PCORDER COM INC, S-1/A, 1998-12-09

PCORDER COM INC
S-1/A, 1998-12-09
COMPUTER & COMPUTER SOFTWARE STORES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1998

REGISTRATION NO. 333-62985

----------------

AMENDMENT NO. 1

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------

PCORDER.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

----------------

DELAWARE 5734 74-2720849
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)

----------------

5000 PLAZA ON THE LAKE
AUSTIN, TX 78746
(512) 684-1100
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACE OF BUSINESS)

----------------

JAMES J. LUTTENBACHER
CHIEF FINANCIAL OFFICER
5000 PLAZA ON THE LAKE
AUSTIN, TX 78746
(512) 684-1100
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

----------------

COPIES TO:

WILLIAM D. SHERMAN DONALD M. KELLER, JR.
DAVID C. WILSON GLEN R. VAN LIGTEN
JUSTIN L. BASTIAN MITCHELL S. ZUKLIE
ROCHELLE A. KRAUSE VIVIAN P. MORRIS
MORRISON & FOERSTER LLP VENTURE LAW GROUP
755 PAGE MILL ROAD A PROFESSIONAL CORPORATION
PALO ALTO, CA 94304 2800 SAND HILL ROAD
MENLO PARK, CA 94025

----------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

----------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION DATED DECEMBER 9, 1998.

[LOGO]

PCORDER.COM, INC.

COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

-----------

All of the shares of Common Stock offered hereby are being sold by
pcOrder.com, Inc. ("pcOrder" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price per share will be between $
and $ . For factors to be considered in determining the initial public
offering price, see "Underwriting".

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN CONSIDERATION RELEVANT TO
AN INVESTMENT IN THE COMMON STOCK.

Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "PCOR".

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

-----------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total(3)................................ $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting".
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments, if
any. If such option is exercised in full, the total initial public offering
price, underwriting discount and proceeds to company will be $ , $ and
$ , respectively. See "Underwriting".

-----------

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about October , 1998, against payment therefor in immediately available
funds.

GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
SG COWEN

-----------

The date of this Prospectus is , 1998.
<PAGE>

----------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THIS
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".

2
<PAGE>

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and the Financial Statements and
Notes thereto appearing elsewhere in this Prospectus, including information
under "Risk Factors". Except as otherwise noted, all information in this
Prospectus, including share and per share information, assumes no exercise of
the Underwriters' over-allotment option. See "Description of Capital Stock" and
"Underwriting". As used herein, "Trilogy" refers to Trilogy Software, Inc. and
its predecessor entities, including Trilogy Development Group, Inc.

THE COMPANY

pcOrder is a leading provider of Internet-based electronic commerce solutions
that enable the computer industry's suppliers, resellers and end-users to buy
and sell computer products online. The Company's solutions are designed to
increase the efficiency and effectiveness of the sales, marketing and
distribution of computer products and to enable members of the industry to take
advantage of the increasing adoption of e-commerce. Forrester Research
estimates that the business-to-business e-commerce market will grow from $8
billion in 1997 to $327 billion by 2002. In addition, Forrester also believes
that computer products is the largest and fastest growing segment, by revenue,
in business-to-business e-commerce.

The Company's comprehensive offering consists of software applications and
content databases which enable industry participants to buy and sell computer
products online by increasing the automation product search, comparison,
configuration, pricing, financing, ordering and reseller selection. The Company
believes it is uniquely positioned to deliver these solutions through its: (i)
ability to deliver a broad set of advanced front-office and e-commerce software
applications, including configuration and pricing; (ii) position as a leading
content provider of computer product and compatibility information; and (iii)
experience in delivering industry-specific functionality and integrations into
business systems of computer industry participants.

The Company's solutions have been adopted by market leaders including Bay
Networks, Compaq, CompuCom, CompUSA, CMP Publications, GE Capital, IBM, Ingram
Micro, Kingston, MCI Systemhouse, MicroAge Integration Company, PC Wholesale,
Pinacor and Tech Data. In the 12 months ended June 30, 1998, over $3 billion of
quotes for computer products had been generated using the Company's solutions,
representing use by more than 3,500 sales representatives from over 500
resellers. The Company's revenues have grown from $3.7 million in 1995 to $10.6
million in 1997, and were $9.6 million in the first six months of 1998.

The Internet and Internet-related technologies are revolutionizing the way
businesses and consumers communicate, share information and conduct business.
Businesses are increasingly replacing paper-based transactions and
communications with e-commere solutions in an effort to reduce costs, decrease
inventories and shorten time-to-market. The Company believes that the computer
industry is particularly well suited to the use of Internet-enabled e-commerce
solutions due to the large size and fragmented nature of the industry, its high
costs of sales and distribution and the industry's propensity to embrace
technology for automating processes. In addition, rapid technological change
has resulted in the continuing decline of component prices and shorter life
cycles of computer products. Such pressures have heightened the importance for
industry participants to employ build-to-order and configure-to-order models in
order to reduce inventories, to improve the ability to gauge and meet changing
customer demand and to shorten time-to-market by delaying the acquisition of
component parts until the time an order is placed. The Company believes that a
key capability required to address these needs is real-time access to
information providing seamless configuration and pricing at the point of sale.

3
<PAGE>

The Company believes there is a significant need for an independent,
industry-wide solution to enable the buying and selling of computer products
online. The Company leverages Internet technologies to provide comprehensive e-
commerce solutions designed to increase sales and marketing productivity, meet
end-user demand for online ordering, reduce costs and shorten order fulfillment
cycles for industry participants. The Company's solutions include software
applications that are designed to increase the automation of product search,
comparison, configuration, pricing, financing and ordering, combined with what
the Company believes is the industry's largest content database consisting of
detailed product, categorization, compatibility, pricing and availability
information on more than 600,000 active products from over 1,000 manufacturers.

The Company is a party to a technology license agreement with its parent
company, Trilogy, which provides pcOrder the ability to leverage Trilogy's
front-office and e-commerce software applications, including one of the
industry's leading configuration and pricing engines. The Company has extended
these applications to support the specific configuration and pricing rules of
the computer industry in order to help industry sales representatives and end-
users quickly and accurately build custom configured systems across multiple
vendors.

In addition to its development of software applications and content
databases, the Company has completed integrations to the systems of leading
industry suppliers for such functions as order placement, pricing, inventory
queries and order status queries, financing and credit approval. These
integrations can be leveraged by pcOrder customers that wish to establish or
enhance electronic links with their business partners. Furthermore, the Company
provides software integration, customization, training and Web hosting services
designed to ensure the successful deployment of its solutions.

The Company believes that its position as an independent third-party,
combined with its industry focus and experience, has enabled it to build
product functionality, content and supplier integrations that address the
diverse requirements of manufacturers, distributors, resellers, retailers,
other industry participants and end-users, including corporate buyers and
consumers. Accordingly, the Company believes it is able to offer more cost-
effective and rapid time-to-market solutions for e-commerce than the
proprietary development efforts of industry participants. To the extent the
Company continues to develop and enhance its software applications, content
databases and supplier integrations, pcOrder believes that the incentive will
increase for companies to outsource these e-commerce services to the Company.

STRATEGY

The Company's objective is to be the leading e-commerce technology and
content provider to the computer industry. The key elements of the Company's
strategy are as follows:

. Leverage internet technology to provide communication capability and
support complex transactions across a range of computer industry
participants;

. Broaden adoption of the Company's e-commerce solutions through
relationships with computer industry market leaders;

. Extend the Company's position as an industry leading source of product
information source;

. Leverage the Company's position as an independent third-party solutions
provider to achieve broad market adoption; and

. Expand software applications functionality to increase automation of the
sales, marketing, and channel management functions of the industry.

4
<PAGE>

RELATIONSHIP WITH TRILOGY

The Company was established as a separate business unit within Trilogy, its
parent corporation, on July 1, 1993, and was incorporated under the laws of
Delaware on July 18, 1994. The Company believes Trilogy is a leading provider
of sales, marketing and business-to-business e-commerce applications. Trilogy's
software solutions are designed to integrate each function in a company's sales
and marketing operation, including pricing management, product management,
sales, commissions, promotions, contract management and channel management. In
addition, Trilogy's software solutions are designed to enable companies to
engage in e-commerce as well as improve channel management processes. The
Company has customized the technology it licenses from Trilogy to create
solutions targeted at the computer industry. In addition, pcOrder's solutions
provide customers with configuration logic that is used to configure systems,
and provide customers with pricing and availability information on over 600,000
products from over 1,000 manufacturers.

The Company has a non-exclusive, worldwide, royalty-bearing license to
certain of Trilogy's front office automation software. The Company and Trilogy
have entered into a Technology, Services and License Agreement, a Management
Services Agreement and a Tax Allocation Agreement which define the on-going
relationship between the two companies. For a description of the terms of these
agreements, see "Relationship with Trilogy".

Following this offering, Trilogy will own approximately % of the Common
Stock of the Company. Trilogy has informed the Company that it does not intend
to sell any such shares in the near future. However, other than an agreement
not to sell any of its shares for 180 days after the date of this Prospectus
without the prior consent of the representatives of the Underwriters, Trilogy
is not contractually restricted from selling such shares.

The Company's principal executive offices are located at 5000 Plaza on the
Lake, Austin, Texas 78746. Its telephone number at that location is (512) 684-
1100.

pcOrder(R), pcOrder.com(R), pcOrder Labs(TM), CommerceStation(TM), VIPER(TM),
Channel Assembly Module(TM), Web Storefront(TM), Sales Desktop(TM), Customer
Desktop(TM), TechBuyer(TM), TechBuyer Customer Desktop(TM) and "Moving the
Computer Industry to the Web"(TM) are registered and unregistered trademarks,
service marks and trade names of the Company. This Prospectus also contains
trademarks, service marks and trade names other than those identified in this
paragraph, all of which are the property of their respective holders.
Information contained in the Company's Web site does not constitute a part of
this Prospectus.

5
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.. shares
Common Stock to be outstanding after
this offering....................... shares(1)
Use of proceeds...................... For general corporate purposes, including
capital expenditures and working capital.
See "Use of Proceeds".
Proposed Nasdaq National Market
symbol.............................. "PCOR"
</TABLE>

SUMMARY FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
JULY 1, 1993 ENDED
(INCEPTION) THROUGH YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------------ --------------
1993 1994 1995 1996 1997 1997 1998
------------------- ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software applications and
content.................... $ -- $ 450 $3,388 $5,182 $ 8,869 $3,655 $7,113
Service..................... -- 65 335 700 1,720 859 2,470
------ ------ ------ ------ ------- ------ ------
Total revenues............ -- 515 3,723 5,882 10,589 4,514 9,583
------ ------ ------ ------ ------- ------ ------
Cost of revenues:
Software applications and
content.................... 50 485 1,579 1,749 2,588 989 2,130
Service..................... -- 53 192 185 988 361 1,054
------ ------ ------ ------ ------- ------ ------
Total cost of revenues.... 50 538 1,771 1,934 3,576 1,350 3,184
------ ------ ------ ------ ------- ------ ------
Gross profit (loss).......... (50) (23) 1,952 3,948 7,013 3,164 6,399
Operating expenses:
Research and development.... 185 106 660 1,168 1,129 504 1,785
Selling and marketing....... -- 72 577 2,555 4,793 2,171 4,116
General and administrative.. -- -- 116 726 1,792 565 1,296
Amortization of deferred
stock compensation......... -- -- -- -- -- -- 227
------ ------ ------ ------ ------- ------ ------
Total operating expenses.. 185 178 1,353 4,449 7,714 3,240 7,424
------ ------ ------ ------ ------- ------ ------
Operating income (loss)...... (235) (201) 599 (501) (701) (76) (1,025)
Interest income.............. -- -- -- -- -- -- 45
------ ------ ------ ------ ------- ------ ------
Income (loss) before income
taxes....................... (235) (201) 599 (501) (701) (76) (980)
Income tax provision
(benefit)................... (80) (68) 207 (191) 427 47 --
------ ------ ------ ------ ------- ------ ------
Net income (loss)............ $ (155) $ (133) $ 392 $ (310) $(1,128) $ (123) $ (980)
====== ====== ====== ====== ======= ====== ======
Basic and diluted net income
(loss) per share(2)......... $(0.12) $(0.10) $ 0.03 $(0.02) $ (0.09) $(0.01) $(0.08)
====== ====== ====== ====== ======= ====== ======
Weighted average shares
outstanding(3).............. 1,280 1,280 12,800 12,800 12,800 12,800 12,803
====== ====== ====== ====== ======= ====== ======
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 6,583 $
Working capital (deficit)(5)............................ (3,344)
Total assets............................................ 15,507
Stockholders' equity (deficit).......................... (1,548)
</TABLE>
- --------
(1) Based on the number of shares outstanding as of June 30, 1998. Excludes (i)
2,557,111 shares of Common Stock issuable upon the exercise of outstanding
stock options under the Company's 1996 Stock Option Plan (the "1996 Option
Plan") at a weighted average exercise price of $3.00 per share, (ii) an
additional 375,964 shares of Common Stock reserved for future grant under
the 1996 Option Plan and (iii) 320,000 shares of Common Stock issuable upon
the exercise of a certain other option. See "Management--1996 Stock Option
Plan", "--Agreement Regarding Grant of Options" and Note 8 of Notes to
Financial Statements.
(2) Computed on the basis described in Note 2 of Notes to Financial Statements.
(3) For the period July 1, 1993 (inception) through July 17, 1994, the Company
operated as a business unit of Trilogy and was incorporated on July 18,
1994. Accordingly, no Common Stock of the Company was outstanding prior to
the date of incorporation. For purposes of computing net income (loss) per
share, the number of shares of Common Stock issued at the date of
incorporation, restated for effects of subsequent stock splits, has been
reflected as if outstanding from date of inception on July 1, 1993.
(4) Adjusted to give effect to the receipt by the Company of the net proceeds
from the sale of the shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $ per share. See
"Use of Proceeds" and "Capitalization".
(5) Working capital (deficit) at June 30, 1998 includes the effect of deferred
revenue of $12,799,000.

6
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, prospective
purchasers of the Common Stock offered hereby should carefully consider the
following factors in evaluating the Company and its business. This Prospectus
contains certain forward-looking statements. These statements involve risks
and uncertainties, and actual results could differ materially from the results
discussed in the forward-looking statements as a result of certain of the risk
factors set forth below and for the reasons described elsewhere in this
Prospectus. All forward-looking statements and reasons why results may differ
included in this Prospectus are made as of the date hereof, and the Company
assumes no obligation to update any such forward-looking statement or reasons
why actual results might differ.

LIMITED OPERATING HISTORY; HISTORY OF LOSSES AND ANTICIPATED CONTINUING
OPERATING LOSSES

The Company was established as a separate business unit within Trilogy on
July 1, 1993, was incorporated on July 18, 1994 and began to recognize revenue
in April 1994. A majority of the Company's significant customers entered into
their agreements with the Company only since the third quarter of 1997.
Accordingly, the Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based and is subject to all
of the risks inherent in the establishment of a new business enterprise. The
Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets such
as the markets addressed by the Company. To address these risks, the Company
must, among other things, manage its growth, significantly expand its sales
and marketing organization, successfully develop new products and product
enhancements, achieve market acceptance of its products and services and
respond to competitive developments. There can be no assurance that the
Company will be successful in addressing these risks, that the Company's past
revenue growth will continue in the future or that the Company will achieve
profitability in the future or, if achieved, that the Company will maintain
profitability on a quarterly or annual basis. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

Except for a small operating profit in 1995, the Company has incurred annual
losses from operations since its inception on July 1, 1993, and the Company
expects to continue to incur losses from operations on both a quarterly and an
annual basis for the foreseeable future. At June 30, 1998, the Company had an
accumulated deficit of $2.3 million. The Company believes that its future
profitability and success, if any, will depend in large part on, among other
things, its ability to maintain and expand relationships with computer product
manufacturers, distributors, resellers, retailers, other industry participants
and end-users, including corporate buyers and consumers, and its ability to
successfully enter into new relationships with such participants. To date, the
Company has achieved only limited penetration of its current customers. A key
element of the Company's strategy is to increase its penetration of existing
customer accounts through the sale of its products that offer greater
functionality and have higher revenue potential. In order to implement this
strategy, the Company intends to significantly expand its sales and marketing
organization, which will require substantial financial, personnel and
management expenditures. In the event that these or other initiatives
undertaken by the Company do not result in significantly increased revenues,
the Company's business, financial condition and results of operations would be
materially and adversely affected. The Company's business is still in an
emerging stage, and revenue and income potential from the Company's business
is unproven, making an evaluation of the Company and its prospects difficult.
There can be no assurance that the Company's revenues will increase or even
continue at their current levels or that the Company will achieve or maintain
profitability or generate cash from operations in future periods. See "--
Significant Fluctuations in Future Operating Results", "--Risks Associated
with Emerging Market for E-Commerce; Unproven Business Model" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

7
<PAGE>

SIGNIFICANT FLUCTUATIONS IN FUTURE OPERATING RESULTS

The Company's revenues and operating results have in the past fluctuated
significantly and are expected to fluctuate significantly in the future due to
a combination of factors, many of which are outside of the Company's control.
Factors that may materially and adversely affect the Company's future revenues
and operating results include, but are not limited to, the Company's ability
to significantly expand its sales and marketing organization, the Company's
ability to successfully develop new and enhanced products, the Company's
ability to manage its growth, the level of demand for the Company's products,
the timing and amount of license payments from the Company's customers, the
Company's ability to retain existing customers and increase sales to such
customers, the timing and volume of new orders and the Company's capacity to
fulfill such orders, the Company's ability to maintain or increase current
rates of sales productivity, the level of product and price competition, the
announcement or introduction of new or enhanced products and services by the
Company or its competitors, the Company's ability to upgrade and develop its
internal control systems, the amount and timing of operating costs and capital
expenditures relating to expansion of the Company's business and sales and
marketing infrastructure, downtime of the Company's systems or Internet
capacity or reliability problems, risks associated with the Company's
relationship with Trilogy, the Company's ability to attract and retain key
technical, sales and managerial personnel, the growth in the use and
acceptance of, and activity on, the Internet, World Wide Web ("Web") and
Internet-related technologies, particularly by corporate, institutional and
government users for the purchase of computer products, the extent to which
unauthorized access and use of online information is perceived as a threat to
network security, customer budgets, seasonal trends in customer purchasing and
general economic conditions. In response to competitive pressures or new
product introductions, the Company may take certain pricing or marketing
actions that could materially and adversely affect the Company's operating
results. In addition, the timing and amount of revenues associated with
particular sales can vary significantly based upon (i) the number of products
that are accessed and the number of authorized users, and (ii) whether the
fees are perpetual or subscription-based. The Company has in the past
recognized, and may in the future be required to recognize, a significant
portion of revenue derived from license agreements with its customers in a
single fiscal quarter, which can cause significant variations in quarterly
revenues. Moreover, small delays in customer orders can cause significant
variability in the Company's revenues and results of operations for any
particular period. As a result, the timing of significant orders and the
recognition of revenue from such orders is unpredictable. Unfavorable changes
in any of the above factors could materially and adversely affect the
Company's revenues, gross margins and results of operations.

