campaigns and customize products
and services and providing timely, consistent, multichannel customer interaction
does not grow as quickly or become as large as we anticipate, our revenues will
be reduced. Our market is still emerging, and our success depends on its growth.
Our potential customers may:

     o    not understand or see the benefits of using these products,

     o    not achieve favorable results using these products,

     o    experience technical difficulty in implementing or using these
          products, or

                                       18
<PAGE>   19

     o    use alternative methods to solve the same business problems.

     In addition, because our products can be used in connection with Internet
commerce and we are currently developing additional Internet commerce solutions,
if the Internet commerce market does not grow as quickly as we anticipate, we
may experience sales which are lower than our expectations.

IF WE FAIL TO DEVELOP NEW PRODUCTS OR IMPROVE OUR EXISTING PRODUCTS TO MEET OR
ADAPT TO THE CHANGING NEEDS AND STANDARDS OF OUR INDUSTRY, SALES OF OUR PRODUCTS
MAY DECLINE.

     Our future success depends on our ability to address the rapidly changing
needs of our customers and potential customers. We must maintain and improve our
E.piphany E.5 System and develop new products that include new technological
developments, keep pace with products of our competitors and satisfy the
changing requirements of our customers. If we do not, we may not achieve market
acceptance and we may be unable to attract new customers. E.piphany may also
lose existing customers, to whom we seek to sell additional software solutions
and professional services.

     To achieve increased market acceptance of our products, we must, among
other things, continue to:

     o    improve and introduce new software solutions for reporting and
          analysis, distributed database marketing and e-commerce,

     o    improve the effectiveness of our software, particularly in
          implementations involving very large databases and large numbers of
          simultaneous users,

     o    enhance our software's ease of administration,

     o    design software for vertical markets,

     o    make available international versions of our software,

     o    improve our software's ability to extract data from existing software
          systems, and

     o    adapt to rapidly changing computer operating system and database
          standards and Internet technology.

     We may not be successful in developing and marketing these or other new or
improved products. If we are not successful, we may lose sales to competitors.
In addition, we have entered into customer contracts, which contain specific
performance goals relating to new product releases or enhancements, and if we
are not able to meet these goals, we may be required to, among other things,
return fees, pay damages and offer discounts.

IF OUR PRODUCTS DO NOT STAY COMPATIBLE WITH CURRENTLY POPULAR SOFTWARE PROGRAMS,
WE MAY LOSE SALES AND REVENUES.

     The E.piphany E.5 System must work with commercially available software
programs that are currently popular. If these software programs do not remain
popular, or we do not update our software to be compatible with newer versions
of these programs, we may lose customers.

     In order to operate the E.piphany E.5 System, the system must be installed
on both a computer server running the Microsoft Windows NT or Windows 2000
computer operating systems and a computer server running database software from
Microsoft or Oracle. We are currently in various stages of porting our software
to operate on additional operating systems and databases, including UNIX, IBM
DB2 and other third party application servers such as BEA System's Web Logic
product. If we fail to successfully complete these modifications in a timely
manner, we may lose sales and revenues. In addition, users access the E.piphany
E.5 System through standard Internet browsers such as Microsoft Internet
Explorer. If we fail to obtain access to developer versions of any of these
software products, we may be unable to build and enhance our products on
schedule.


                                       19
<PAGE>   20

     After installation, the E.piphany E.5 System collects and analyzes data to
profile customers' characteristics and preferences. This data may be stored in a
variety of our customers' existing software systems, including systems from
Oracle, PeopleSoft, Siebel Systems, and SAP, running on a variety of computer
operating systems. If we fail to enhance our software to collect data from new
versions of these products, we may lose potential customers. If we lose
customers, our revenues and profitability may be harmed.

OUR PRODUCTS HAVE LONG SALES CYCLES WHICH MAKES IT DIFFICULT TO PLAN EXPENSES
AND FORECAST RESULTS.