As a result of the Company's limited operating history and the emerging
nature of the e-commerce market in which the Company competes, there can be no
assurance that the Company will be able to accurately forecast its revenues.
The Company's current and future expense levels are based primarily on its
operating plans and estimates of future revenues and are to a large extent
fixed costs. The Company may be unable to adjust spending in a timely manner
to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in revenues would likely have an immediate material
adverse effect on the Company's business, financial condition and results of
operations. Moreover, the Company currently intends to significantly expand
its sales and marketing organization, which would result in a substantial
increase in operating expenses. To the extent such expenses are incurred prior
to or do not result in increased revenues, the Company's operating losses in a
given quarter may be significantly greater than expected. Based upon all of
the foregoing, the Company believes that its quarterly and annual revenues,
expenses and operating results are likely to vary significantly in the future,
that period-to-period comparisons of the Company's results of operations are
not necessarily meaningful and that such comparisons should not be relied upon
as indications of future performance. Moreover, although the Company's
revenues have increased in recent periods, there can be no assurance that the
Company's revenues will grow in future periods, that they will grow at past
rates or that the Company will achieve profitability on a quarterly or annual
basis in the future. Due to the foregoing as well as other factors, it is
likely that the Company's operating results will be

8
<PAGE>

below market analysts' expectations in some future quarters, which could
materially and adversely affect the market price of the Common Stock. See
"Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Quarterly Results of
Operations".

DEPENDENCE ON SIGNIFICANT GROWTH OF SALES AND MARKETING ORGANIZATION

The Company believes that its future profitability and success will depend
in large part on, among other things, its ability to maintain and expand its
relationships with computer product manufacturers, distributors, resellers,
retailers and other industry participants, and its ability to enter into new
relationships with such participants. To date, the Company has achieved only
limited penetration of its current customers. A key element of the Company's
strategy is to increase its penetration of existing customer accounts. In
order to implement this strategy, the Company intends to significantly expand
its sales and marketing organization. However, competition for sales and
marketing personnel is intense. Moreover, the recruitment and hiring of such
individuals is typically a time-consuming and expensive process. There can be
no assurance that the Company will be able to attract, assimilate and retain
qualified sales and marketing personnel on a timely basis in the future, or at
all. The Company's failure to do so would have a material adverse effect on
the Company's business, financial condition and results of operations.

RISKS ASSOCIATED WITH EMERGING MARKET FOR E-COMMERCE; UNPROVEN BUSINESS MODEL

The market for software products such as those offered by the Company is
still emerging, and there can be no assurance that it will continue to grow or
that, even if the market does grow, the Company's products will achieve market
acceptance among computer product manufacturers, distributors, resellers,
retailers, other industry participants and end-users, including corporate
buyers and consumers. Historically, these entities have purchased computer
products and accessories and exchanged information regarding such products
primarily through traditional means of commerce and communications. The
Company has expended, and will continue to expend, significant resources
educating potential customers about the Company's products and their
capabilities and benefits. There can be no assurance that these expenditures
will enable the Company's products to achieve market acceptance. If the market
for the Company's products fails to grow or grows more slowly than the Company
anticipates, or if the Company's products fail to achieve significant market
acceptance, the Company's business, results of operation and financial
condition would be materially and adversely affected.

A majority of the Company's significant customers have entered into their
agreements with the Company only since the third quarter of 1997. These
contracts generally have terms ranging from one to five years, and the Company
has only limited experience with renewing such contracts. The Company's future
growth is dependent in part on its ability to renew existing contracts on
terms favorable to the Company and to further penetrate its existing customer
accounts with products that offer greater functionality and higher revenue
potential. Because of the Company's limited experience with these contract
renewals, there can be no assurance the Company will be successful in renewing
existing contracts, or if such contracts are renewed, that they will be
renewed on terms favorable to the Company. Any failure to do so on the part of
the Company would have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company's business model is evolving and unproven. The Company is
dependent on its ability to attract a significant number of customers and
channel partners from the computer industry and expand its existing
relationships. There can be no assurance that the Company will be successful
in achieving market acceptance of its independent third-party e-commerce
solutions and services or in achieving significant market share before
competitors offer products, applications or services with features similar or
superior to the Company's current or proposed offerings. If a significant
number of

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participants fail to adopt the Company's solutions or adopt such solutions
more slowly than anticipated, or if the Company fails to retain or fails to
further penetrate its existing customer accounts, the Company may not achieve
the critical mass of users it believes is necessary to enable the success of
its solutions and services. In particular, a fundamental element of the
Company's business strategy is to enter into contractual relationships with
manufacturers and distributors that enable the Company to derive increasing
revenues from such customers to the extent that the Company's e-commerce
solutions are more broadly adopted by market participants. Accordingly, the
Company intends to incur significant expenses during the rest of 1998 and 1999
to implement such strategy. There can be no assurance that the Company will be
successful in its efforts to increase the number of manufacturers,
distributors, resellers, retailers and other market participants that adopt
the Company's solutions. Any failure on the part of the Company to do so would
have a material adverse effect on the Company's business, financial condition
and results of operations.

DEPENDENCE ON GROWTH OF THE INTERNET, INTERNET INFRASTRUCTURE DEVELOPMENT AND
INTERNET COMMERCE

The increased use of the Internet for retrieving, sharing and transferring
information among manufacturers, distributors, resellers, retailers and end-
users, including corporate buyers and consumers, of computers and computer
products has only recently begun to develop, and the Company's success will
depend in large part on continued growth in, and the use of, the Internet for
commerce. Critical issues remain unresolved concerning commercial use of the
Internet, including security, reliability, cost, ease of access, quality of
service and necessary increases in bandwidth availability, and these issues
are likely to affect the development of the market for the Company's products.
The adoption of the Internet for information retrieval and exchange, commerce
and communications, particularly by those enterprises that have historically
relied upon traditional means of commerce and communications, generally will
require the acceptance by these entities of a new and evolving medium of
conducting business and exchanging information. Such acceptance is likely only
in the event that the Internet provides these entities with greater efficiency
and an improved arena of commerce and communication. Demand for and market
acceptance of commerce on the Internet are subject to a high level of
uncertainty and are dependent on a number of factors, including the growth in
commercial access to and acceptance of new interactive technologies, the
development of technologies that facilitate interactive communication between
organizations and targeted audiences and increases in user bandwidth. If the
Internet as a commercial or business medium fails to develop or develops more
slowly than expected, the Company's business, results of operations and
financial condition would be materially adversely affected. The recent growth
in the use of the Internet has caused frequent periods of performance
degradation, requiring the upgrade of routers and switches, telecommunications
links and other components forming the infrastructure of the Internet by
Internet service providers and other organizations with links to the Internet.
Any perceived degradation in the performance of the Internet as a whole could
undermine the benefits of the Company's products. The Company's ability to
increase the speed with which it provides services to customers and to
increase the scope of such services ultimately is limited by and reliant upon
the speed and reliability of the networks operated by third parties.
Consequently, the emergence and growth of the market for the Company's
products is dependent on improvements being made to the entire Internet
infrastructure to alleviate overloading and congestion. No assurance can be
given that these improvements will be made or that, if made, they will be made
in a sufficiently timely and cost-effective manner so as to facilitate market
acceptance of the Company's products.

CUSTOMER CONCENTRATION; RISKS ASSOCIATED WITH RELIANCE ON CERTAIN CONTRACTS

In the year ended December 31, 1995, three of the Company's customers
accounted for approximately 99% of the Company's revenues, and in the years
ended December 31, 1996 and 1997, and the six month period ended June 30,
1998, the Company's top five customers accounted for 89%, 64% and 64%,
respectively, of the Company's total revenues for such corresponding period.
Generally,

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contracts with these customers have terms ranging from one to five years and
may be terminated earlier in the event of an uncured breach or certain other
events. The Company expects that it will continue to depend upon a relatively
small number of contracts for a substantial portion of its revenues for the
foreseeable future. There can be no assurance that the Company will derive any
revenue from sales of products pursuant to agreements with these customers in
any given future period. In the event that any such contracts are not renewed
or are otherwise terminated, the Company's business, financial condition and
results of operations would be materially and adversely affected. See
"Business--Products".

RISKS ASSOCIATED WITH MAINTAINING DATABASE

The Company updates and maintains an extensive database of technical and
descriptive information on computer products, including over 600,000 computer
products from over 1,000 manufacturers. This information is used to support
the Company's applications and the Company seeks to provide users with timely
access to current, comprehensive information on product specifications,
availability and pricing. Certain of the Company's contracts obligate it to
maintain data accuracy at prescribed levels. Maintaining the Company's
databases is a highly manual process and the Company utilizes a combination of
highly trained internal personnel and contract personnel provided by third-
party service organizations. Furthermore, the Company's computer systems and
databases must be sufficiently scalable to process large amounts of complex
product specification and configuration data without significant degradation
in performance. In the past the Company has experienced periodic difficulties
with data accuracy. For example, in the second quarter of 1998, database
capacity constraints limited the Company's ability to accept daily pricing and
availability updates from distributors, which resulted in a temporary
disruption in the Company's ability to provide this data to certain reseller
customers, and failures to renew and delays of contract renewals by certain of
such customers. Although these difficulties have not in the past materially
adversely effected the Company, there can be no assurance that the Company
will not experience similar data maintenance and accuracy problems in future
periods, which could result in a loss of customers or have a material adverse
effect on the Company's business, financial condition and results of
operations. Furthermore, certain of the Company's customer contracts provide
for service level guarantees for data accuracy. To the extent the Company is
unable to maintain data accuracy at required levels, the Company could incur
significant liabilities and the applicable contracts could be terminated, any
of which would have a material adverse effect on the Company's business,
results of operations and financial condition.

CONTROL BY AND RELATIONSHIP WITH TRILOGY

The Company is currently a subsidiary of Trilogy. Upon completion of this
offering, Trilogy will own approximately % of the outstanding Common Stock of
the Company ( % if the Underwriters' over-allotment option is exercised in
full). For so long as Trilogy continues to beneficially own in excess of 50%
of the outstanding Common Stock of the Company, Trilogy will be able to direct
the election of all directors of the Company and exercise a controlling
influence over the business and affairs of the Company, including any
determinations with respect to mergers or other business combinations
involving the Company, the acquisition or disposition of assets by the
Company, future issuances of Common Stock or other equity securities by the
Company, the incurrence of indebtedness by the Company and the payment of
dividends with respect to the Common Stock. Similarly, Trilogy will have the
power to determine matters submitted to a vote of the Company's stockholders
without the consent of the Company's other stockholders, will have the power
to prevent or cause a change in control of the Company and could take other
actions that might be favorable to Trilogy but unfavorable to other
stockholders of the Company. The Company and Trilogy have entered into various
agreements intended to define the relationship between them. There can be no
assurance that Trilogy's ownership of the Company's Common Stock or its other
relationships with the Company will not have a material adverse effect on the
Company or its other stockholders. See "Relationship With Trilogy".

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<PAGE>

RISKS ASSOCIATED WITH DEPENDENCE ON TRILOGY; LIMITED INDEPENDENT OPERATING
HISTORY; POTENTIAL CONFLICTS OF INTEREST

The Company is dependent upon Trilogy to provide certain key technology and
management functions to the Company. Pursuant to the terms of a Technology,
Services and License Agreement, (the "Technology Agreement"), the Company
licenses certain technology from Trilogy on a non-exclusive basis subject to
certain limitations. Any termination of such license, or reduction in the
performance of such licensed technology, that requires the Company to
internally develop or license similar technology from a third party would be
disruptive to the Company's business. Further, the Company believes that
similar technology is not currently available from any third-party and, if the
license from Trilogy were terminated, there can be no assurance that the
Company could successfully internally develop similar technology or license
similar technology from a third-party. As a result, any termination of the
license from Trilogy would have a material adverse effect on the Company's
business, financial condition and results of operations. Additionally, Trilogy
is prohibited from competing with the Company only until August 1999. There
can be no assurance that Trilogy will not compete directly with the Company
after August 1999, and any such competition could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Relationship with Trilogy". Further, Trilogy has joint
ownership rights in technology jointly developed by the Company and Trilogy
during the term of the Technology Agreement, and there can be no assurance
that Trilogy will not utilize such technology in competition with the Company
after August 1999 or license its technology to competitors of the Company,
which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Relationship with
Trilogy".

The Company has historically relied on Trilogy to provide certain human
resource, finance, recruiting, legal and other services. Upon completion of
this offering, Trilogy will have no obligation to provide assistance to the
Company except as described in "Relationship with Trilogy". The Company will
be required to develop and implement the operational, administrative and other
systems and infrastructure necessary to support its current and future
business. The Company estimates that the cost of such development and
implementation will be material to the Company. Any failure to successfully
develop and implement such systems and infrastructure would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "--Control By and Relationship with Trilogy" and "--Management
of Growth".

Conflicts of interest may arise between the Company and Trilogy in a number
of areas relating to their past and ongoing relationships, including potential
competitive business activities, indemnity arrangements, tax and intellectual
property matters, potential acquisitions or financing transactions, sales or
other dispositions by Trilogy of shares of the Company's Common Stock held by
it following this offering and the exercise by Trilogy of its ability to
control the management and affairs of the Company. The Company and Trilogy
have not established any formal procedures to address or resolve these
potential conflicts. There can be no assurance that any conflicts that may
arise between the Company and Trilogy will be resolved in a manner that does
not have a material adverse effect on the Company or its other stockholders,
even if such result is not intended by Trilogy. In addition, except as
described in "Relationship with Trilogy", nothing in the Company's agreements
with Trilogy prohibits Trilogy from competing directly with the Company or
being acquired by a third party, either of which could have a material adverse
effect on the Company's business, financial condition or results of
operations. See "Relationship with Trilogy".

Ownership interests of directors or officers of the Company in the common
stock of Trilogy or service as both a director or officer of the Company and
an officer or employee of Trilogy could create or appear to create potential
conflicts of interest when directors and officers are faced with decisions
that could have different implications for the Company and Trilogy. Joseph A.
Liemandt, a director of the Company, is the Chairman and Chief Executive
Officer and a substantial stockholder of Trilogy.

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<PAGE>

The Company and Trilogy have not established any formal procedures to address
or resolve these potential conflicts.

POSSIBLE FUTURE SALES OF COMMON STOCK BY TRILOGY

Subject to applicable federal securities laws and the restrictions set forth
below, after completion of this offering, Trilogy may sell any and all of the
shares of the Company's Common Stock beneficially

owned by it or distribute any or all of such shares of Common Stock to its
stockholders. Sales or distribution by Trilogy of substantial amounts of
Common Stock in the public market or to its stockholders, or the perception
that such sales or distribution could occur, could adversely affect the
prevailing market prices for the Common Stock. Trilogy is not subject to any
obligation to retain its controlling interest in the Company, except that
Trilogy has agreed not to sell or otherwise dispose of any shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of Goldman, Sachs & Co. See "Underwriting". No notice
will be given to stockholders of the Company if Goldman, Sachs & Co. grants
such written consent to Trilogy. As a result, there can be no assurance
concerning the period of time during which Trilogy will maintain its
beneficial ownership of Common Stock owned by it following this offering.
Moreover, there can be no assurance that, in any transfer by Trilogy of a
controlling interest in the Company, any holders of Common Stock will be able
to participate in such transaction or will realize any premium or other
amounts with respect to their shares of Common Stock. Trilogy and its
transferees have registration rights with respect to the shares of the Common
Stock owned by it, which rights would facilitate any future disposition. See
"Relationship with Trilogy".

DEPENDENCE ON COMPUTER INDUSTRY

The Company derives substantially all of its revenues either directly or
indirectly from the computer industry, and the Company's future growth is
dependent on the computer industry. The computer industry is sensitive to
general economic, business and industry conditions that can cause buyers of
computers and computer products to reduce or delay their investments in
computer systems. Any event or condition that results in decreased spending on
computers or computer products, or consolidation within the computer industry,
could have a negative effect on the Company's customers and negatively impact
the Company's business, operating results and financial condition.
Furthermore, certain of the Company's customers have recently been acquired.
Although to date such acquisitions have not had an adverse effect on the
Company' s relationships with these customers, there can be no assurance that
these acquisitions or other acquisitions of the Company's customers in the
future will not negatively impact the Company's relationships with these
customers or one or more consolidations in the computer industry which could
have a material adverse effect on the Company's business, results of
operations and financial condition.

RISK OF SYSTEM FAILURE; SINGLE SITE

The Company's success depends largely upon the efficient and uninterrupted
operation of its communication systems. The Company has contracted with
certain of its customers to provide server hosting and to maintain redundant
leased lines to ensure system availability. All of the Company's development
and management systems are located at a single facility leased by the Company
in Austin, Texas. The Company's systems and operations are vulnerable to
damage or interruption from fire, flood, power loss, telecommunications
failure, break-ins and similar events. Although the Company has taken certain
steps to prevent a system failure, there can be no assurance that such
measures will be successful and that the Company will not experience system
failures in the future. Furthermore, the Company does not have a formal
disaster recovery plan and does not carry sufficient business interruption
insurance to compensate it for losses that may occur as a result of any system
failure. The occurrence of any system failure or similar event could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Facilities".

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<PAGE>

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING

The Company requires substantial working capital to fund its business and
expects to use a significant portion of the net proceeds of this offering to
fund its expected continuing operating losses. The Company currently believes
that its existing capital resources, combined with the net proceeds of this
offering, will be sufficient to meet its presently anticipated cash
requirements for at least the next 12 months. Thereafter, the Company may be
required to raise additional funds; provided, however, no assurance can be
given that the Company will not be required to raise additional financing
prior to such time. If additional funds are raised through the issuance of
equity securities, stockholders of the Company may experience significant
dilution. Furthermore, there can be no assurance that additional financing
will be available when needed or that, if available, such financing will be
available on terms acceptable to the Company and its stockholders. If such
financing is not available when required or is not available on acceptable
terms, the Company may be unable to expand its sales and marketing
organization, develop new products and product enhancements, take advantage of
business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources".