     It takes us between three and six months to complete the majority of our
sales and it can take us up to one year or longer. It is therefore difficult to
predict the quarter in which a particular sale will occur and to plan
expenditures accordingly. The period between initial contact with a potential
customer and their purchase of products and services is relatively long due to
several factors, including:

     o    the complex nature of our products,

     o    our need to educate potential customers about the uses and benefits of
          our products,

     o    the purchase of our products requires a significant investment of
          resources by a customer,

     o    our customers have budget cycles which affect the timing of purchases,

     o    uncertainty regarding future economic conditions,

     o    many of our customers require competitive evaluation and internal
          approval before purchasing our products,

     o    potential customers may delay purchases due to announcements or
          planned introductions of new products by us or our competitors, and

     o    many of our customers are large organizations, which may require a
          long time to make decisions.

     The delay or failure to complete sales in a particular quarter could reduce
our revenues in that quarter, as well as subsequent quarters over which revenues
for the sale would likely be recognized. If our sales cycle unexpectedly
lengthens in general or for one or more large orders, it would adversely affect
the timing of our revenues. If we were to experience a delay of several weeks on
a large order, it could harm our ability to meet our forecasts for a given
quarter.

IF WE FAIL TO ESTABLISH, MAINTAIN OR EXPAND OUR RELATIONSHIPS WITH THIRD
PARTIES, OUR ABILITY TO GROW REVENUES COULD BE HARMED.

     In order to grow our business, we must generate, retain and strengthen
relationships with third parties. To date, we have established relationships
with several companies, including consulting organizations and system
integrators that implement our software, including Deloitte & Touche, KPMG and
PricewaterhouseCoopers; resellers, including Acxiom, Hewlett-Packard and
Harte-Hanks; and application service providers that provide access to our
software to their customers over the Internet, including Interrelate. If the
third parties with whom we have relationships do not provide sufficient,
high-quality service or integrate and support our software correctly, our
revenues may be harmed. In addition, the third parties with whom we have
relationships may offer products of other companies, including products that
compete with our products. We typically enter into contracts with third parties
that generally set out the nature of our relationships. However, our contracts
do not require these third parties to devote resources to promoting, selling and
supporting our products. Therefore we have little control over these third
parties. We cannot assure you that we can generate and maintain relationships
that offset the significant time and effort that are necessary to develop these
relationships.

IF WE FAIL TO EXPAND OUR DIRECT AND INDIRECT SALES CHANNELS, WE WILL NOT BE ABLE
TO INCREASE REVENUES.

     In order to grow our business, we need to increase market awareness and
sales of our products and services. To achieve this goal, we need to increase
both our direct and indirect sales channels. If we fail to do so, this failure

                                       20
<PAGE>   21

could harm our ability to increase revenues. We currently receive substantially
all of our revenues from direct sales, but we intend to increase sales through
indirect sales channels in the future. We also need to expand our direct sales
force by hiring additional salespersons and sales management.

     We intend to derive revenues from indirect sales channels by selling our
software through value added resellers. These resellers offer our software
products to their customers together with consulting and implementation services
or integrate our software solutions with other software.

     We expect as part of our strategy to increase international sales through
the use of direct and indirect sales channels. We will be even more dependent on
indirect sales channels in the future due to our international strategy. We also
plan to expand our international direct sales force and therefore must hire
additional sales personnel outside the United States. Our ability to develop and
maintain these channels will significantly affect our ability to penetrate
international markets.

WE HAVE GROWN VERY QUICKLY AND IF WE FAIL TO MANAGE OUR GROWTH, OUR ABILITY TO
GENERATE NEW REVENUES AND ACHIEVE PROFITABILITY WOULD BE HARMED.

     We have grown significantly since our inception and will need to grow
quickly in the future. Any failure to manage this growth could impede our
ability to increase revenues and achieve profitability. We have increased our
number of employees from 21 at December 31, 1997 to 978 as of March 31, 2001.
Our future expansion could be expensive and strain our management and other
resources. In order to manage growth effectively, we must:

     o    hire, train and integrate new personnel,

     o    integrate people and technologies from acquired companies,

     o    continue to augment our financial and accounting systems,

     o    manage our sales operations, which are in several locations, and

     o    expand our facilities.

     If we do not manage our growth effectively, our business could suffer.

IF WE ACQUIRE ADDITIONAL COMPANIES OR TECHNOLOGIES IN THE FUTURE, THEY COULD
PROVE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE OR
ADVERSELY AFFECT OUR OPERATING RESULTS.

     In addition to the acquisitions that we have already completed, we may
acquire or make investments in other complementary companies, services and
technologies in the future. If we fail to properly evaluate and execute
acquisitions and investments, they may seriously harm our business and
prospects. To successfully complete an acquisition, we must:

     o    properly evaluate the business, personnel and technology of the
          company to be acquired,

     o    accurately forecast the financial impact of the transaction, including
          accounting charges and transaction expenses,

     o    integrate and retain personnel,

     o    combine potentially different corporate cultures,

     o    effectively integrate products and research and development, sales,
          marketing and support operations, and

     o    maintain focus on our day-to-day operations.


                                       21
<PAGE>   22

     Further, the financial consequences of our acquisitions and investments may
include potentially dilutive issuances of equity securities, one-time
write-offs, amortization expenses related to goodwill and other intangible
assets and the incidence of contingent liabilities.

IF OTHERS CLAIM THAT WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY, WE COULD
INCUR SIGNIFICANT EXPENSES OR BE PREVENTED FROM SELLING OUR PRODUCTS.

     We cannot assure you that others will not claim that we are infringing
their intellectual property rights or that we do not in fact infringe those
intellectual property rights. We have not conducted a search for existing
intellectual property registrations and we may be unaware of intellectual
property rights of others that may cover some of our technology.

     We have been contacted by a company which has asked us to evaluate the need
for a license of several patents that the company holds directed to data
extraction technology. This company has filed litigation alleging infringement
of its patents against several of our competitors. We cannot assure you that the
holder of the patents will not file litigation against us or that we would
prevail in the case of such litigation. In addition, the patent holder has
informed us that it has applications pending in numerous foreign countries. The
patent holder may also have applications on file in the United States covering
related subject matter which are confidential until the patent or patents, if
any, is issued.

     Any litigation regarding intellectual property rights could be costly and
time-consuming and divert the attention of our management and key personnel from
our business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Claims of
intellectual property infringement might also require us to enter into costly
royalty or license agreements.

     Further, we may not be able to obtain royalty or license agreements on
terms acceptable to us, or at all. We also may be subject to significant damages
or an injunction against use of our products. A successful claim of patent or
other intellectual property infringement against us would have an immediate
material adverse effect on our business and financial condition.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, THIS INABILITY
COULD WEAKEN OUR COMPETITIVE POSITION, REDUCE OUR REVENUES AND INCREASE OUR
COSTS.

     Our success depends in large part on our proprietary technology. We rely on
a combination of patent, copyright, trademark and trade secrets, confidentiality
procedures and licensing arrangements to establish and protect our proprietary
rights. We may be required to spend significant resources to monitor and police
our intellectual property rights. If we fail to successfully enforce our
intellectual property rights, our competitive position may be harmed.

     Our pending patent and trademark registration applications may not be
allowed or competitors may successfully challenge the validity or scope of these
registrations. In addition, our patents may not provide a significant
competitive advantage.

     Other software providers could copy or otherwise obtain and use our
products or technology without authorization. They also could develop similar
technology independently which may infringe our proprietary rights. We may not
be able to detect infringement and may lose a competitive position in the market
before we do so. In addition, competitors may design around our technology or
develop competing technologies. The laws of some foreign countries do not
protect proprietary rights to the same extent as do the laws of the United
States.