LENGTHY SALES AND IMPLEMENTATION CYCLE

Due in part to the significant departure from traditional means of commerce
and communications entailed by the adoption and use of the Company's products,
the Company is generally required to provide a significant level of education
regarding the use and benefits of its products, and potential customers tend
to engage in extensive internal reviews before making purchase decisions. In
addition, the purchase of the Company's products by its customers for
deployment within a customer's organization typically involves a significant
commitment of capital and other resources, and is therefore subject to delays
that are beyond the Company's control, such as the customers' internal
procedures to approve large capital expenditures, budgetary constraints and
the testing and acceptance of new technologies that affect key operations,
among other factors. The decision-making process can also be substantially
impacted by the sales practices of, and product introductions by, the
Company's competitors. The sales cycle of the Company's products has
historically been 2 to 6 months for resellers and 9 to 12 months or longer for
manufacturers and distributors; however, there can be no assurance that the
Company will not experience longer sales cycles in the future. Certain of the
Company's customers have in the past experienced difficulties or delays in
completing implementations of the Company's products. Although such
difficulties and delays to date have not had a material adverse effect on the
Company, no assurances can be given that similar difficulties or delays will
not occur in the future. Any such difficulties or delays could cause delays in
the recognition of related revenues, cause customers to reject the Company's
solutions or lead to the delay or non-receipt of future orders for the
Company's products, any of which could have a material adverse effect on the
Company's business, operating results and financial condition. See "--
Significant Fluctuations in Future Operating Results".

MANAGEMENT OF GROWTH

The Company's business has grown rapidly in the last three years, with total
revenues increasing from $3.7 million in 1995 to $10.6 million in 1997 and the
total number of employees increasing from 1 in July 1994 to 147 as of June 30,
1998. Furthermore, significant increases in the number of employees are
anticipated during the rest of 1998 and future periods. In particular, the
Company currently intends to significantly expand the number of employees in
its sales and marketing organization and to expand the number of employees in
its client services, research and development and finance organizations. This
growth has resulted in, and can be expected to continue to require,
substantial expansion of the Company's infrastructure, including operating and
financial systems and

14
<PAGE>

controls and the geographic scope of its operations and customers. Recent
rapid growth has also resulted, and will continue to result, in new and
increased responsibilities for management personnel, and such growth has
placed and, if it continues, is expected to continue to place, a significant
strain on the Company's management and operations. The Company has recently
hired a significant number of executives to augment its management
infrastructure to manage the potential growth of its business, including its
Chief Financial Officer and certain key sales and marketing personnel. These
individuals have not previously worked together or with the Company's existing
management and are in the process of integrating as a management team. There
can be no assurance that they will be able to work together effectively. In
addition, the Company has historically relied on Trilogy to provide certain
human resource, finance, recruiting, legal and other services, and the Company
is in the process of assuming responsibility for such services and similar
services provided by outside sources. Furthermore, the Company's dependence on
outside sources to provide services previously performed by Trilogy will
likely increase. There can be no assurance that the Company will be able to
manage any future expansion successfully, and any inability to do so would
have a material adverse effect on the Company's business, operating results
and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview".

NEW PRODUCTS AND TECHNOLOGICAL CHANGES; RISKS ASSOCIATED WITH TRANSITION TO
NEW TECHNOLOGY PLATFORM

The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards and frequent new product
introductions. The introduction of products embodying new technologies or the
emergence of new industry standards can render existing products obsolete and
unmarketable. The Company's success will depend upon its ability to enhance
its existing products and to develop and introduce, on a timely and cost-
effective basis, new products that keep pace with technological developments
and emerging industry standards and address increasingly sophisticated
customer requirements. There can be no assurance that the Company will be
successful in identifying, developing and marketing product enhancements or
new products that respond to technological change or evolving industry
standards, that the Company will not experience difficulties that could delay
or prevent the successful development, introduction and marketing of these
products, or that its new products and product enhancements will adequately
meet the requirements of the marketplace and achieve market acceptance. The
Company's business, operating results and financial condition would be
materially and adversely affected if the Company were to incur difficulties or
delays in developing new products or enhancements or if such products or
enhancements did not gain market acceptance.

Products as complex as those offered by the Company may contain undetected
errors or defects when first introduced or as new versions are released. There
can be no assurance that, despite testing by the Company and by current and
potential customers, errors will not be found in new products or product
enhancements after commencement of commercial shipments, resulting in loss of
or delay in market acceptance. The Company's introduction of new products or
product enhancements with reliability, quality or compatibility problems could
also result in reduced bookings, delays in collecting accounts receivable and
additional service and warranty costs. The Company has in the past experienced
difficulties and delays in successfully installing its products at certain
customer sites. Although in each case the problems were remedied and did not
have a material adverse effect on the Company, no assurances can be given that
similar problems will not occur in the future or that such problems, if they
were to occur, would not have a material adverse effect on the Company.

The Company is currently engaged in transitioning certain aspects of its
product architecture to a more modular and flexible design. There can be no
assurance that the Company or its new customers will not experience any
performance problems with this new technology platform, whether in the form of
bugs, compatibility difficulties or otherwise. In addition, there can be no
assurance that the Company's existing customers will be able to successfully
transition to this new technology platform. A

15
<PAGE>

failure of the Company's products based on this new technology platform to
perform satisfactorily or a failure by the Company to properly manage the
transition by its existing customers to this new technology platform could
result in cancellation of customer contracts, a decline in the Company's
competitive position or reduced or delayed sales of its products, any of which
could have a material adverse effect on the Company's business, operating
results and financial condition.

DEPENDENCE UPON KEY PERSONNEL

The Company's future success depends in significant part upon the continued
service of a relatively small number of key management, technical, sales and
marketing personnel, especially Ross A. Cooley, the Company's Chairman of the
Board and Chief Executive Officer, and Christina C. Jones, the Company's
President and Chief Operating Officer, each of whom is a party to an
employment agreement with the Company. See "Management--Employment
Agreements." Mr. Cooley, in his capacity as the Company's Chairman of the
Board and Chief Executive Officer, currently performs various executive and
leadership functions, including development of the Company's strategic and
operational plans, executive management of new customer and new account
relationship activities and recruitment of senior management personnel. In
addition, Mr. Cooley is responsible for the financial results of the Company.
Ms. Jones, in her capacity as the Company's President and Chief Operating
Officer, is principally responsible for managing the Company's daily
operations. The Company currently does not carry key person life insurance for
either Mr. Cooley or Ms. Jones. The Company's future success also depends on
its continuing ability to attract and retain other highly qualified
management, technical, sales and marketing personnel. Competition for such
personnel is intense, and the Company has at times in the past experienced
difficulty in recruiting qualified personnel. There can be no assurance that
the Company will retain its key management, technical, sales and marketing
employees or that it will be successful in attracting, assimilating and
retaining other highly qualified management, technical, sales and marketing
personnel in the future. The loss of any member of the Company's key
management, technical, sales and marketing personnel or the inability to
attract and retain additional qualified personnel would have a material
adverse effect on the Company's business, operating results and financial
condition. See "Management".

RISK OF CHANGES IN ACCOUNTING STANDARDS

Statement of Position 97-2 ("SOP 97-2"), "Software Revenue Recognition," was
issued in October 1997 by the American Institute of Certified Public
Accountants and amended by Statement of Position 98-4 ("SOP 98-4"). The
Company adopted SOP 97-2 and 98-4 effective January 1, 1998. The Company
believes that its current revenue recognition policies and practices are
materially consistent with SOP 97-2 and SOP 98-4. However, full implementation
guidelines for this standard have not yet been issued. Once available, such
implementation guidance could lead to unanticipated changes in the Company's
current revenue recognition practices, and such changes could materially
adversely affect the Company's future revenue and earnings. Such
implementation guidelines may necessitate significant changes in the Company's
business practices in order for the Company to continue to recognize revenue
in a consistent manner. For these and other reasons, such changes may have a
material adverse effect on the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

COMPETITION

The market for software products that enable e-commerce is intensely
competitive, and the Company expects competition in its market segment to
increase substantially. Numerous companies provide e-commerce solutions, and
several competitors target the specific computer and computer related products
industry in which the Company competes. The Company's competitors include both
large companies with substantially greater resources than the Company and the
internal IT departments of certain of the Company's customers and potential
customers. The Company believes

16
<PAGE>

that its principal sources of competition are systems integrators and the
internal IT departments of its customers and potential customers. These
organizations may seek to develop e-commerce solutions through the use of
tools offered by the Company's competitors primarily focused on providing e-
commerce enabling solutions to the computer industry such as Calico Software,
Selectica, Inc., SMART Technologies, Inc., Open Market, Inc. and BroadVision,
Inc. Furthermore, there are a number of significantly larger companies with
which the Company does not currently compete that do not presently offer the
same or similar e-commerce solutions offered by the Company but that could
with limited barriers to entry compete directly with the Company in the
future. In addition, except as described in "Relationship with Trilogy",
nothing in the Company's agreements with Trilogy prohibits Trilogy from
competing directly or indirectly with the Company. The Company believes that
the principal competitive factors for companies seeking to provide e-commerce
enabling solutions are price, functionality, product performance, content,
reliability and customer service. Increased competition could result in price
reductions, reduced margins and loss of market share, any of which would
materially and adversely affect the Company's business, operating results and
financial condition. Many of the Company's current and potential competitors
have significantly longer operating histories and significantly greater
financial, technical, marketing and other resources than the Company. There
can be no assurances that the Company will be able to compete successfully
with its existing competitors or with new competitors or that competitive
pressures faced by the Company will not materially and adversely affect its
business, operating results and financial condition. See "Business--
Competition".

UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY

The Company's success depends in part on its ability to protect its
proprietary software and other intellectual property. To protect its
proprietary rights, the Company relies generally on copyright, trademark and
trade secret laws, confidentiality agreements with employees and third-parties
and license agreements with consultants, vendors and customers, although the
Company has not signed such agreements in every case. Despite such
protections, a third party could, without authorization, copy or otherwise
obtain and use the Company's products or technology, or develop similar
technology. There can be no assurance that the Company's agreements with
employees, consultants and others who participate in product development
activities will not be breached, that the Company will have adequate remedies
for any breach, or that the Company's software or trade secrets will not
otherwise become known or independently developed by competitors.

Many of the Company's current and potential competitors dedicate
substantially greater resources to protection and enforcement of intellectual
property rights, especially patents. If a blocking patent has issued or issues
in the future, the Company would need to either obtain a license or design
around the patent. There can be no assurance that the Company would be able to
obtain such a license on acceptable terms, if at all, or to design around the
patent. The Company pursues the registration of certain of its trademarks and
service marks in the United States and in certain other countries, although it
has not secured registration of all of its marks. In addition, the laws of
some foreign countries do not protect the Company's proprietary rights to the
same extent as do the laws of the United States, and effective copyright,
trademark and trade secret protection may not be available in such
jurisdictions. The Company licenses certain of its proprietary rights to third
parties, and there can be no assurance that such licensees will abide by
compliance and quality control guidelines with respect to such proprietary
rights or that such licensees will not take actions that would materially and
adversely affect the Company's business, financial condition and results of
operations.

There can be no assurance that the Company's efforts to protect its
intellectual property rights through copyright, trademark and trade secret
laws will be effective to prevent misappropriation of its technology or to
prevent the development by others of products or technologies similar to or
competitive with those developed by the Company. The Company's failure or
inability to protect its proprietary rights could materially and adversely
affect its business, financial condition and results of operations.

17
<PAGE>

The computer software industry is characterized by frequent and substantial
intellectual property litigation that often is complex and expensive and
involves a significant diversion of resources and uncertainty of outcome. In
the future, the Company may need to pursue litigation to enforce and protect
its intellectual property rights or to defend against a claim of infringement
or invalidity. The Company attempts to avoid infringing known proprietary
rights of third parties in its product development efforts. However, the
Company has not conducted and does not intend to conduct comprehensive patent
searches to determine whether the technology used in its products infringes
patents held by third parties. In addition, it is difficult to proceed with
certainty in a rapidly evolving technological environment in which there may
be numerous patent applications pending, many of which are confidential when
filed. If the Company were to discover that its products violate third-party
proprietary rights, there can be no assurance that it would be able to obtain
licenses to continue offering such products, that any such licenses would be
available on commercially reasonable terms, if at all, or that litigation
regarding alleged infringement could be avoided or settled without substantial
expense and damage awards. Any claims against the Company relating to the
infringement of third-party proprietary rights, even if not meritorious, could
result in the expenditure of significant financial and managerial resources
and in injunctions preventing the Company from distributing certain products.
Such claims could materially and adversely affect the Company's business,
financial condition and results of operations.

RISK OF PRODUCT LIABILITY CLAIMS

The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims. However, the limitation of liability provisions contained in
the Company's license agreements may not be effective under the laws of
certain jurisdictions. Although the Company has not experienced any material
product liability claims to date, the sale and support of the Company's
products entails the risk of such claims. The Company currently has only
limited insurance coverage against product liability and errors and omissions
claims and there can be no assurance that such insurance will continue to be
available to the Company on commercially reasonable terms or at all. A product
liability claim brought against the Company could have a material adverse
effect on the Company's business, results of operations and financial
condition. See "Business--Product Development".

PUBLICITY

The November 30, 1998 issue of Forbes magazine contained an article (the
"Forbes Article") regarding the Company. The Forbes Article included
statements resulting directly or indirectly from interviews with Ross Cooley
and Christina Jones, the Company's Chief Executive Officer and President,
respectively, by representatives of Forbes magazine. Such statements include
the following: (i) "Last year pcOrder lost $1.1 million on revenues of $10.6
million; this year revenues should double while losses continue;" (ii) "The
grand vision is to have every single computer bought using pcOrder
technology;" (iii) "Jones insists that the problem [with data reliability] has
been fixed;" and (iv) "[pcOrder is] celebrating a deal reported to be worth
$30 million or so that pcOrder.com, Inc. just closed with Ingram Micro Inc.,
the world's largest computer distributor." Although the Forbes Article
accurately reflects the substance of the interviews with Mr. Cooley and Ms.
Jones, these statements were not intended to be relied upon by potential
investors in making an investment decision to purchase the Common Stock
offered hereby. Furthermore, the Company disclaims all the information
contained in the Forbes Article for purposes of this offering, and prospective
investors should not rely on such information or any other information not
contained in this Prospectus in making an investment decision to purchase the
Common Stock offered hereby. Forecasts relating to market position, revenues,
data reliability and market acceptance of the Company and its products,
especially given the rapidly evolving market for the Company's products and
services, are forward-looking statements that involve numerous risks and
uncertainties. The Company's actual results could differ materially from those
stated in such forward-looking statements as a result of numerous factors,
including those set forth in these "Risk Factors" and elsewhere in this
Prospectus.

18
<PAGE>

INTERNATIONAL SALES RISKS

Although the Company has had limited sales outside of the U.S. and Canada,
the Company expects to increase its sales in international markets. In order
to expand international sales, the Company must establish additional foreign
operations, hire additional personnel and establish relationships with
additional channel partners. This expansion will require significant
management attention and financial resources and could have a material adverse
effect on the Company's business, financial condition and results of
operations. In addition, there can be no assurance that the Company will be
able to maintain or increase international market demand for the Company's
products and services. Although the Company's international sales are
primarily denominated in U.S. dollars, the Company expects to incur an
increasing percentage of obligations denominated in foreign currencies. A
change in the value of the U.S. dollar relative to foreign currencies could
make the Company's products more expensive and, therefore, potentially less
competitive in those markets and could otherwise adversely affect the
Company's ability to meet its foreign-currency-denominated obligations.
Currently, the Company does not employ currency hedging strategies to reduce
this risk. In addition, the Company's international business may be subject to
a variety of risks, including difficulties in collecting international
accounts receivable or obtaining U.S. export licenses, potentially longer
payment cycles, increased costs associated with maintaining international
marketing efforts, the introduction of non-tariff barriers and higher duty
rates and difficulties in enforcement of contractual obligations and
intellectual property rights. There can be no assurance that such factors will
not have a material adverse effect on the Company's future international sales
and, consequently, on the Company's business, financial condition or results
of operations.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. This could result in system failures or miscalculations,
causing disruptions of operations including, among other things, a temporary
inability to process transactions, send invoices or engage in other normal
business activities. As a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with such "Year
2000" requirements. The Company uses a number of computer software programs
and operating systems and its proprietary solutions include source code which
must address the Year 2000 issue. However, the Company believes that its Year
2000 issues are limited to information technology ("IT") systems (i.e.,
software programs and computer operating systems) and that there are no non-IT
systems (i.e., embedded systems such as devices used to control, monitor or
assist the operation of equipment and machinery), the failure of which as a
result of Year 2000 issues would have a material adverse effect on the
Company's operations. Further, the Company has been informed by Trilogy that
Trilogy believes its internal computer systems and products are Year 2000
compliant, and, based on a preliminary review, the Company believes its own IT
systems are currently Year 2000 compliant. The Company has not historically
made any material expenditures in readying its IT systems for the Year 2000
and does not believe it will be necessary in the future to expend any material
amounts in connection with Year 2000 compliance. There can be no assurance
that there are not currently unknown and unforeseen problems which will
require the Company to make material expenditures in order to assess and
remedy any future Year 2000 problems, and in any such event the expenditures
will be paid out of the Company's general and administrative expenses.

19
<PAGE>

material adverse effect on the Company's business, financial condition and
results of operations. The Company does not have a contingency plan for this
scenario, and it will be necessary for the Company to make the necessary
expenditures to assess and remedy the situation in the event it arises in the
future, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations". In addition,
to the extent the Company's customers' systems are not Year 2000 compliant,
problems in communications among industry participants could result in a delay
in the Company's products achieving market acceptance.

The Company's solutions also utilize and depend on third-party equipment and
software that may not be Year 2000 compliant. The Company has not conducted
audits of its third-party providers to determine their level of Year 2000
compliance. Failure of such third-party equipment or software, or of systems
maintained by the Company's suppliers, to operate properly with regard to the
Year 2000 and thereafter could require the Company to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
the Company's business, financial condition and results of operations.
Furthermore, the purchasing patterns of customers or potential customers may
be affected by Year 2000 issues as companies expend significant resources to
correct their current systems for Year 2000 compliance. These expenditures may
result in reduced funds available to purchase products from the Company of
computer product manufacturers, which could have a material adverse effect on
the Company's business, financial condition and results of operations.

NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF SHARE PRICE

Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market will
develop upon completion of this offering or, if it does develop, that such
market will be sustained. The initial public offering price of the Common
Stock will be determined by negotiation between the Company and the
representatives of the Underwriters, and may not be representative of the
price that will prevail in the open market. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price.

The market price of the Common Stock after this offering may be
significantly affected by factors such as the announcement of new products or
product enhancements by the Company or its competitors, technological
innovations by the Company or its competitors, quarterly variations in the
Company's results of operations, and general market conditions or market
conditions specific to particular industries. In particular, the stock prices
for many companies in the technology and emerging growth sector have
experienced wide fluctuations which have often been unrelated to the operating
results of such companies. Such fluctuations may adversely affect the market
price of the Common Stock. Furthermore, in the past, following periods of
volatility in the market price of a company's securities, securities class
action claims have been brought against the issuing company. There can be no
assurance that such litigation will not occur in the future with respect to
the Company. Such litigation could result in substantial costs and a diversion
of management's attention and resources, even if ultimately determined in
favor of the Company, and any adverse determination in such litigation could
also subject the Company to significant liabilities, any or all of which could
have a material adverse effect on the Company's business, operating results
and financial condition.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

20
<PAGE>

Securities Act. As of the date of this Prospectus, 12,914,239 "restricted
shares" as defined in Rule 144 will be outstanding. Of such shares, and
without consideration of the contractual restrictions described below, no
shares would be available for immediate sale in the public market without
restriction pursuant to Rule 144(k). Beginning 90 days after the date of this
Prospectus, and without consideration of the contractual restrictions
described below, no shares would be eligible for sale in reliance upon Rule
144 and 89,239 shares would be eligible for sale in reliance upon Rule 701
adopted under the Securities Act. In addition, options to purchase
approximately 179,402 shares will be vested and exercisable and eligible for
sale in Reliance upon Rule 701.

In general, under Rule 144 as currently in effect, beginning 90 days after
the offering, a person (or persons whose shares are aggregated) who owns
shares that were purchased from the Company (or any Affiliate) at least one
year previously, including any person who may be deemed an Affiliate of the
Company, is entitled to sell within any three-month period a number of shares
that does not exceed the greater of (i) 1% of the then outstanding shares of
the Common Stock, or (ii) the average weekly trading volume of the Common
Stock on the Nasdaq National Market during the four calendar weeks preceding
the date on which notice of the sale is filed with the Securities and Exchange
Commission (the "Commission"). Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about the Company. Any person (or persons whose
shares are aggregated) who is not deemed to have been an Affiliate of the
Company at any time during the 90 days preceding a sale, and who owns shares
within the definition of "restricted securities" under Rule 144 that were
purchased from the Company (or any Affiliate) at least two years previously,
would be entitled to sell such shares under Rule 144(k) without regard to the
volume limitations, manner of sale provisions, public information requirements
or notice requirements.

Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its
employees, directors, officers, consultants or advisers prior to the date the
issuer becomes subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to written
compensatory benefit plans or written contracts relating to the compensation
of such persons. In addition, the Commission has indicated that Rule 701 will
apply to typical stock options granted by an issuer before it becomes subject
to the reporting requirements of the Exchange Act, along with the shares
acquired upon exercise of such options (including exercises after the date of
this Prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this Prospectus, may be sold (i) by
persons other than Affiliates, subject only to the manner of sale provisions
of Rule 144, and (ii) by Affiliates under Rule 144 without compliance with its
one-year holding period requirement.

The Company's officers and directors and Trilogy have agreed not to sell any
of their shares of Common Stock for 180 days after the date of this Prospectus
without the prior written consent of the representatives of the Underwriters.
As a result of these contractual restrictions and subject to the provisions of
Rules 144(k), 144 and 701, as applicable, 12,914,239 shares subject to
restriction will be eligible for sale 180 days after the date of this
Prospectus. See "Underwriting".

The Company has agreed not to offer, sell or otherwise dispose of any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or any rights to acquire Common Stock for a
period of 180 days after the date of this Prospectus, without the prior
written consent of the representatives of the Underwriters, subject to certain
limited exceptions. See "Underwriting".

21
<PAGE>

days after the date of this Prospectus and will automatically become effective
upon filing. Following such filing, shares registered under such registration
statement will, subject to the Lock-Up Agreements, Rule 144 volume limitations
applicable to Affiliates and the lapsing of the Company's repurchase rights,
be available for sale in the open market upon the exercise of vested options
90 days after the effective date of this Prospectus. At June 30, 1998, options
to purchase 2,557,111 shares were issued and outstanding under the 1996 Plan.
See "Shares Eligible for Future Sale".

EFFECT OF CERTAIN CHARTER PROVISIONS; ANTI-TAKEOVER EFFECTS OF CERTIFICATE OF
INCORPORATION, BYLAWS AND DELAWARE LAW

The Company's Certificate of Incorporation, as amended and restated (the
"Certificate of Incorporation"), and Bylaws, as amended and restated
("Bylaws"), contain certain provisions that may have the effect of
discouraging, delaying or preventing a change in control of the Company or
unsolicited acquisition proposals that a stockholder might consider favorable,
including provisions authorizing the issuance of "blank check" preferred
stock. In addition, certain provisions of Delaware law may also have the
effect of discouraging, delaying or preventing a change in control of the
Company or unsolicited acquisition proposals. The anti-takeover effect of
these provisions may also have an adverse effect on the public trading price
of the Company's Common Stock. See "Management--Stock Plans", "Description of
Capital Stock--Preferred Stock" and "--Certain Anti-Takeover, Limited
Liability and Indemnification Provisions; Section 203 of the Delaware General
Corporation Law".

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price is substantially higher than the book
value per share of the outstanding Common Stock. As a result, investors
purchasing Common Stock in this offering will incur immediate and substantial
dilution. To the extent outstanding options to purchase Common Stock are
exercised, there will be further dilution. See "Dilution" and "Shares Eligible
for Future Sale".

UNCERTAINTY AS TO USE OF PROCEEDS

The principal purposes of this offering are to increase the Company's
working capital, to create a public market for the Company's Common Stock and
to facilitate future access to public equity markets. The Company currently
has no specific plans for the use of the net proceeds from this offering other
than for general corporate purposes, including working capital and capital
expenditures. Accordingly, the Company's management will retain broad
discretion as to the allocation of a substantial portion of the net proceeds
from this offering. Pending any such uses, the Company plans to invest the net
proceeds in investment-grade, interest-bearing securities. See "Use of
Proceeds" and "Certain Transactions".

22
<PAGE>

USE OF PROCEEDS

Based on an assumed initial public offering price of $ per share, the net
proceeds to the Company from the sale of the shares of Common Stock to be
sold by the Company hereby will be approximately $ (approximately $ if
the Underwriters exercise their over-allotment option in full), after
deduction of underwriting discounts and commissions and estimated offering
expenses payable by the Company.

The principal purposes of this offering are to increase the Company's
working capital, to create a public market for the Company's Common Stock, to
facilitate future access by the Company to public equity markets, and to
provide increased visibility and credibility to the Company. The Company
presently has no specific plans for use of the net proceeds of this offering.
The Company intends to use the net proceeds primarily for general corporate
purposes, including working capital to fund anticipated operating losses
arising in part from substantial investment in expanding the Company's sales
and marketing organization, and capital expenditures. The Company may, when
and if the opportunity arises, use an unspecified portion of the net proceeds
to acquire or invest in complementary businesses, products and technologies.
The Company has no present understandings, commitments or agreements with
respect to any material acquisition of, or investment in, third parties. The
Company believes that its existing capital resources, combined with the net
proceeds of this offering, will be sufficient to meet its presently
anticipated cash requirements through at least the next 12 months. There can
be no assurance that the Company will not be required to raise additional
financing prior to such time, that additional financing will be available when
needed or that, if available, such financing will be available on terms
favorable to the Company and its stockholders. Pending use of the net proceeds
for the above purposes, the Company intends to invest such funds in interest-
bearing, investment-grade securities. See "Risk Factors--Future Capital Needs;
Uncertainty of Additional Financing".

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying any cash dividends on its Common Stock in
the foreseeable future.

23
<PAGE>

CAPITALIZATION

The following table sets forth, as of June 30, 1998, the cash position and
capitalization of the Company (i) on an actual basis, and (ii) on an as
adjusted basis to give effect to the sale by the Company of the shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $ per share and the receipt by the Company of the
estimated net proceeds therefrom.

<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS,
EXCEPT SHARE
AMOUNTS)
<S> <C> <C>
Cash and cash equivalents................................. $ 6,583 $
======= ====
Long-term obligations, less current portion............... $ -- $ --
Stockholders' equity (deficit):
Preferred Stock, $.01 par value per share; 3,200,000
shares authorized; no shares issued or outstanding
(actual or as adjusted)................................ -- --
Common Stock, $.01 par value per share; 50,000,000
shares authorized; 12,866,925 shares issued and
outstanding (actual)(1); and shares issued and
outstanding (as adjusted)(1)........................... 129
Additional paid-in capital.............................. 2,072
Deferred stock compensation............................. (1,435)
Retained earnings (deficit)............................. (2,314)
------- ----
Total stockholders' equity (deficit).................. (1,548)
------- ----
Total capitalization.................................. $(1,548) $
======= ====
</TABLE>
- --------
(1) Excludes 2,557,111 shares of Common Stock issuable upon exercise of
options outstanding as of June 30, 1998 at a weighted average exercise
price per share of $3.00, and 375,964 additional shares reserved for
future grant. Also excludes the right under the terms of an applications
subscription arrangement to require the Company to grant an option to
purchase up to 320,000 shares of Common Stock if certain events occur,
including an initial public offering. As of June 30, 1998, no specified
event had occurred and the option was not outstanding. See "Management--
1996 Stock Option Plan" and Note 8 of Notes to Financial Statements.

24
<PAGE>

DILUTION

At June 30, 1998, the net tangible book value of the Company was a deficit
of $1,548,000, or $(0.12) per share of Common Stock. Net tangible book value
(deficit) per share represents the amount of total tangible assets of the
Company reduced by the amount of its total liabilities, divided by the number
of shares of Common Stock outstanding. After giving effect to the sale by the
Company of the shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $ per share and the receipt by the
Company of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company as of June 30, 1998 would have been $ , or $
per share of Common Stock. This represents an immediate increase in pro forma
net tangible book value of $ per share to existing stockholders and an
immediate dilution of $ per share to new investors purchasing shares of
Common Stock in this offering. The following table illustrates the per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Net tangible book value (deficit) per share as of June 30, 1998.. $(0.12)
Increase per share attributable to new investors.................
-------
As adjusted net tangible book value per share after this offering..
----
Dilution per share to new investors................................ $
====
</TABLE>

The following table sets forth, on an as adjusted basis as of June 30, 1998,
with respect to existing stockholders and new investors in this offering, a
comparison of the number of shares of Common Stock acquired from the Company,
the percentage ownership of such shares, the total cash consideration paid,
the percentage of total cash consideration paid and the average price per
share paid assuming the sale by the Company of the shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of $
per share and the receipt by the Company of the estimated net proceeds
therefrom:

<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
------------------ ---------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 12,866,925 % $539,000 % $0.04
New investors.....................
---------- --- -------- ---
Total........................... 100% 100%
========== === ======== ===
</TABLE>

The preceding table assumes no exercise of any outstanding stock options. As
of June 30, 1998, there were options outstanding to purchase a total of
2,557,111 shares of Common Stock at a weighted average exercise price of $3.00
per share and 375,964 additional shares reserved for future grant. Also
excludes the right under the terms of an applications subscription agreement
to require the Company to grant to a customer an option to purchase up to
320,000 shares of Common Stock if one of specified certain events occurs,
including an initial public offering. As of June 30, 1998, no specified event
had occurred and the option was not outstanding. To the extent outstanding
options are exercised or shares reserved for future grant are issued, there
will be further dilution to new investors. See "Management--1996 Stock Option
Plan" and Note 8 of Notes to Financial Statements.

25
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and with the Financial Statements and Notes thereto which are
included elsewhere in this Prospectus. The statement of operations data for
the fiscal years ended December 31, 1995, 1996 and 1997 and the six months
ended June 30, 1998 and the balance sheet data at December 31, 1996 and 1997
and June 30, 1998 are derived from the audited Financial Statements included
elsewhere in this Prospectus. The balance sheet data as of December 31, 1995
is derived from audited financial statements that are not included in this
Prospectus. The statement of operations data for the six months ended June 30,
1997 is derived from unaudited financial statements included elsewhere in this
Prospectus and, in the opinion of the Company, include all adjustments,
consisting solely of normal recurring accruals, which are necessary to present
fairly the data for such period and as of such date. The statement of
operations data for the period from inception (July 1, 1993) to December 31,
1993 and the year ended December 31, 1994 and the balance sheet data at
December 31, 1993 and 1994 are derived from audited financial statements not
included in this Prospectus. Historical results are not necessarily indicative
of results in the future, and the results for interim periods are not
necessarily indicative of results to be expected for the entire year. See
"Risk Factors--Significant Fluctuations in Future Operating Results" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1993
(INCEPTION) SIX MONTHS
THROUGH YEAR ENDED DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, ------------------------------ ----------------
1993 1994 1995 1996 1997 1997 1998
------------ ------ ------ ------ ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software applications and
content.................... $ -- $ 450 $3,388 $5,182 $ 8,869 $ 3,655 $ 7,113
Service..................... -- 65 335 700 1,720 859 2,470
------ ------ ------ ------ ------- ------- -------
Total revenues............ -- 515 3,723 5,882 10,589 4,514 9,583
------ ------ ------ ------ ------- ------- -------
Cost of revenues:
Software applications and
content.................... 50 485 1,579 1,749 2,588 989 2,130
Service..................... -- 53 192 185 988 361 1,054
------ ------ ------ ------ ------- ------- -------
Total cost of revenues.... 50 538 1,771 1,934 3,576 1,350 3,184
------ ------ ------ ------ ------- ------- -------
Gross profit (loss).......... (50) (23) 1,952 3,948 7,013 3,164 6,399
Operating expenses:
Research and development.... 185 106 660 1,168 1,129 504 1,785
Selling and marketing....... -- 72 577 2,555 4,793 2,171 4,116
General and administrative.. -- -- 116 726 1,792 565 1,296
Amortization of deferred
stock compensation......... -- -- -- -- -- -- 227
------ ------ ------ ------ ------- ------- -------
Total operating expenses.. 185 178 1,353 4,449 7,714 3,240 7,424
------ ------ ------ ------ ------- ------- -------
Operating income (loss)...... (235) (201) 599 (501) (701) (76) (1,025)
Interest income.............. -- -- -- -- -- -- 45
------ ------ ------ ------ ------- ------- -------
Income (loss) before income
taxes....................... (235) (201) 599 (501) (701) (76) (980)
Income tax provision
(benefit)................... (80) (68) 207 (191) 427 47 --
------ ------ ------ ------ ------- ------- -------
Net income (loss)............ $ (155) $ (133) $ 392 $ (310) $(1,128) $ (123) $ (980)
====== ====== ====== ====== ======= ======= =======
Basic and diluted net income
(loss) per share(1)......... $(0.12) $(0.10) $ 0.03 $(0.02) $ (0.09) $ (0.01) $ (0.08)
====== ====== ====== ====== ======= ======= =======
Weighted average shares
outstanding(2).............. 1,280 1,280 12,800 12,800 12,800 12,800 12,803
====== ====== ====== ====== ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------ JUNE 30,
1993 1994 1995 1996 1997 1998
----- ----- ------ ------ ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents(3)............. $ -- $ -- $ -- $ -- $ 2,207 $ 6,583
Working capital
(deficit)(4)............... (155) (291) 255 (253) (1,489) (3,344)
Total assets................ -- 1,088 1,492 3,435 4,978 15,507
Stockholders' equity
(deficit).................. (155) (287) 442 132 (995) (1,548)
</TABLE>
- -------
(1) Computed on the basis described in Note 2 of Notes to Financial
Statements.
(2) For the period July 1, 1993 (inception) through July 17, 1994, the Company
operated as a business unit of Trilogy and was incorporated on July 18,
1994. Accordingly, no Common Stock of the Company was outstanding up to
the date of incorporation. For purposes of computing net income (loss) per
share, the number of shares of Common Stock issued at the date of
incorporation, restated for effects of subsequent stock splits, have been
reflected as if outstanding from date of inception on July 1, 1993.
(3) Prior to 1997, the Company relied on Trilogy for all of its cash
management requirements.
(4) Working capital (deficit) at December 31, 1996 and 1997 and June 30, 1998
includes the effect of deferred revenue of $2,162,000, $4,212,000 and
$12,799,000, respectively.

26
<PAGE>

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

The following discussion should be read in conjunction with, and is
qualified in its entirety by, the more detailed information and the Financial
Statements and Notes thereto included elsewhere in this Prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including, but not limited to, those set forth under "Risk Factors"
and elsewhere in this Prospectus.

OVERVIEW

pcOrder is a leading provider of Internet-based e-commerce solutions that
are designed to enable the computer industry's suppliers, resellers and end-
users to buy and sell computer products online. The Company leverages Internet
technologies to provide comprehensive e-commerce solutions designed to
increase sales and marketing productivity, meet end-user demand for online
ordering, reduce costs and shorten order fulfillment cycles for industry
participants. The Company's solutions include software applications that
automate product search, comparison, configuration, pricing, financing and
ordering, combined with what the Company believes is the industry's largest
content database consisting of detailed product, categorization,
compatibility, pricing and availability information.

The Company was established as a separate business unit within Trilogy on
July 1, 1993, and was incorporated on July 18, 1994. The Company began to
recognize revenue in April 1994, and has periodically released new products
and enhancements to its existing products since that date. In late 1996, Ross
A. Cooley joined the Company as Chairman and Chief Executive Officer and
brought significant computer industry experience and long-term relationships
with computer industry participants to the Company. Since that time, the
Company's e-commerce solutions for the computer industry have gained broader
acceptance, and have been adopted by market leaders including Bay Networks,
Inc. ("Bay Networks"), Compaq Computer Corporation ("Compaq"), CompuCom
Systems, Inc. ("CompuCom"), CompUSA Inc. ("CompUSA"), CMP Publications, Inc.
("CMP Publications"), GE Capital Corp. ("GE Capital"), Ingram Micro, Inc.
("Ingram Micro"), International Business Machines Corporation ("IBM"),
Kingston Technology Corporation ("Kingston"), MCI Systemhouse Corp. ("MCI
Systemhouse"), MicroAge Integration Company, Pinacor, Inc. ("Pinacor") and
Tech Data Corporation ("Tech Data"). In addition, over 500 resellers use the
Company's solution. The Company's revenues have grown from $3.7 million in
1995 to $10.6 million in 1997, and were $9.6 million in the first six months
of 1998.