     In addition, one of the ways in which we charge for our software is based
on the number of users at a particular site that will be permitted to use the
software. Organizations that have a site license for a fixed number of users for
our products could allow unauthorized use of our software by unlicensed users.
Unauthorized use is difficult to detect and, to the extent that our software is
used without authorization, we may lose potential license fees.

PRIVACY AND SECURITY CONCERNS, PARTICULARLY RELATED TO THE USE OF OUR SOFTWARE
ON THE INTERNET, MAY LIMIT THE EFFECTIVENESS OF AND REDUCE THE DEMAND FOR OUR
PRODUCTS.


                                       22
<PAGE>   23

     The effectiveness of our software products relies on the storage and use of
customer data collected from various sources, including information collected on
web sites, as well as other data derived from customer registrations, billings,
purchase transactions and surveys. Our collection and use of such data for
customer profiling may raise privacy and security concerns. Our customers
generally have implemented security measures to protect customer data from
disclosure or interception by third parties. However, the security measures may
not be effective against all potential security threats. If a well-publicized
breach of customer data security were to occur, our software products may be
perceived as less desirable, impacting our future sales and profitability.

     In addition, due to privacy concerns, some Internet commentators, consumer
advocates, and governmental or legislative bodies have suggested legislation to
limit the use of customer profiling technologies. The European Union and some
European countries have already adopted some restrictions on the use of customer
profiling data. In addition, Internet users can, if they choose, configure their
web browsers to limit the collection of user data for customer profiling. Should
many Internet users choose to limit the use of customer profiling technologies,
or if major countries or regions adopt legislation or other restrictions on the
use of customer profiling data, our software would be less useful to customers,
and our sales and profits could decrease.

OUR PRODUCTS ARE NEW, AND IF THEY CONTAIN DEFECTS, OR OUR SERVICES ARE NOT
PERCEIVED AS HIGH QUALITY, WE COULD LOSE POTENTIAL CUSTOMERS OR BE SUBJECT TO
DAMAGES.

     We began shipping our first products in early 1998. Our products are
complex and may contain currently unknown errors, defects or failures,
particularly since they are new and recently released. In the past we have
discovered software errors in some of our products after introduction. We may
not be able to detect and correct errors before releasing our products
commercially. If our commercial products contain errors, we may be required to:

     o    expend significant resources to locate and correct the error,

     o    delay introduction of new products or commercial shipment of products,
          or

     o    experience reduced sales and harm to our reputation from dissatisfied
          customers.

     Our customers also may encounter system configuration problems which
require us to spend additional consulting or support resources to resolve these
problems.

     In addition, our customers generally store their data across computer
networks, which are often connected to the Internet. Our software operates
across our customers' computer networks and can, at the customer's option, be
accessed through an Internet connection. Our software contains technology
designed to prevent theft or loss of data. Nevertheless, customers may encounter
security issues with their existing databases installed across networks,
particularly the Internet, or with our software. A security breach involving our
software, or a widely publicized security breach involving the Internet
generally, could harm our sales. A security breach involving our software could
also expose us to claims for damages.

     Because our software products are used for important decision-making
processes and enable our customers to interact with their customers, product
defects may also give rise to product liability claims. Although our license
agreements with customers typically contain provisions designed to limit our
exposure, some courts may not enforce all or part of these limitations. Although
we have not experienced any product liability claims to date, we may encounter
these claims in the future. Product liability claims, whether or not successful,
could:

     o    divert the attention of our management and key personnel from our
          business,

     o    be expensive to defend, and

     o    result in large damage awards.

     Our product liability insurance may not be adequate to cover all of the
expenses resulting from a claim. In addition, if our customers do not find our
services to be of high quality, they may elect to use other training,


                                       23
<PAGE>   24

consulting and product integration firms rather than contract for our services.
If customers are dissatisfied with our services, we may lose revenues.