The Company derives its revenues from software applications and content fees
and related service fees. Software applications fees consist of subscription-
based or perpetual license arrangements. Content fees are contracted for on a
subscription basis. In substantially all cases, the Company's software
applications and content are sold as a single solution. Content fees are
charged for access, entry, updating and maintenance of computer product data.
Service fees are primarily generated from integration, customization and
training. Such fees are generally charged on a time and materials basis;
however, the Company has in the past and may from time to time in the future
provide such services on a fixed price basis. Prior to 1997, software
applications fees had been derived primarily from perpetual licenses of the
Company's products. In late 1996, the Company commenced a transition of its
pricing model to subscription-based arrangements. Currently, the Company
derives the majority of its software applications and content fees from
subscription-based arrangements, but may from time to time grant perpetual
licenses to accommodate individual customer needs.

Revenue from perpetual licenses or software application arrangements
("subscriptions") is recognized when an agreement has been executed, the
product has been delivered or the implementation is complete, as applicable,
and no vendor obligations or customer acceptance rights remain. In the case

27
<PAGE>

of perpetual licenses, revenue is recognized at such time. In the case of
subscriptions, revenue recognition commences at such time, and is generally
recognized ratably over the life of the arrangement. Software maintenance fees
relating to perpetual licenses are recognized ratably over the term of the
applicable maintenance agreement. Content fees are recognized ratably over the
applicable maintenance period, which generally commences upon initial content
entry. See Note 2 of Notes to Financial Statements.

Time and materials service fees are recognized as the services are
performed. The Company recognizes revenue on fixed price service arrangements
upon (i) the completion of specific contractual events, or (ii) based on an
estimated percentage of completion as work progresses.

The Company records cash advances and amounts billed in excess of revenue
recognized as deferred revenue. The deferred revenue balance on June 30, 1998
was $12,799,000. Substantially all of this deferred revenue will be recognized
as revenue prior to June 30, 1999. The deferred revenue balance generally
results from contractual commitments made by customers to pay amounts to the
Company in advance of receipt of products or services. The timing and amount
of cash advances from customers can vary significantly depending on specific
contract terms and can therefore have a significant impact on the amount of
deferred revenue in any given period. Deferred revenue is not indicative of
the Company's contract backlog or future revenues. The Company derives the
majority of its revenues from subscription-based arrangements which may have
pre-payment terms resulting in deferred revenue and which require renewal for
license access and service beyond the contract period. Fluctuations in
deferred revenue result in similar fluctuations in the Company's cash flow
from operations. Accordingly, cash flow from operations is positively impacted
when deferred revenue increases and negatively impacted when deferred revenue
declines.

Statement of Position 97-2 ("SOP 97-2"), "Software Revenue Recognition" was
issued in October 1997 by the American Institute of Certified Public
Accountants and amended by Statement of Position 98-4 ("SOP 98-4"). The
Company adopted SOP 97-2 and SOP 98-4 effective January 1, 1998. The Company
believes its current revenue recognition policies and practices are materially
consistent with SOP 97-2 and SOP 98-4. However, full implementation guidelines
for this standard have not been issued. Once available, such implementation
guidance could lead to unanticipated changes in the Company's current revenue
accounting practices, and such changes could materially adversely affect the
Company's future revenue and earnings. Such implementation guidance may
necessitate significant changes in the Company's business practices in order
for the Company to continue to recognize revenue in a consistent manner. Such
changes may have a material adverse effect on the Company's business,
operating results and financial condition.

Pursuant to an intercompany license agreement with Trilogy, the Company is
obligated to pay Trilogy royalties based on fees generated from perpetual
license agreements, software maintenance and subscription-based licenses.
Also, the Company has entered into certain agreements with Trilogy pursuant to
which Trilogy provides certain administrative and corporate support services
to the Company, including certain tax administration, payroll, payroll
accounting, banking, corporate finance, recruiting and employee training
services. In addition, the Company has entered into a tax allocation agreement
with Trilogy. See Notes 2 and 4 of Notes to Financial Statements.

Except for a small profit in 1995, the Company has incurred annual losses
from operations from its inception in July 1993 to date, and the Company
expects to continue to incur losses from operations on both a quarterly and an
annual basis for the foreseeable future. The Company had an accumulated
deficit of $2.3 million at June 30, 1998. Furthermore, the Company intends to
invest significantly in its sales and marketing organization, programs and
activities to increase sales of its products and services to its existing
customers and to new customers. However, historically the Company's sales
cycle has been 2 to 6 months for resellers and up to 9 to 12 months or longer
for manufacturers and distributors. Consequently, even if the Company achieves
increased sales of its products and services as a result

28
<PAGE>

of its investments in its sales force, such increases likely will not be
recognized in the quarter in which such investment are made.

Because the market for the Company's products has only recently emerged, and
based on other factors described in this Prospectus, the Company believes that
its quarterly and annual revenues, expenses and operating results are likely
to vary significantly in the future, that period-to-period comparisons of the
Company's results of operations are not necessarily meaningful and that such
comparisons should not be relied upon as indications of future performance.
Moreover, although the Company's revenues have increased in recent periods,
there can be no assurance that the Company's revenues will grow in future
periods, that they will grow at past rates or that the Company will achieve
profitability on a quarterly or annual basis in the future. The Company's
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in the early stage of development,
particularly companies in new and rapidly evolving markets. There can be no
assurance that the Company will be successful in addressing such risks and
difficulties or that the Company will achieve profitability in the future.

RESULTS OF OPERATIONS

The following table sets forth the results of operations for the Company
expressed as a percentage of total revenues. The Company's historical
operating results are not necessarily indicative of the results for any future
period.

<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
----------------- -----------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Software applications and content................ 91% 88% 84% 81% 74%
Service.......................................... 9 12 16 19 26
--- --- --- --- ---
Total revenues................................. 100 100 100 100 100
--- --- --- --- ---
Cost of revenues:
Software applications and content................ 43 30 25 22 22
Service.......................................... 5 3 9 8 11
--- --- --- --- ---
Total cost of revenues......................... 48 33 34 30 33
--- --- --- --- ---
Gross profit...................................... 52 67 66 70 67
Operating expenses:
Research and development......................... 18 20 11 11 19
Selling and marketing............................ 15 43 45 48 43
General and administrative....................... 3 12 17 13 14
Amortization of deferred stock compensation...... -- -- -- -- 2
--- --- --- --- ---
Total operating expenses....................... 36 75 73 72 78
--- --- --- --- ---
Operating income (loss)........................... 16 (8) (7) (2) (11)
Interest income................................... -- -- -- -- 1
--- --- --- --- ---
Income (loss) before income taxes................. 16 (8) (7) (2) (10)
Income tax provision (benefit).................... 5 (3) 4 1 --
--- --- --- --- ---
Net income (loss)................................. 11% (5)% (11)% (3)% (10)%
=== === === === ===
</TABLE>

29
<PAGE>

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1998

REVENUES

Total revenues increased 112% from $4.5 million for the six months ended
June 30, 1997 to $9.6 million for the six months ended June 30, 1998. The
Company's top five customers for the six months ended June 30, 1997 accounted
for 79% of total revenues during that period, and the Company's top five
customers for the six months ended June 30, 1998 accounted for 64% of total
revenues during that period.

SOFTWARE APPLICATIONS AND CONTENT. Software applications and content
revenues increased 95% from $3.7 million for the six months ended June 30,
1997 to $7.1 million for the six months ended June 30, 1998, representing 81%
and 74% of total revenues, respectively. The increase in absolute dollars was
due primarily to the addition of subscription-based and perpetual license
customers and increased subscription-based arrangements for additional
authorized users for existing customers.

Software applications and content revenues recognized under perpetual
licenses were $437,000 and $678,000 in the six months ended June 30, 1997 and
1998, respectively, representing 10% and 7% of total revenues, respectively.
The increase in absolute dollars was due primarily to a perpetual license
agreement executed during the six months ended June 30, 1998. The decline in
perpetual license revenue as a percentage of total revenues was principally
due to the adoption of subscription-based arrangements by a majority of new
customers.

SERVICE. Service revenues increased 188% from $859,000 for the six months
ended June 30, 1997 to $2.5 million for the six months ended June 30, 1998,
representing 19% and 26% of total revenues, respectively. The increase in
absolute dollars and as a percentage of total revenues was due primarily to
software integration, customization and training services associated with an
increase in the number of software applications and content customers and the
recognition of revenue under a fixed-fee agreement in the first quarter of
1998.

COST OF REVENUES

SOFTWARE APPLICATIONS AND CONTENT. Cost of software applications and content
revenues consists primarily of royalties paid to Trilogy and the cost of
providing software and content maintenance. Cost of software applications and
content revenues increased 115% from $989,000 during the six months ended June
30, 1997 to $2.1 million during the six months ended June 30, 1998,
representing 27% and 30% of software applications and content revenues,
respectively. The increase in cost of software applications and content
revenues in absolute dollars was due primarily to (i) the increase in
headcount within the Company's content management group ("PC Labs") and the
depreciation related to additional computer equipment for PC Labs purchased
during 1998 and (ii) the increase in royalties paid to Trilogy on software
applications as a result of increased total revenues. The increase in cost of
software applications and content revenues as a percentage of software
applications and content revenues was due primarily to the increased personnel
and other costs associated with PC Labs providing content management services
to a greater number of customers.

SERVICE. Cost of service revenues consists primarily of the cost of in-house
and contract personnel providing software integration, customization and
training. Cost of service revenues increased 192% from $361,000 for the six
months ended June 30, 1997 to $1.1 million for the six months ended June 30,
1998, representing 42% and 43% of service revenues, respectively. The increase
in cost of service revenues in absolute dollars and as a percentage of service
revenues was due primarily to the increased personnel and other costs
associated with providing these services to a greater number of customers.
Additionally, the increase in cost of service revenues as a percentage of
total revenues for the six months ended June 30, 1998 was offset primarily by
the recognition of revenue under a fixed fee arrangement for which the
majority of the associated costs were expensed in the fourth quarter of 1997.

30
<PAGE>

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of personnel costs to support product development. Research and
development expenses increased 254% from $504,000 for the six months ended
June 30, 1997 to $1.8 million for the six months ended June 30, 1998,
representing 11% and 19% of total revenues, respectively. These increases were
due primarily to an increase in internal development personnel. The Company
believes that continued investment in research and development is critical to
attaining its strategic objectives and, as a result, expects research and
development costs in absolute dollars to increase significantly in future
periods.

SELLING AND MARKETING. Selling and marketing expenses consist primarily of
salaries and outsourced personnel costs, advertising, travel, tradeshows and
public relations expenses. Selling and marketing expenses increased 90% from
$2.2 million for the six months ended June 30, 1997 to $4.1 million for the
six months ended June 30, 1998, representing 48% and 43% of total revenues,
respectively. The increase in absolute dollars was due primarily to an
increase in personnel and the Company's increased marketing campaign
expenditures. The Company believes that such expenses will increase in
absolute dollars and as a percentage of revenues in future periods as it
expands its sales and marketing organization and activities.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel costs, recruiting and professional legal and accounting
services, as well as management fees paid to Trilogy. General and
administrative expenses increased 129% from $565,000 for the six months ended
June 30, 1997 to $1.3 million for the six months ended June 30, 1998,
representing 13% and 14% of total revenues, respectively. The increase in
absolute dollars and as a percentage of total revenues was due primarily to
increased personnel and facility expenses necessary to support the Company's
growth. The Company believes general and administrative expenses will increase
in absolute dollars as the Company expands its personnel and infrastructure to
support its growth and assumes the responsibilities of a public company.

AMORTIZATION OF DEFERRED STOCK COMPENSATION. In 1998, the Company recorded
total deferred stock compensation of $1.7 million in connection with stock
options granted during the six months ended June 30, 1998. Such amount is
being amortized over the vesting periods of the applicable options, resulting
in amortization of $227,000 for the six months ended June 30, 1998. These
amounts represent the difference between the exercise price of certain stock
option grants and the deemed fair value of the Company's Common Stock at the
time of such grants.

INCOME TAXES

The Company is included in the consolidated income tax return of Trilogy.
The Company has also entered into a tax sharing agreement with Trilogy. Should
Trilogy's ownership interest fall below 80% of the outstanding shares, the
Company will no longer be included in the consolidated group or subject to the
tax sharing agreement. See Note 2 of Notes to Financial Statements.

The effective tax rate used to record the income tax provisions was 61% and
0% for the six months ended June 30, 1997 and 1998, respectively. The
effective tax rate for the six months ended June 30, 1997 and 1998 is based on
the estimated annual effective tax rate, including the impact of increases to
the valuation allowance for deferred tax assets.

COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1997

REVENUES

The Company's total revenues increased 80% from $5.9 million in 1996 to
$10.6 million in 1997. The Company's top five customers for 1996 accounted for
approximately 89% of total revenues in 1996, and the Company's top five
customers for 1997 accounted for 64% of total revenues in 1997.

31
<PAGE>

SOFTWARE APPLICATIONS AND CONTENT. Software applications and content
revenues increased 71% from $5.2 million in 1996 to $8.9 million in 1997,
representing 88% and 84% of total revenues, respectively. The increase in
absolute dollars was due primarily to the increase in revenues from
subscription-based arrangements, partially offset by the decrease in revenues
from perpetual licenses, as customer demand shifted from perpetual licenses to
subscription-based arrangements. Software applications and content revenues
recognized under perpetual licenses were $2.0 million and $744,000 in 1996 and
1997, respectively, representing 33% and 7% of total revenues, respectively.
Revenues from subscription-based arrangements increased due primarily to
additional subscription- based customers.

SERVICE. Service revenues increased 146% from $700,000 in 1996 to $1.7
million in 1997, representing 12% and 16% of total revenues, respectively. The
increase was due primarily to software integration, customization and training
services associated with an increase in the number of software applications
and content customers.

COST OF REVENUES

SOFTWARE APPLICATIONS AND CONTENT. Cost of software applications and content
revenues increased from $1.7 million in 1996 to $2.6 million in 1997,
representing 34% and 29% of software applications and content revenues,
respectively. The decrease in cost of software applications and content
revenues as a percentage of such revenues was due primarily to the decrease in
revenues from perpetual licenses, as to which the Company is required to pay
Trilogy higher royalty rates than on subscription-based arrangements.

SERVICE. Cost of service revenues increased from $185,000 in 1996 to
$988,000 in 1997, representing 26% and 57% of service revenues, respectively.
The increase in cost of service revenues in absolute dollars was due primarily
to an increase in personnel and other costs associated with providing these
services to a greater number of customers. Cost of service revenues increased
as a percentage of service revenues due primarily to the incurrence of costs
associated with deployment of a fixed fee consulting arrangement in 1997 with
the recognition of related revenues in 1998 and the Company's efforts to hire
service personnel.

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT. Research and development expenses decreased
marginally from $1.2 million in 1996 to $1.1 million in 1997, representing 20%
and 11% of total revenues, respectively. The decrease as a percentage of
revenues was due primarily to the completion of the development of certain of
the Company's products as such products became available for sale and
deployment in 1997. As a result, research and development expenses in absolute
dollars remained relatively flat from 1996 to 1997.

SELLING AND MARKETING. Selling and marketing expenses increased 88% from
$2.6 million in 1996 to $4.8 million in 1997, representing 43% and 45% of
total revenues, respectively. The increase in absolute dollars was due
primarily to increases in personnel and expenditures relating to the Company's
sales and marketing organization and activities.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
147% from $726,000 in 1996 to $1.8 million in 1997, representing 12% and 17%
of total revenues, respectively. The increase in absolute dollars and as a
percentage of total revenues was due primarily to increased personnel and
facility expenses necessary to support the Company's growth.

INCOME TAXES

The Company is included in the consolidated income tax return of Trilogy. An
income tax provision was recorded by the Company using an effective tax rate
of 38% and 61% for the years ended December 31, 1996 and 1997, respectively.
The increase in the effective rate for 1997 resulted from the establishment of
a valuation allowance to reduce the net deferred tax assets to zero.

32
<PAGE>

COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1996

REVENUES

The Company's total revenues increased 58% from $3.7 million in 1995 to $5.9
million in 1996. Three of the Company's customers accounted for approximately
99% of the Company's total revenues in 1995, and the Company's top five
customers for 1996 accounted for approximately 89% of total revenues in 1996.

SOFTWARE APPLICATIONS AND CONTENT. Software applications and content
revenues increased 53% from $3.4 million in 1995 to $5.2 million in 1996,
representing 91% and 88% of total revenues, respectively. The increase in
absolute dollars was due primarily to the increase in revenues from perpetual
licenses. Such revenues were $871,000 and $2.0 million in 1995 and 1996,
respectively.

SERVICE REVENUES. Service revenues increased from $335,000 in 1995 to
$700,000 in 1996, representing 9% and 12% of total revenues, respectively. The
increase in absolute dollars and as a percentage of total revenues was due
primarily to additional services provided to new perpetual license and
subscription-based customers in connection with the deployment of the
Company's applications.

COST OF REVENUES

SOFTWARE APPLICATIONS AND CONTENT. Cost of software applications and content
revenues increased 11% from $1.6 million in 1995 to $1.7 million in 1996,
representing 47% and 34% of software applications and content revenues,
respectively. The decrease as a percentage of software applications and
content revenues was primarily due to a fixed royalty payment of $350,000 to
Trilogy in 1995.

SERVICE. Cost of service revenues decreased 4% from $192,000 in 1995 to
$185,000 in 1996, representing 57% and 26% of service revenues, respectively.
The decrease was attributable primarily to significant non-billable work
performed in 1995 in connection with a customer contract.

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT. Research and development expenses increased 77%
from $660,000 in 1995 to $1.2 million in 1996, representing 18% and 20% of
total revenues, respectively. The increase was due primarily to costs
associated with an increase in internal development personnel.

SELLING AND MARKETING. Selling and marketing expense increased from $577,000
in 1995 to $2.6 million in 1996, representing 15% and 43% of total revenues,
respectively. The increase was due primarily to increased personnel necessary
to support the Company's increased sales and marketing organization and
activities.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
from $116,000 in 1995 to $726,000 in 1996, representing 3% and 12% of total
revenues, respectively. The increase in absolute dollars and as a percentage
of total revenues was due primarily to increased personnel and facility
expenses necessary to support the Company's growth.

INCOME TAXES

The Company is included in the consolidated income tax return of Trilogy. An
income tax provision was recorded by the Company using an effective tax rate
of 35% and 38% for the years ended December 31, 1995 and 1996, respectively.