WE INTEND TO EXPAND OUR INTERNATIONAL SALES EFFORTS BUT WE DO NOT HAVE
SUBSTANTIAL EXPERIENCE IN INTERNATIONAL MARKETS.

     We intend to expand our international sales efforts in the future. We have
limited experience in marketing, selling and supporting our products and
services abroad. If we are unable to grow our international operations
successfully and in a timely manner, our business and operating results could be
seriously harmed. In addition, doing business internationally involves greater
expense and many additional risks, particularly:

     o    unexpected changes in regulatory requirements, taxes, trade laws and
          tariffs,

     o    differing intellectual property rights,

     o    differing labor regulations,

     o    unexpected changes in regulatory requirements,

     o    changes in a specific country's or region's political or economic
          conditions,

     o    greater difficulty in establishing, staffing and managing foreign
          operations, and

     o    fluctuating exchange rates.

     We have expanded our international operations, which has required a
significant amount of attention from our management and substantial financial
resources. We have begun efforts at international expansion in Europe and Asia
and, as of March 31, 2001, had 166 employees located in Australia, Canada,
France, Germany, Japan, Switzerland, The Netherlands and the United Kingdom. We
are also exploring other regions for future expansion.

IF DATABASE ACCESS BECOMES STANDARDIZED, DEMAND FOR OUR PRODUCTS WILL BE
REDUCED.

     Our products are useful for integrating data from a variety of disparate
data sources. Adoption of uniform, industry-wide standards across various
database and analytic software programs could minimize the importance of the
data integration capabilities of our products. This, in turn, could adversely
affect the competitiveness and market acceptance of our products. Also, a single
competitor in the market for database and analytic software programs or Internet
relationship management may become dominant, even if there is no formal
industry-wide standard. If large numbers of our customers adopt a single
standard, this would similarly reduce demand for our product. If we lose
customers because of the adoption of standards, we may have lower revenues and
profitability.

SEASONAL TRENDS IN SALES OF BUSINESS SOFTWARE MAY AFFECT OUR QUARTERLY REVENUES.

     The market for business software has experienced seasonal fluctuations in
demand. The first and third quarters of the year have been typically
characterized by lower levels of revenue growth. We believe that these
fluctuations are caused in part by customer buying patterns, which are
influenced by year-end budgetary pressures and by sales force commission
structures. As our revenues grow, we may experience seasonal fluctuations in our
revenues.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT AN
ACQUISITION OF E.PIPHANY.

     Our certificate of incorporation and bylaws contain provisions which could
make it harder for a third party to acquire us without the consent of our board
of directors. For example, if a potential acquirer were to make a hostile bid
for us, the acquirer would not be able to call a special meeting of stockholders
to remove our board of directors or act by written consent without a meeting. In
addition, our board of directors have staggered terms, which makes it difficult
to remove them all at once. The acquirer would also be required to provide
advance notice of its proposal to remove directors at an annual meeting. The
acquirer also will not be able to cumulate votes at a meeting, which will


                                       24
<PAGE>   25
require the acquirer to hold more shares to gain representation on our board of
directors than if cumulative voting were permitted.

     Our board of directors also has the ability to issue preferred stock which
would significantly dilute the ownership of a hostile acquirer. In addition,
Section 203 of the Delaware General Corporation Law limits business combination
transactions with 15% stockholders that have not been approved by the board of
directors. These provisions and other similar provisions make it more difficult
for a third party to acquire us without negotiation. These provisions may apply
even if the offer may be considered beneficial by some stockholders.

     Our board of directors could choose not to negotiate with an acquirer that
it did not feel was in the strategic interests of our company. If the acquirer
was discouraged from offering to acquire us, or prevented from successfully
completing a hostile acquisition by the antitakeover measures, you could lose
the opportunity to sell your shares at a favorable price.



                                       25
<PAGE>   26

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK

     The following discusses our exposure to market risk related to changes in
foreign currency exchange rates and interest rates. This discussion contains
forward-looking statements that are subject to risks and uncertainties. Actual
results could vary materially as a result of a number of factors including those
set forth in the "Risk Factors" section of this quarterly report.