33
<PAGE>

UNAUDITED QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited quarterly statement of
operations data for the six quarters ended June 30, 1998. In the opinion of
management, this information has been prepared substantially on the same basis
as the audited Financial Statements appearing elsewhere in this Prospectus,
and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts stated below to present fairly
the unaudited quarterly results of operations. The quarterly data should be
read in conjunction with the audited Financial Statements of the Company and
the Notes thereto appearing elsewhere in this Prospectus. The operating
results for any quarter are not necessarily indicative of the operating
results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1997 1997 1998 1998
-------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Software applications
and content........... $1,745 $1,910 $2,347 $2,867 $3,146 $3,967
Service................ 387 472 469 392 1,359 1,111
------ ------ ------ ------ ------ ------
Total revenues....... 2,132 2,382 2,816 3,259 4,505 5,078
------ ------ ------ ------ ------ ------
Cost of revenues:
Software applications
and content........... 432 557 702 897 910 1,220
Service................ 139 223 270 356 433 621
------ ------ ------ ------ ------ ------
Total cost of
revenues............ 571 780 972 1,253 1,343 1,841
------ ------ ------ ------ ------ ------
Gross profit............ 1,561 1,602 1,844 2,006 3,162 3,237
Operating expenses:
Research and
development........... 283 221 320 305 810 975
Selling and marketing.. 988 1,183 1,270 1,352 1,736 2,380
General and
administrative........ 261 305 404 822 636 660
Amortization of
deferred stock
compensation.......... -- -- -- -- -- 227
------ ------ ------ ------ ------ ------
Total operating
expenses............ 1,532 1,709 1,994 2,479 3,182 4,242
------ ------ ------ ------ ------ ------
Operating income
(loss)................. 29 (107) (150) (473) (20) (1,005)
Interest income......... -- -- -- -- 7 38
------ ------ ------ ------ ------ ------
Income (loss) before
income taxes........... 29 (107) (150) (473) (13) (967)
Income tax provision
(benefit).............. (18) 65 93 287 -- --
------ ------ ------ ------ ------ ------
Net income (loss)....... $ 47 $ (172) $ (243) $ (760) $ (13) $ (967)
====== ====== ====== ====== ====== ======
<CAPTION>
QUARTER ENDED
----------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1997 1997 1998 1998
-------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL
REVENUES:
Revenues:
Software applications
and content........... 82% 80% 83% 88% 70% 78%
Service................ 18 20 17 12 30 22
------ ------ ------ ------ ------ ------
Total revenues....... 100 100 100 100 100 100
------ ------ ------ ------ ------ ------
Cost of revenues:
Software applications
and content........... 20 24 25 27 20 24
Service................ 7 9 10 11 10 12
------ ------ ------ ------ ------ ------
Total cost of
revenues............ 27 33 35 38 30 36
------ ------ ------ ------ ------ ------
Gross profit............ 73 67 65 62 70 64
Operating expenses:
Research and
development........... 13 9 11 9 18 19
Selling and marketing.. 47 50 45 42 39 47
General and
administrative........ 12 12 15 25 14 13
Amortization of
deferred stock
compensation.......... -- -- -- -- -- 5
------ ------ ------ ------ ------ ------
Total operating
expenses............ 72 71 71 76 71 84
------ ------ ------ ------ ------ ------
Operating income
(loss)................. 1 (4) (6) (14) (1) (20)
Interest income......... -- -- -- -- -- 1
------ ------ ------ ------ ------ ------
Income (loss) before
income taxes........... 1 (4) (6) (14) (1) (19)
Income tax provision
(benefit).............. (1) 3 3 9 -- --
------ ------ ------ ------ ------ ------
Net income (loss)....... 2% (7)% (9)% (23)% (1)% (19)%
====== ====== ====== ====== ====== ======
</TABLE>

34
<PAGE>

The Company's total revenues and software applications and content revenues
increased quarter to quarter during each of the six quarters ended June 30,
1998 due primarily to increasing market acceptance of the Company's products,
and increases in its installed base of customers. Service revenues have
generally increased quarter to quarter due primarily to software integration,
customization and training services associated with an increase in the number
of software applications and content customers. Service revenues decreased in
absolute dollars and as a percentage of total revenues in the fourth quarter
of 1997 and increased significantly in absolute dollars and as a percentage of
total revenues for the quarter ended March 31, 1998 due primarily to the
recognition of revenues from a significant fixed fee arrangement in the
quarter ended March 31, 1998 for which work began in the quarter ended
December 31, 1997. Cost of applications and content revenues increased in
absolute dollars quarter to quarter with the increase in software applications
and content revenues. Cost of service revenues increased in absolute dollars
and as a percentage of service revenues through the quarter ended September
30, 1997 due primarily to an increase in personnel and other costs associated
with providing these services to a greater number of customers.

Research and development expenses in absolute dollars and as a percentage of
total revenues were relatively constant through the four quarters ended
December 31, 1997. Beginning in the quarter ended March 31, 1998, research and
development expenses increased significantly in both absolute dollars and as a
percentage of revenues due to significant increases in research and
development personnel and related costs to fund development of new products,
data models and tools.

Selling and marketing expenses increased in absolute dollars quarter to
quarter during each of the six quarters ended June 30, 1998, reflecting the
increase in growth of the Company's sales and marketing organizations and
activities. Selling and marketing expenses decreased as a percentage of
revenues in the three quarters ended March 31, 1998 because the Company's
total revenues increased at a greater rate than selling and marketing expenses
during such periods.

With the exception of the quarter ended December 31, 1997, general and
administrative expenses generally increased quarter to quarter in absolute
dollars and remained relatively constant as a percentage of total revenues due
primarily to increased personnel and facility expenses necessary to support
the Company's growth. General and administrative expenses increased
significantly in the quarter ended December 31, 1997 as a result of an
increase in accrued management bonuses and allowance for bad debts.

FACTORS AFFECTING OPERATING RESULTS

The Company's revenues and operating results have in the past fluctuated
significantly and are expected to fluctuate significantly in the future due to
a combination of factors, many of which are outside of the Company's control.
In addition, the timing and amount of revenues associated with particular
sales can vary significantly based upon (i) the number of products that are
accessed and the number of authorized users, and (ii) whether the fees are
perpetual or subscription-based. The Company has in the past recognized, and
may in the future be required to recognize, a significant portion of revenue
derived from license agreements with its customers in a single fiscal quarter,
which can cause significant variations in quarterly revenues. Moreover, small
delays in customer orders can cause significant variability in the Company's
total revenues and results of operations for any particular period. As a
result, the timing of significant orders and the recognition of revenue from
such orders is unpredictable. Unfavorable changes in any of the above factors
could materially and adversely affect the Company's revenues, gross margins
and results of operations in future periods.

35
<PAGE>

Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. Accordingly, any significant shortfall in
revenues would likely have an immediate material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors--Significant Fluctuation in Future Operating Results". Based upon all
of the foregoing, the Company believes that its quarterly and annual revenues,
expenses and operating results are likely to vary significantly in the future,
that period-to-period comparisons of the Company's results of operations are
not necessarily meaningful and that such comparisons should not be relied upon
as indications of future performance. Moreover, although the Company's
revenues have increased in recent periods, there can be no assurance that the
Company's revenues will grow in future periods, that they will grow at past
rates or that the Company will achieve profitability on a quarterly or annual
basis in the future. Due to the foregoing as well as other factors, it is
likely that the Company's operating results will be below market analysts'
expectations in some future quarters, which could materially and adversely
affect the market price of the Common Stock.

Historically, the Company has received a significant portion of its revenues
from a limited number of customer agreements. The Company believes that a
customer's decision to purchase its products or license its technology is
relatively discretionary and, especially for large-scale users, generally
involves a significant commitment of capital resources. Therefore, any
downturn in the economy or in the business of customers or potential customers
could have a material adverse effect on the Company's revenues and quarterly
results of operations. See "Risk Factors--Significant Fluctuations in Future
Operating Results".

Due to the foregoing factors, it is likely that in some future quarters the
Company's operating results will fall below the expectations of securities
analysts and investors, which would likely have a material adverse effect on
the trading price of the Common Stock.

LIQUIDITY AND CAPITAL RESOURCES

From inception through 1996, the Company financed its operations primarily
through advances from its parent, Trilogy. Since 1997, the Company has
primarily financed its operations from cash provided by operations. As of June
30, 1998, the Company had $6.6 million of cash and cash equivalents. As of
June 30, 1998, the Company's principal commitments consisted of obligations
outstanding under operating leases. Although the Company has no material
commitments for capital expenditures, management anticipates a substantial
increase in its capital expenditures and lease commitments consistent with
anticipated growth in operations, infrastructure and personnel.

Cash used by operations was $647,000 in 1996, and cash provided by
operations was $3.1 million in 1997. Cash used in operations in 1996 resulted
primarily from a net loss of $310,000 and an increase in accounts receivable
of $2.2 million, largely offset by increases in deferred revenue of
$1.1 million and accounts payable and accrued expenses of $618,000. Net cash
provided by operations of $5.9 million for the six months ended June 30, 1998
was primarily attributable to an increase in deferred revenue of $8.6 million
and an increase in payables to Trilogy of $2.2 million, largely offset by a
net loss of $980,000 and an increase of $4.9 million in accounts receivable.

Net cash used in investing activities of $359,000, $662,000, and $1.7
million for 1996 and 1997 and the six months ended June 30, 1998,
respectively, was primarily related to purchases of equipment. In the six
months ended June 30, 1998, the Company also had expenditures for leasehold
improvements related to the move into their current facility and software and
computers for additional employees.

Cash provided by financing activities of $1.0 million in 1996 and cash used
in financing activities of $254,000 in 1997 was primarily attributable to the
net increase and decrease, respectively, in amounts payable to Trilogy for
advances received or repaid. Cash provided by financing activities of $200,000
for the six months ended June 30, 1998, was attributable to the exercise of
stock options.

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<PAGE>

Since its inception, the Company has significantly increased its operating
expenses. The Company currently anticipates that it will continue to
experience significant growth in its operating expenses for the foreseeable
future and that its operating expenses will be a material use of the Company's
cash resources. The Company believes that its existing capital resources,
combined with the net proceeds of this offering, will be sufficient to meet
its presently anticipated cash requirements through at least the next 12
months. There can be no assurance that the Company will not be required to
raise additional financing prior to such time, that additional financing will
be available when needed or that, if available, such financing will be
available on terms favorable to the Company and its stockholders.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See Note 2 of Notes to Financial Statements for recently adopted and
recently issued accounting standards.

YEAR 2000 COMPLIANCE

There can be no assurance that Year 2000 errors or defects will not be
discovered in the Company's current or future products. Any failure by the
Company to make its products Year 2000 compliant, or of such products not to
be Year 2000 compliant as a result of a failure of Trilogy's products to be
Year 2000 compliant, could result in a decrease in sales of the Company's
products, unanticipated expenses to address Year 2000 problems or significant
liabilities resulting from losses suffered by the Company's customers due to
such Year 2000 problems, any of which could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company does not have a contingency plan for this most reasonably likely
worst-case scenario, and it will be necessary for the Company to make the
necessary expenditures to assess and remedy the situation in the event it
arises in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations". In addition, to the extent the Company's
customers' systems are not Year 2000 compliant, problems in communications
among industry participants could result in a delay in the Company's products
achieving market acceptance.

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<PAGE>

The Company's solutions also utilize and depend on third-party equipment and
software that may not be Year 2000 compliant. The Company has not conducted
audits of its third-party providers to determine their level of Year 2000
readiness. Failure of such third-party equipment or software, or of systems
maintained by the Company's suppliers, to operate properly with regard to the
Year 2000 and thereafter could require the Company to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
the Company's business, financial condition and results of operations.
Furthermore, the purchasing patterns of customers or potential customers may
be affected by Year 2000 issues as companies expend significant resources to
correct their current systems for Year 2000 compliance. These expenditures may
result in reduced funds available to purchase products from the Company of
computer product manufacturers, which could have a material adverse effect on
the Company's business, financial condition and results of operations.

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<PAGE>

BUSINESS

INDUSTRY BACKGROUND

GROWTH OF INTERNET USAGE AND E-COMMERCE

The Internet and Internet-related technologies are revolutionizing the way
businesses and consumers communicate, share information and conduct business.
As the number of Internet users and the sophistication of Internet-enabled
content and development tools have increased, the Internet's functionality has
expanded from a medium primarily for publishing information to enabling
complex business-to-business and business-to-consumer communications and
commerce. At the same time, businesses across many industries are faced with
increasing competitive pressures to lower costs, decrease inventories, and
improve sales and marketing productivity and time-to-market. To address these
challenges, businesses are increasingly replacing paper-based transactions
with e-commerce solutions that provide enhanced accuracy and secure exchange
of time-sensitive business information. Forrester Research, Inc. ("Forrester")
estimates that the business-to-business e-commerce market will grow from $8
billion in 1997 to $327 billion by 2002, representing a compound annual growth
rate of over 100%. In addition, Forrester also believes that computer products
is the largest and fastest growing segment, by revenue, in business-to-
business e-commerce. Moreover, the Company believes that the computer industry
is particularly well suited to the use of Internet-enabled e-commerce
solutions due to: (i) the large size and fragmented nature of the industry,
(ii) the high costs of sales and distribution, (iii) the challenges in
managing the volume and complexity of product, pricing, and configuration
information resulting from a wide array of products, short product life cycles
and increased demand for custom configured solutions, and (iv) the industry's
propensity to embrace technology for automating processes.

NEED TO ENHANCE EFFICIENCIES IN THE SALES, MARKETING AND DISTRIBUTION OF
COMPUTER PRODUCTS

According to International Data Corporation ("IDC"), the North American
computer products market, including PCs, servers, workstations, related
storage devices, peripherals and data communications equipment totaled $129
billion in 1997 and is expected to reach $178 billion by 2002. Furthermore,
purchases of computer products often involve purchases of related software
applications.

As the market for computer products has developed, the diverse group of
participants has grown both in size and complexity. These participants include
(i) over 1,000 computer hardware, software, peripheral and component vendors,
(ii) over 100,000 distribution channel participants, including distributors,
resellers, systems integrators and retailers, and (iii) millions of end-users,
including both corporate buyers and consumers. The computer industry supply
chain consists of various sales and distribution models, including direct-to-
the-end-user and indirect 2-tier and 3-tier models. Industry participants
frequently employ hybrids of these models and multiple industry participants
are typically involved in the sale and fulfillment of a transaction. For
example, national resellers and integrators may buy directly from
manufacturers or indirectly through multiple distributors. In addition,
manufacturers may choose to configure and ship directly to end-users for
orders placed through resellers or they may utilize their distributor and
reseller channel partners to configure and fulfill orders. Direct
manufacturers may contract with distributors, resellers and integrators in
order to provide multi-vendor fulfillment or local service and support. As a
result of these numerous interrelationships, the industry faces challenges in
the timely and accurate sharing of information about customers, products,
configuration, pricing, inventory and ordering.

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<PAGE>

[Graphic depicting the flow of commerce from (i) manufacturers to direct end-
users, (ii) manufacturers to corporate resellers and retailers, and corporate
resellers and retailers to end-users, and (iii) manufacturers to distributors,
distributors to VARs, Integrators and retailers, and VARs, integrators and
retailers to end-users.]

The relative success of the direct-to-the-end-user and build-to-order models
has put additional pressure on computer industry participants to improve
information flows within the channel in order to improve time-to-market,
reduce costs and compete more effectively. Rapid technological change has
resulted in the continuing decline of component prices and shorter life cycles
of computer products. Such pressures have heightened the need for industry
participants to employ build-to-order and configure-to-order models in order
to reduce inventories, improve the ability to gauge and meet changing customer
demand and improve time-to-market by delaying the acquisition of component
parts until an order is placed.

The increasing complexity of computer product distribution and the increase
in customers' demands for time-efficient ordering processes has put pressure
on industry participants to increase the productivity and responsiveness of
their sales forces. Additionally, the substantial pricing pressure throughout
the industry has required manufacturers and distributors to reduce operating
costs and improve the efficiency and effectiveness of their sales and
marketing investments. The wide array of products, short product life cycles
and high volume of new product introductions make it difficult for sales
representatives and end-users to remain current with changing product and
compatibility information. These difficulties have underscored the need for
tools and a central repository of current product information in order to
increase productivity and accuracy of sales representatives and enable end-
users to independently select, configure and order products.

Both business-to-business and business-to-consumer e-commerce transactions
can offer better access to critical information affecting the purchase
decision, including product compatibility and availability, demand/supply data
and detailed end-user preferences. However, because the sale of computer
products frequently involves multiple industry participants, industry-wide
standardization and acceptance is required in order to provide a comprehensive
e-commerce solution for the industry. Past efforts to accomplish this have
been largely proprietary, point-to-point solutions and have required
significant investments to develop and maintain the required IT
infrastructure, including software applications, content databases and
integrations into partners' systems. Additionally, many of these systems have
lacked the ability to scale to meet industry requirements. It has also been
difficult for these systems to achieve widespread adoption because competition
amongst industry participants has made it difficult for them to reach
agreement on a single standard. The Company believes that many participants
seek the benefits of a robust and scalable system, but have not been able to
justify the associated costs of building such a system independently.

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<PAGE>

THE PCORDER OPPORTUNITY

The Company believes there is a significant need for an independent,
industry-wide solution for enabling the computer industry's suppliers,
resellers and end-users to buy and sell computer products online. The Company
leverages Internet technologies to provide a comprehensive e-commerce solution
designed to increase sales and marketing productivity, meet end user demand
for online ordering, reduce costs and shorten order fulfillment cycles for
industry participants.

THE PCORDER SOLUTION

pcOrder is a leading provider of Internet-based e-commerce solutions that
are designed to enable the computer industry's suppliers, resellers and end-
users to buy and sell computer products online. The Company's solutions are
designed to increase the efficiency and effectiveness of the sales, marketing
and distribution of computer products and enable members of the industry to
take advantage of increasing adoption of e-commerce. The Company believes it
is uniquely positioned to deliver these solutions through its: (i) ability to
deliver a broad set of advanced front-office and e-commerce software
applications, including configuration and pricing; (ii) position as a leading
content provider of computer product and compatibility information; and, (iii)
experience in delivering industry-specific functionality and integrations into
business systems of computer industry participants. To date, the Company's
e-commerce solutions have been adopted by industry leaders such as Bay
Networks, Compaq, CompuCom, CompUSA, CMP Publications, GE Capital, IBM, Ingram
Micro, Kingston, MCI Systemhouse, MicroAge Integration Company, PC Wholesale,
Pinacor and Tech Data, as part of their overall e-commerce strategy.