Foreign Currency Exchange Rate Risk

     The majority of our operations are based in the United States and,
accordingly, the majority of our transactions are denominated in U.S. Dollars.
However, we do have foreign-based operations where transactions are denominated
in foreign currencies and are subject to market risk with respect to
fluctuations in the relative value of currencies. Currently, we have operations
throughout Asia, Asia Pacific, Canada, Europe, Middle East and Latin America and
conduct transactions in the local currency of each location. To date, the impact
of fluctuations in the relative value of other currencies has not been material.

Interest Rate Risk

     As of March 31, 2001, we had short-term investments of $95.8 million which
consisted of fixed income securities. Declines of interest rates over time would
reduce our interest income from our short-term investments. Based upon our
balance of short-term investments, a decrease in interest rates of 0.5% would
cause a corresponding decrease in our annual interest income by approximately
$479,000. As of March 31, 2001, we did not have any short-term or long-term debt
outstanding.

     The following summarizes the Company's short-term investments and the
weighted average yields, as of March 31, 2001 (in thousands, except interest
rates);

<TABLE>
<CAPTION>
                                                     Expected maturity date
                              ----------------------------------------------------------------------
                                2001      2002      2003      2004      2005    Thereafter    Total
                              -------    ------    ------    ------    ------   ----------   -------
<S>                           <C>        <C>       <C>       <C>       <C>      <C>          <C>
Certificates of deposit       $ 1,191    $   --    $   --    $   --    $   --     $   --     $ 1,191
Weighted ave. yield              3.55%       --        --        --        --         --        3.55%

Commercial paper              $35,061        --        --        --        --         --     $35,061
Weighted ave. yield              5.71%       --        --        --        --         --        5.71%

Corporate bonds               $25,627        --        --        --        --         --     $25,627
Weighted ave. yield              6.07%       --        --        --        --         --        6.07%

Government notes/bonds        $26,503    $7,454        --        --        --         --     $33,957
Weighted ave. yield              4.89%     5.39%       --        --        --         --        5.00%
                              -------    ------    ------    ------    ------     ------     -------
Total investment securities   $88,382    $7,454    $   --    $   --    $   --     $   --     $95,836
                              =======    ======    ======    ======    ======     ======     =======
</TABLE>

     From time to time we reevaluate our accounting for all of our investments
and we may recognize a loss in our income statement if we determine that the
investment is permanently impaired. We held $7.5 million in commercial paper in
a California public utility as of March 31, 2001. The investment had a maturity
date of February 15, 2001 and was not paid by the public utility. As of March
31, 2001, we determined that the investment was permanently impaired based on
our evaluation and therefore we recognized a loss of $1,875,000 during the three
months ended March 31, 2001. Subsequent to the date of the write-down, our
investment advisor agreed to repurchase our commercial paper at par value in the
total sum of $7.5 million. As a result, we will recognize a $1,875,000 gain on
this investment for the three months ended June 30, 2001.

                                       26
<PAGE>   27



                                 E.PIPHANY, INC.

                            FORM 10-Q, MARCH 31, 2001

                           PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     As of the date hereof, there is no material litigation pending against
E.piphany. From time to time, E.piphany may be a party to litigation and claims
incident to the ordinary course of our business. Although the results of
litigation and claims cannot be predicted with certainty, we believe that the
final outcome of such matters will not have a material adverse effect on the
results of operations, financial condition or prospects of E.piphany.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     (a) None.

     (b) None.

     (c) None.

     (d) None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

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

     None.

ITEM 5. OTHER INFORMATION

     None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

         See exhibit index attached hereto.

     (b) Reports on Form 8-K

         None.




                                       27
<PAGE>   28

                                 E.PIPHANY, INC.

                            FORM 10-Q, MARCH 31, 2001

                                   SIGNATURES

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

                                 E.PIPHANY, INC.