The Company's e-commerce solutions include software applications that are
designed to increase the automation of product search, comparison,
configuration, pricing, financing and ordering, and leverage the Company's
content databases. The Company's content databases contain more than 600,000
active products from over 1,000 manufacturers, which the Company believes is
the industry's largest aggregation of product content, including detailed
product, categorization, compatibility, pricing and availability information.
The Company believes that its position as an independent, industry leading
provider of product information has enabled the Company to offer a more cost-
effective and robust product database to industry participants than internally
developed point solutions.

The Company is a party to a technology license agreement with its parent
company, Trilogy, which provides pcOrder the ability to leverage Trilogy's
front-office and e-commerce software applications, including what the Company
believes is one of the industry's leading configuration and pricing engines.
The Company has extended these applications to support the specific
configuration and pricing rules of the computer industry in order to help
industry sales representatives and end-users quickly and accurately build and
order custom configured solutions across multiple vendors.

In addition to its development of applications and content, the Company has
completed integrations to the systems of leading industry suppliers for such
functions as order placement, pricing and inventory queries, order status
queries, financing and credit approval. These integrations can be used by
pcOrder customers that wish to establish or enhance the electronic links with
their business partners. Furthermore, the Company provides software
integration, customization, training and web hosting services designed to
ensure the successful deployment of its solutions.

pcOrder's solutions are designed to provide its customers with the following
benefits:

MEET CUSTOMER DEMAND FOR ONLINE ORDERING. The Company believes that end-
users are increasingly demanding the ability to customize and purchase
computer products and services online. The Company's solutions are designed to
provide its customers the ability to offer online product configuration,
pricing, selection and ordering capabilities. This provides end-users with the
ability to order computer products and support services from a manufacturer
providing fulfillment through the

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<PAGE>

channel, or from a reseller providing product through a distributor or
manufacturer, all in a manner transparent to end-users.

INCREASE EFFECTIVENESS AND REDUCE COSTS OF SALES AND MARKETING EFFORTS. The
Company's offering provides customers with a robust solution that is designed
to enhance the productivity and effectiveness of sales and marketing efforts.
The Company believes that its solutions enable computer industry participants
to increase sales force productivity by providing a centralized, comprehensive
source for product data, and, in turn, enabling sales representatives to
rapidly respond to customer needs with accurate and complete information
regarding product, compatibility, pricing and availability. The Company's
electronic configuration and ordering technology is also designed to reduce
costs by producing more accurate multi-vendor product configurations and
enable online ordering.

REDUCE INVENTORY COSTS BY FACILITATING BUILD-TO-ORDER, CONFIGURE-TO-ORDER
AND CHANNEL ASSEMBLY. Rapidly declining prices in the computer industry have
increased the importance of time-to-market. By providing direct communication
links and product data to computer industry participants, the Company believes
that its solutions enhance industry efforts to increase inventory turns
through the automation and coordination of configuration, pricing, selection
and ordering. The Company believes that this in turn enables the Company's
customers to expand their build-to-order and channel assembly efforts,
decreasing the risk of product obsolescence and improving the industry's
ability to meet individual end-user demand. The Company further believes that
reducing order fulfillment cycles offers customers the opportunity to achieve
higher average selling prices and margins by enabling the sale and delivery of
commodity-based products earlier in the product life cycles.

REDUCE COSTS, RISKS, AND TIME-TO-MARKET OF ESTABLISHING E-COMMERCE
CAPABILITIES. The Company's position as an independent third-party solutions
provider, combined with its industry focus and experience, has enabled it to
build product functionality, content and supplier integrations that are
designed to support the diverse requirements of manufacturers, distributors,
resellers, retailers and other industry participants. Accordingly, the Company
believes it is able to offer a more cost-effective and rapid time-to-market
solution for conducting e-commerce than internally developed point solutions.
To the extent the Company continues to develop and enhance its applications,
content and supplier integrations, the Company believes that the incentives
will increase for companies to outsource these e-commerce services to the
Company.

IMPROVE INDUSTRY COORDINATION BY INCREASING ACCURACY, AVAILABILITY AND
TIMELINESS OF INFORMATION. The Company's applications and content databases
are designed to enable multi-vendor search, comparison, configuration,
pricing, financing, ordering and reseller selection. The Company believes that
because of its status as an independent third-party provider of standardized
product information and applications, industry participants are more willing
to use pcOrder's applications and contribute product information to the
Company's databases. To the extent more industry participants adopt pcOrder
applications and content, the Company believes that its customers derive
greater benefit from the increased opportunity to engage in business
electronically with more participants.

STRATEGY

The Company's objective is to be the leading e-commerce technology and
content provider to the computer industry. The Company's strategy to achieve
this objective includes the following key elements:

LEVERAGE INTERNET TECHNOLOGY. pcOrder leverages Internet technology to
provide communication capability and support complex transactions across a
range of computer industry participants, regardless of participants' legacy
computing environment. Unlike traditional proprietary solutions focusing on
point-to-point solutions with narrowly defined functionality, Internet
technology

42
<PAGE>

enables the Company to electronically link computer industry participants,
including manufacturers, distributors, resellers, retailers, other industry
participants and end-users, including corporate buyers and consumers, with the
objective of enhancing sales and marketing efficiency and effectiveness,
reducing costs, shortening the product fulfillment cycle and improving time to
market.

BROADEN ADOPTION THROUGH RELATIONSHIPS WITH COMPUTER INDUSTRY MARKET
LEADERS. The Company aggressively pursues relationships with leading computer
industry manufacturers, distributors, resellers, retailers and other industry
participants in order to increase adoption of its solutions. To date, the
Company has established relationships with Bay Networks, GE Capital, Compaq,
CompuCom, CompUSA, IBM, Ingram Micro, Kingston, MCI Systemhouse, MicroAge, PC
Wholesale, Pinacor and Tech Data. The Company's objective is to cooperate with
its customers through direct and indirect marketing initiatives to broaden
adoption of the Company's solutions by resellers and end-users.

EXTEND POSITION AS AN INDUSTRY LEADING SOURCE OF PRODUCT INFORMATION. The
Company has built and maintains content databases containing more than 600,000
products from over 1,000 manufacturers. The Company adds or modifies
information relating to, on average, over 20,000 products per month. The
Company seeks to extend its position as an industry leading product
information source by continually broadening and deepening its product data.

LEVERAGE POSITION AS INDEPENDENT THIRD-PARTY SOLUTIONS PROVIDER. The Company
plans to continue to leverage its position as an independent third-party
solutions provider in order to offer broad solutions to its customers. The
Company believes that its ability to offer standardized e-commerce solutions
to the computer industry creates the opportunity to gain economies of scale,
by leveraging the Company's investment in content, technology and
functionality across a wide range of customers. The Company believes that this
will enable it to offer robust solutions more cost-effectively than individual
industry participants, making its e-commerce solutions increasingly attractive
to industry participants. The Company further believes that its position as an
independent third-party solutions provider may allow it to act as a
significant aggregator of sales order transaction and market demand data for
the computer industry.

EXPAND APPLICATION FUNCTIONALITY TO INCREASE AUTOMATION OF ADDITIONAL SALES,
MARKETING AND CHANNEL MANAGEMENT FUNCTIONS. The Company intends to continue to
invest in the development of additional applications and services to meet the
e-commerce needs of the computer industry. The Company plans to execute this
strategy by working closely with its customers to understand and address their
needs and by further automating the critical processes in the sales, marketing
and distribution of computer products. In addition, the Company intends to
enhance its products with additional functionality, such as the Company's
lease financing product developed in conjunction with GE Capital. The Company
believes that by leveraging the knowledge gained from its relationships with a
broad range of industry participants, it is well positioned to define and add
new functionality to its solutions. The Company further believes that by
helping to make its customers more competitive, it will become an increasingly
important part of its customers' businesses and participate in a higher
percentage of its customers' commerce volume.

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<PAGE>

CUSTOMERS

pcOrder has established a customer base of manufacturers, distributors,
resellers, integrators, retailers and other industry participants. During the
year ended December 31, 1997, only MicroAge represented more than 10% of total
revenues. The customers set forth in the table below represent 66% of total
revenues for the six months ended June 30, 1998, except for Compaq, from which
the Company had not yet received revenues during such period.

<TABLE>
<CAPTION>
RESELLERS, INTEGRATORS
SUPPLIERS DISTRIBUTORS & RETAILERS FINANCING COMPANIES
--------- ------------ ---------------------- -------------------
<S> <C> <C> <C>
Bay Networks Ingram Micro CompuCom GE Capital (Vendor
Compaq PC Wholesale CompUSA Financial Services)
IBM Pinacor GE Capital IT Solutions
Kingston Tech Data MCI Systemhouse
MicroAge Integration Company
</TABLE>

In partnership with its major customers, the Company has deployed its
solutions to over 500 small and medium resellers. The following examples
illustrate how certain of the Company's customers use its suite of products
and services to automate and enhance their sales, marketing and inventory
management capabilities.

GE CAPITAL (VENDOR FINANCIAL SERVICES). In 1997, GE Capital (Vendor
Financial Services) ("GE Capital VFS") launched the TechBuyer service, which
provides small and medium resellers with software and services to automate
their sales and marketing functions. The Company was responsible for providing
the entire software and content infrastructure for this undertaking. In
particular, the Company supplied the resellers with desktop-based sales
automation software designed to enhance the productivity of their sales
representatives. In addition, resellers were provided access to the Company's
multi-supplier content databases. Finally the Company installed a leasing
module into the sales automation software, offering resellers the option to
have their sales financed by GE Capital VFS. The Company provides ongoing
software/content maintenance, as well as hosting services to TechBuyer. The
operating agreement between the Company and GE Capital VFS has an initial term
of five years, which renews automatically for another five years unless it is
terminated by either party prior to the end of the initial term. Pursuant to
this agreement, pcOrder received a payment upon execution of the agreement,
and upon GE Capital's acceptance of the commercial solution, and is paid a fee
on an on-going basis based on a percentage of the new financing generated
through pcOrder's marketing of the solution provided by the Company. Also, the
Company will indemnify GE Capital VFS in the event of a claim that the
software solution infringes a third party's intellectual property rights. The
Company retains all ownership rights to its intellectual property and to the
software developed for GE Capital VFS, unless the agreement is terminated upon
the Company's breach, in which case GE Capital VFS may acquire a license to
the Company's software solution.

INTERNATIONAL BUSINESS MACHINES. The Company signed an agreement with IBM in
the first quarter of 1998 to support configuration ("Build it Yourself"), PC
product comparisons and reseller pricing online. The Company also provides
reseller pricing and referrals for IBM's Personal Systems Group Web Site. This
functionality supports IBM's internally developed application Net.Commerce,
which enables customers to shop online. The agreement between IBM and the
Company has a perpetual term, but may be terminated earlier under certain
circumstances. The Company is compensated according to the specific terms of
each transaction document. Under the terms of the agreement, the Company will
indemnify IBM from and against any third-party claims brought against IBM to
the extent based on the infringement by the technology developed by the
Company for IBM of the intellectual property rights of such third party.

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<PAGE>

MICROAGE. MicroAge is Fortune 500 provider of global technology solutions.
As a strategic partner of pcOrder for the past two years, MicroAge has
leveraged pcOrder's technology and services with the objective of increasing
internal sales force productivity and driving customer loyalty throughout its
large network of Value Added Resellers. MicroAge has utilized the pcOrder
platform, software and content to accelerate the deployment of its own branded
e-commerce offering, ECadvantage. The Company is a party to a license
agreement with MicroAge Integration Company and Pinacor, both subsidiaries of
MicroAge, which has automatically renewed at the end of September 1998 and
will be renewed for successive one year terms on each anniversary thereof for
the next three years, unless terminated by either party upon one year prior
notice. Under the terms of the agreement, the Company will indemnify MicroAge
Integration Company and Pinacor from and against any third party claims
brought against such entities to the extent based on the infringement by
technology developed by the Company for such entities of the intellectual
property rights of such third party. Pursuant to the terms of the agreement,
pcOrder receives an annual license fee, and any other services are billed by
the Company on a time and materials basis.

MICROAGE INTEGRATION COMPANY. MicroAge Integration Company provides
corporations, institutions and government agencies with ISO-9001 certified
multi-supplier integration services and distributed computing solutions
through a network of Global Locations spanning more than 39 countries.
Today, pcOrder is used by over seven hundred MicroAge Integration sales
representatives to quote pricing and availability, configure and order
computing solutions.

PINACOR. Pinacor delivers technology products and services to more than
20,000 resellers, retailers, dealers and systems integrators. Using e-
commerce to streamline the delivery of technology solutions and services,
Pinacor supports customers worldwide from strategic distribution hubs in
the United States and Latin America. pcOrder provides extensive product
information that is incorporated into Pinacor's Web-based e-commerce
ordering tool.

TECH DATA. In March 1998, Tech Data adopted pcOrder configuration technology
as a core component of its e-commerce offerings. Tech Data intends to leverage
pcOrder's configuration expertise for the purpose of enabling its customers
and internal sales representatives to quickly and easily configure custom
computer systems. pcOrder's industry relationships will also support Tech
Data's channel assembly strategies. Capitalizing on the heightened demand
created by the industry's movement towards assemble-to-order, pcOrder and Tech
Data have coordinated to introduce the first online configuration solution
designed to support channel assembly initiatives of system manufacturers,
beginning with IBM's Authorized Assembler Program (AAP). This arrangement is
intended to enable Tech Data to gain a competitive advantage by further
streamlining related processes and simplifying component selection. The
Company's subscription services agreement with Tech Data has an initial term
of three years, which may be terminated earlier under certain circumstances.
Pursuant to this agreement, the Company will indemnify Tech Data against a
claim that the software infringes a third party's intellectual property. The
Company receives an annual fee from Tech Data and Tech Data pays for
additional professional consulting services on a time and materials basis.

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<PAGE>

PCORDER PLATFORM

pcOrder provides an integrated platform consisting of application, content
databases, industry integrations and related services that leverages Internet
and Internet-related technologies. The Company's solutions are designed to
meet the specific needs of each industry segment, including manufacturers,
distributors, resellers, integrators, retailers, other industry participants
and end-users, including corporate buyers and consumers.

[Graphic depicting the Company's platform consisting of applications, content
and integrations. Applications are shown as applications Sales Desktop, Web
Storefront, Customer Desktop, Commerce-Station. Subcategories of these
applications are catalog, configuration, pricing, order, referral, finance and
promotion. Content database is shown as integrations and reseller,
distributor, manufacturer and finance company.]

SOFTWARE APPLICATIONS. The Company offers a suite of software applications
that are designed to increase the automation of sales, marketing and
distribution functions. These applications are modular in nature, enabling
customers to purchase and add specific functionality as needed. The Company's
applications are built upon various combinations of the following core
modules:

CATALOG. The Catalog Module is designed to enable users to easily search,
browse, compare, and view product datasheets from the Company's content
databases. For example, users can perform searches such as "show all laptop
computers with hard drives larger than 1 gigabyte."

CONFIGURATION. The Configuration Module is designed to enable users to more
efficiently configure valid systems. Users request desired features through
a needs analysis interface, which then interacts with Trilogy's
configuration engine to select components. This interface shields the user
from technical details of the components while preventing invalid
configurations.

PRICING. The Pricing Module is designed to allow users to access customized
pricing information. Utilizing Trilogy's SC Pricer engine, the Company has
developed a multi-tiered, channel-specific pricing module. For example,
end-user prices can be quoted as a function of the reseller's cost from the
distributor, thus providing seamless, dynamic pricing through the channel.

ORDER. The Order Module is designed to enable online ordering and order
confirmation. Manufacturers, distributors and resellers can access pricing
and availability information from

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<PAGE>

multiple legacy systems and provide such real-time information to their
potential customers. Links between the Company's offering and the
customer's ordering system takes the form of EDI transactions, direct API
calls to the ordering system or direct database integration.

REFERRAL. The Referral Module is designed to enable industry participants
to refer customers to resellers based on location or other characteristics.
In addition, the Referral Module delivers, processes, and tracks referrals
in order to connect end-users with the appropriate channel partners. This
allows manufacturers to work constructively with their resellers with the
obligation of ensuring that customer needs are met.

FINANCE. The Finance Module is designed to allow users to quote lease
rates, electronically submit credit applications and maintain lease data,
as well as customize finance settings, select from multiple financing
options and specify optional financing terms.

PROMOTION. The Promotion Module is designed to provide the capability to
deliver and manage targeted promotions across multiple tiers in the
channel. The Promotion Module can be programmed to dynamically suggest
alternative or add-on products at the point of sale. For example, a
component vendor can coordinate with a reseller to offer the reseller's
online customers pre-packaged alternatives at the point of sale, in order
to maximize reseller margins and dispose of the vendor's excess inventory.

These modules may be accessed either through the Company's packaged software
applications or through customer-specific, custom developed applications.

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<PAGE>

The Company's software applications are specifically designed to meet the
needs of each industry segment, and may be integrated into customers' legacy
transaction and decision-support systems, thus preserving customers' technology
investments. The table below sets forth descriptions of the Company's software
applications and certain of the key benefits of such products.