<TABLE>
<S>                                    <C>
DATE:  May 15, 2001                    SIGNATURE: /s/ Roger S. Siboni
       ------------------------                   ------------------------------
                                                  Roger S. Siboni
                                                  President, Chief Executive
                                                  Officer and Chairman of the Board

DATE: May 15, 2001                     SIGNATURE: /s/ Kevin J. Yeaman
      -------------------------                   ------------------------------
                                                  Kevin J. Yeaman
                                                  Chief Financial Officer
</TABLE>


                                       28
<PAGE>   29

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER   EXHIBIT TITLE
<S>       <C>
 2.1+     Agreement and Plan of Reorganization by and among the Registrant,
          Yosemite Acquisition Corporation and RightPoint Software, Inc.
 2.2++    Agreement and Plan of Merger and Reorganization dated March 14, 2000
          by and among the Registrant, Octane Software, Inc. and Orchid
          Acquisition Corporation.
 2.3++    Form of Octane Software, Inc. shareholder Voting Agreement relating to
          the proposed acquisition of Octane Software, Inc.
 2.4++    Form of Registrant's stockholder Voting Agreement relating to the
          proposed acquisition of Octane Software, Inc.
 3.1*     Restated Certificate of Incorporation of the Registrant.
 3.2*     Restated Bylaws of the Registrant.
10.1*     Form of Indemnification Agreement between the Registrant and each of
          its directors and officers.
10.2*     1999 Stock Plan and form of agreements thereunder.
10.3*     1999 Employee Stock Purchase Plan and form of agreements thereunder.
10.4*     1997 Stock Plan and form of agreements thereunder.
10.5*     Fourth Amended and Restated Investors' Rights Agreement dated June 16,
          1999.
10.6*     Loan and Security Agreement entered into as of January 9, 1998 with
          Silicon Valley Bank.
10.7*     Loan Modification Agreement between the Registrant and Silicon Valley
          Bank dated December 1, 1998.
10.8*     Master Lease Agreement dated June 2, 1999 by and between Comdisco,
          Inc. and the Registrant.
10.9*     Subordinated Loan and Security Agreement dated as of June 2, 1999 by
          and between the Registrant and Comdisco, Inc.
10.10*    Sublease Portion of Third Floor of 1900 Norfolk Street, San Mateo,
          California dated April 23, 1999 by and between Inktomi Corporation and
          the Registrant.
10.11*    Form of Amended and Restated Common Stock Purchase Agreement dated
          March 18, 1997 between the Registrant and four stockholders.
10.12*    Restricted Stock Purchase Agreement, Promissory Note, Stock Pledge
          Agreement and Joint Escrow Instructions dated July 1, 1998 between
          Roger S. Siboni and the Registrant.
10.13*    Promissory Note dated August 15, 1998 between Roger S. Siboni and the
          Registrant.
10.14**   RightPoint Software, Inc. (formerly Datamind Corporation) 1996 Stock
          Option Plan.
10.15***  2000 Nonstatutory Stock Option Plan and form of agreements thereunder.
</TABLE>
------------
*       Incorporated by reference to the Registrant's Registration Statement on
        Form S-1 (Registration No. 333-82799) declared effective by the
        Securities and Exchange Commission on September 21, 1999.

**      Incorporated by reference to the Registrant's Registration Statement on
        Form S-1 (Registration No. 333-94033) declared effective by the
        Securities and Exchange Commission on January 20, 2000.

***     Incorporated by reference to the Registrant's Registration Statement on
        Form S-8 (Registration No. 333-48460) declared effective by the
        Securities and Exchange Commission.

+       Incorporated by reference to Registrant's Registration Statement on Form
        S-4 (File No. 333-92013), declared effective on December 3, 1999.

++      Incorporated by reference to Registrant's Current Report on Form 8-K
        dated March 14, 2000 filed with the Commission on March 28, 2000.