<TABLE>
<CAPTION>
SOFTWARE APPLICATIONS TARGET MARKET SEGMENT DESCRIPTION BENEFITS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CommerceStation Manufacturers . Accepts customer orders on Enables
a website and facilitates manufacturers to
electronic transfer of display product,
orders to the appropriate pricing and
channel partner for availability
fulfillment. information and to
. Provides reseller-specific accept orders
pricing. directly from end-
. Provides channel partners users that are
with requests for product fulfilled through
information, referrals or existing channel
leads. partners.
- ----------------------------------------------------------------------------------------------------
Web Storefront Distributors, . Accepts orders directly Enables Web-based
Resellers from customers via a sales, marketing
website. and ordering for
. Provides end-users with distributors and
direct access to product resellers.
catalog, configuration,
pricing and availability
information.
. Provides promotion
capability through delivery
of targeted marketing
messages.
- ----------------------------------------------------------------------------------------------------
Sales Desktop Distributors, . Sales productivity tool Designed to help
Resellers, for sales representatives. distributors,
Integrators, . Provides instant access to resellers,
Retailers information on over 600,000 integrators and
products from over 1,000 retailers to
manufacturers. increase sales
. Automates quote and order force productivity
generation. and order accuracy.
- ----------------------------------------------------------------------------------------------------
Customer Desktop Manufacturers, . Procurement management Designed to help
Resellers and software including support suppliers to
Integrators for custom catalogs, enhance customer
(indirect to end-users) contract pricing and loyalty by
purchase order approval providing
routing. electronic link
. Creates Internet-based between end-users'
link directly to suppliers' procurement
Web Storefront. processes and
suppliers' Web
Storefronts.
- ----------------------------------------------------------------------------------------------------
VIP Program Manufacturers . Provides manufacturer Designed to help
(VIPER) information, such as manufacturers to
product images and detailed enhance their
product specifications to presence at the
the Sales Desktop point of sale by
application. providing timely
. Enables manufacturers to information to end-
enter and maintain their users and channel
own product information partner
within the Company's representatives.
database.
- ----------------------------------------------------------------------------------------------------
Channel Assembly Module Manufacturers, . Delivers channel assembly Supplies
Distributors product, pricing, manufacturers and
configuration and other distributors with
business rules to channel timely and accurate
partners at the point of information to help
sale. increase efficiency
and flexibility of
supply chain.
- ----------------------------------------------------------------------------------------------------
Configuration & Distributors . Provides validation of Enables
Validation multi-vendor systems within distributors and
the on-line quoting and resellers to
ordering systems of provide private
distributors. label and custom
configured systems.
</TABLE>

48
<PAGE>

CONTENT. The Company's industry content databases contain product information
on more than 600,000 products from over 1,000 manufacturers. These databases
provide the user access to current product information, including
compatibility, necessary to consummate a sale. The Company receives updates and
additions of product data on a regular basis from manufacturers, distributors,
and resellers for an average of 20,000 new products per month, and supplements
the data in three ways:

CATEGORIZATION/CLASSIFICATION. The Company's categorization and
classification processes are designed to create and populate standardized
product groupings across the industry and enable convenient access to a
broad array of products from multiple suppliers. For example, an end-user
can specify all monitors of a certain size and pick from a list of monitors
made by several manufacturers and/or available from multiple suppliers.

DATA AND LOGIC MODELING. The Company's data and logic modeling processes
are designed to enable accurate multi-vendor configuration. For example,
the Company's systems specify that a particular computer accepts SDRAM but
not EDO RAM, thereby helping the user to order the correct upgrade package.
The Company continually develops and enhances its Computer Industry Model
(CIM), a repository of much of the modeling and expertise that enables the
Company's applications to configure multi-vendor computer systems.

DATA SHEET CREATION. The Company creates data sheets designed to give
customers detailed product data in a standardized format, thus enabling
attribute-based searching and side-by-side comparisons of functionality
differences between two or more products. For example, a user deciding
between two otherwise identical laptop computers would be able to see that
one comes with a fax modem and more RAM, but the other is lighter and
smaller.

49
<PAGE>

The Company has developed a detailed process for receiving, processing, and
verifying the accuracy of the content in its databases. In addition, the
Company has invested in creating advanced tools to enable pcLabs, the Company's
content management unit, to enter, maintain, and test component data. pcLabs
develops and maintains extensive product and pricing information on over
600,000 products from over 1,000 manufacturers. The Company receives electronic
updates from many of its manufacturers, distributors and reseller customers on
a daily basis. After a normalization process which assigns supplier codes and a
master product part number, the information is imported into the Company's
databases. pcLabs places each product into the appropriate class and category,
and then performs extensive secondary research for content modeling and data
sheet creation. pcOrder maintains a staff of configuration modelers whose
function is to research new systems and components to determine the rules that
govern how they can be configured. The modelers convert this information into a
programming language with a configuration-specific syntax, which is then used
to update the CIM. For example, a laptop requires over 90 technical
specifications and allows for up to 40 marketing attributes. Throughout the
content creation process, the information undergoing rigorous quality assurance
testing. In order to manage data quality, the Company has implemented a
comprehensive Data Quality process which involves an automated regression test
and analysis of over 34,000 validation test cases. See "Risk Factors--Risks
Associated with Maintaining Databases".

[Graphic depicting flow of electronic pricing information (SKU) through
normalization, classification, quality assurance, regression testing to
production.]
INTEGRATIONS. The Company has completed mission-critical integrations to
the systems of leading industry suppliers for such functions as order
placement, pricing and inventory queries, order status queries, financing
and credit approval. These integrations can be leveraged by pcOrder
customers that wish to establish or enhance electronic links with their
business partners. For example, a manufacturer can quote pricing and
inventory available through its channel partners on its Web site, and then
transfer the order to a channel partner for delivery. Alternatively, a
reseller can access information about its suppliers, inventories in
addition to its own, and then display the combined total to its customers
through its Web Storefront.

SERVICES. In order to provide a comprehensive platform, the Company offers a
range of services to speed integration and adoption of the Company's solutions
at the customer site.

50
<PAGE>

SOFTWARE INTEGRATION, CUSTOMIZATION AND TRAINING. Several of the
Company's solutions, particularly higher-end installations, require a
significant amount of professional services. These services may include
the development of interfaces for integration with the customer's legacy
systems, the customization of the Company's software to meet the specific
needs and situation of the customer, or the training of the customer's
employees in the operation of the software application. The Company
provides all of these services through a dedicated consulting and
training force. Customers typically pay for consulting and training
services on a time-and-materials basis.

WEB HOSTING. While some of the Company's customers host their Web sites
internally, a substantial number of customers utilize the Company's
hosting services. The Company maintains a Web hosting facility including
multiple servers and connectivity through dedicated T-1 lines from its
Austin location.

SALES AND MARKETING

The Company sells and markets its software applications, content and services
primarily through its sales and marketing organization.

SALES. The Company's sales force consists of technical presale consultants,
account developers, field sales representatives and telemarketers. The Company
deploys sales teams consisting of both sales and technical professionals to
provide customized proposals, presentations and demonstrations to potential
customers. The primary decision makers in the Company's customers'
organizations typically include members of such customers' management
executives such as the chief executive officer, the chief financial officer,
vice presidents of marketing, vice presidents of sales and chief information
officers.

MARKETING. The Company's marketing efforts are directed at establishing a
market leadership position and, therefore, the Company is investing heavily in
an expansion of its marketing organization and activities. Targeted at
executives in the computer industry, pcOrder's marketing programs are focused
on creating awareness and generating interest in the pcOrder solution. The
Company engages in a variety of co-marketing activities with certain of its key
customers designed to leverage and strengthen the Company's relationship with
its customers. The Company is an active participant in industry conferences and
expositions. It has sponsored several industry conferences in the past, and
believes that exposure of this nature has contributed to the Company's
visibility within the computer industry. The Company's marketing personnel
engage in a variety of marketing activities, including managing and maintaining
the pcOrder Web site, issuing newsletters, making direct mailings, placing
advertisements, conducting public relations and establishing and maintaining
close relationships with industry analysts.

CLIENT SERVICES

The Company implements its customer support, software integration,
customization and training services primarily through its client services
organization. The organization's goal is to ensure successful and rapid
deployment and high levels of customer satisfaction by facilitating open
communications to quickly identify, analyze and solve problems. The Company's
participation in the customer's implementation may include planning and
requirements definition, project management, custom integration, unit and
system tests and support procedures design. The Company believes that providing
a high level of customer service and technical support is necessary to achieve
timely product implementation. The Company provides ongoing product support
services to its customers in the form of telephone, e-mail and Web-based
support, documentation and software updates and error corrections. All product
updates are available to customers for downloading from the Company's Web site.
A team of dedicated engineers provides product, technical and product
registration support from

51
<PAGE>

7:00 a.m. to 7:00 p.m., Central time, on business days, from the Company's
support offices. The Company also makes training available to its customers.

TECHNOLOGY

The Company's solutions are based on open industry standards and are designed
to be fully modular and extensible. The architecture is designed to allow new
modules to be added to the backbone, and replaced when newer versions become
available. The Company's software application and content databases are made
available through both thin client (Web browser/HTML) and Win32 client-server
interfaces. Both interfaces access the same application layer, which provides
functionality such as configuration, pricing, product information data sheets,
financing and online ordering.

The Company's software applications have been implemented through the use of
industry standard technologies, including HTTP/HTML, C++, COM/DCOM, CORBA,
Windows NT and ODBC. The Company believes this implementation provides timely
systems integration, ease of implementation, broad connectivity and the ability
to leverage technological advancements.

The Company has a nonexclusive, worldwide, royalty-bearing license to use,
make, reproduce and prepare derivative works of certain of Trilogy's front
office automation software. See "Relationship with Trilogy". The Company
customizes application modules licensed to it by Trilogy for the specific needs
and situations of its customers. Examples of this customization include
industry-specific configuration and pricing modules. The Company creates its
own application modules that specifically address the functionality needs of
computer industry participants. An example of one of these modules is
CommerceStation, a computer industry-specific application that allows
manufacturers to accept orders directly from end-users and fulfill them through
existing channel partners.

RESEARCH AND DEVELOPMENT

The Company's research and development efforts include software application
development and customization, data modeling and tools development. The
Company's software application development teams are dedicated to identifying
and developing software solutions to meet the unique needs of computer industry
participants. This includes both the development of original software
applications as well as customizing Trilogy's applications. The Company's
database content research and development efforts are primarily focused on the
development of data models and tools that enhance the Company's content
management and maintenance capabilities.

Research and development expenses were $1.1 million in 1997 and $1.8 million
for the six months ended June 30, 1998. The Company intends to continue to make
substantial investments in research and development and related activities to
maintain and enhance its product lines. The Company believes that its future
success will depend in large part on its ability to support current and future
releases of software applications, to maintain and extend its content databases
and to timely develop new products that achieve market acceptance. Any failure
by the Company to do so would have a material adverse effect on the Company's
business, operating results and financial condition. See "Risk Factors--New
Products and Technological Changes; Risks Associated with Transition to New
Technology Platform".

COMPETITION

52
<PAGE>

departments of certain of the Company's customers and potential customers. The
Company believes that its principal sources of competition are systems
integrators and the internal IT departments of its customers and potential
customers. These organizations may seek to develop e-commerce solutions through
the use of tools offered by the Company's competitors primarily focused on
providing e-commerce enabling solutions to the computer industry such as Calico
Software, Selectica, Inc., SMART Technologies, Inc., Open Market, Inc. and
BroadVision, Inc. Furthermore, there are a number of significantly larger
companies with which the Company does not currently compete that do not
presently offer the same or similar e-commerce solutions offered by the Company
but that could with limited barriers to entry compete directly with the Company
in the future. In addition, except as described in "Relationship with Trilogy",
nothing in the Company's agreements with Trilogy prohibits Trilogy from
competing directly or indirectly with the Company. The Company believes that
the principal competitive factors for companies seeking to provide e-commerce
enabling solutions are price, functionality, product performance, content,
reliability and customer service. The Company believes its e-commerce solution
differs from approaches taken by its competitors primarily because of the
content database the Company provides. Increased competition could result in
price reductions, reduced margins and loss of market share, any of which would
materially and adversely affect the Company's business, operating results and
financial condition. Many of the Company's current and potential competitors
have significantly longer operating histories and significantly greater
financial, technical, marketing and other resources than the Company.

EMPLOYEES

As of June 30, 1998, the Company had 147 full-time employees, including 37 in
sales and marketing, 24 in research and development, 33 in content management,
23 in customer support, 13 in professional services and 17 in administration.
In addition, the Company also employed 19 part-time and contract employees in
content management and client support. All of these employees are located in
the United States. The Company believes that its future success is dependent on
attracting and retaining highly skilled engineering, sales and marketing, and
senior management personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will continue to be able to attract
and retain qualified employees. The Company's employees are not represented by
any collective bargaining unit. The Company has never experienced a work
stoppage and considers its relations with its employees to be good.

FACILITIES

The Company's principal facility occupies an aggregate of approximately
22,000 square feet in Austin, Texas, pursuant to leases that expire in January
1999, December 1999 and March 2003, respectively, and pcOrder believes that its
existing principal facility is adequate for its current requirements. The
Company further believes that additional space can be obtained to meet its
future growth requirements.

53
<PAGE>

RELATIONSHIP WITH TRILOGY

The Company was established as a separate business unit within Trilogy on
July 1, 1993, and was incorporated on July 18, 1994. As of June 30, 1998,
Trilogy owned 99.5% of the outstanding shares of Common Stock of the Company.
Mr. Liemandt, a director of the Company, is Chairman and Chief Executive
Officer and a substantial stockholder of Trilogy. Upon completion of this
offering, Trilogy will beneficially own approximately % of the outstanding
shares of Common Stock ( % if the Underwriters' over-allotment option is
exercised in full). For as long as Trilogy continues to beneficially own more
than 50% of the outstanding shares of the Company's Common Stock, Trilogy will
be able to direct the election of all of the members of the Company's Board of
Directors and exercise a controlling influence over the business and affairs of
the Company, including any determinations with respect to mergers or other
business combinations involving the Company, the acquisition or disposition of
assets by the Company, the incurrence of indebtedness by the Company, the
issuance of any additional Common Stock or other equity securities of the
Company, and the payment of dividends with respect to the Common Stock.
Similarly, Trilogy will have the power to determine matters submitted to a vote
of the Company's stockholders without the consent of the Company's other
stockholders, will have the power to prevent a change in control of the Company
and could take other actions that might be favorable to Trilogy. See "Risk
Factors-- Control By and Relationship with Trilogy".

Trilogy has advised the Company that its current intent is to continue to
hold all of the Common Stock beneficially owned by it following this offering.
However, Trilogy is not subject to any contractual obligation to retain its
controlling interest, except that Trilogy has agreed not to sell or otherwise
dispose of any shares of Common Stock of the Company for a period of 180 days
after the date of this Prospectus without the prior written consent of Goldman,
Sachs & Co. See "Underwriting". As a result, there can be no assurance
concerning the period of time during which Trilogy will maintain its beneficial
ownership of Common Stock owned by it following this offering. Any disposition
by Trilogy of any of the shares of Common Stock it owns following this offering
may be effected in one or more transactions, including a public offering, a
distribution by Trilogy of such Common Stock to its stockholders, an offer by
Trilogy to exchange such Common Stock for outstanding Trilogy common stock, or
other transaction. Beneficial ownership of at least 80% of the total voting
power of the Company and 80% of each class of nonvoting capital stock of the
Company is required in order for Trilogy to be able to effect a tax free spin
off of the shares of Common Stock or certain other tax free transactions. See
"Risk Factors--Risks Associated with Dependence on Trilogy; Limited Independent
Operating History; Potential Conflicts of Interest" and "Risk Factors--Possible
Future Sales of Common Stock by Trilogy".

In June 1996, the Company and Trilogy entered into certain agreements for the
purpose of clarifying the ongoing relationship with between the two companies.
Because these agreements were entered into at a time when the Company was a
wholly-owned subsidiary of Trilogy, they may not be the result of arms'-length
negotiations between the parties. In August 1996, the Company and Trilogy
entered into an Asset Transfer Agreement, as amended in August 1998 (the "Asset
Transfer Agreement"), pursuant to which Trilogy transferred the assets and
liabilities of its pcOrder.com division to the Company. In exchange for the
transferred assets, the Company issued to Trilogy 900 shares of the Company's
common stock, $0.01 par value per share, establishing the Company as a wholly-
owned subsidiary of Trilogy (such shares were subsequently split into
11,520,000 shares of Common Stock). Pursuant to the Asset Transfer Agreement,
the parties made customary representations and warranties regarding their
businesses and operations, and each agreed to indemnify the other in the event
of any damages arising from the other's breach of any such representation or
warranty. In addition, Trilogy agreed not to engage in, directly or indirectly,
any business directly in competition with the Company for a period of three
years after the effective date of the Asset Transfer Agreement. Further, during
such three year period, Trilogy also agreed not to hire or recruit any person
who was,

54
<PAGE>

at the effective date of the Asset Transfer Agreement or within the 12 month
period preceding such effective date, an employee of the pcOrder.com division
of Trilogy. Trilogy has the right, and to the extent Trilogy transfers the
shares held by it, transferees of these shares will have the right, on no more
than five occasions after this offering, to require the Company to register the
shares of Common Stock held by it within 180 days of such request. In addition,
Trilogy has the right under certain circumstances, including the filing of the
registration statement to which this Prospectus is a part, to require the
Company to include shares held by Trilogy in a registration statement
registering other shares of Common Stock of the Company. These registration
rights are subject to certain conditions and limitations, including a right of
the Company not to effect a requested registration under certain conditions.
The Company has agreed to indemnify Trilogy and any transferees of the shares
of Common Stock currently held by Trilogy against, and provide contribution
with respect to, certain liabilities under the Securities Act in connection
with such registration. Trilogy's registration rights expire eight years after
the effective date of the Asset Transfer Agreement. Trilogy has waived its
right to include any of its shares in this offering.

The Technology, Services and License Agreement, the Management Services
Agreement and the Tax Allocation Agreement described below, have each been
filed as exhibits to the Registration Statement of which this Prospectus forms
a part and such summaries are qualified in their entirety by this reference to
the full text of such agreements. Because the Company was greater than a 95%
subsidiary of Trilogy at the time these agreements were entered into, they may
not be the result of arms'-length negotiations between the parties.

TECHNOLOGY, SERVICES AND LICENSE AGREEMENT

In September 1998, the Company and Trilogy entered into a Technology,
Services and License Agreement (the "Technology Agreement"), which amended and
superseded a Master Software License Agreement and a Reseller Agreement
previously entered into by the parties, pursuant to which Trilogy has licensed
certain intellectual property rights to the Company, and the Company has agreed
to license certain intellectual property rights to Trilogy. Each party has
granted the other access to, and a nonexclusive, irrevocable, perpetual,
worldwide, license to internally use, make, reproduce and/or prepare derivative
works of the products of the other party as of September 1, 1998, in the form
as of that date, and any updates, changes to, and new releases of those
products, subject to the happening of a Trigger Event (as defined below) (as
applicable, the "Trilogy Intellectual Property" or the "pcOrder Intellectual
Property"), or to sublicense any third party to do so, subject to certain
confidentiality and other restrictions. Trilogy also granted the Company a
nonexclusive, irrevocable, perpetual, worldwide right and license under the
Trilogy Intellectual Property to make, use, reproduce, prepare derivative works
based upon, license, offer to license, import, export, publish, distribute,
perform, display, advertise, market, promote, service and or support those of
pcOrder's products that are network based e-commerce products for enabling
sales, purchasing, marketing or distribution within the computer products
market ("Computer E-Commerce Products"), and to sublicense any third party to
do so, subject to the payment of royalties as described below. The Company also
granted Trilogy a nonexclusive, irrevocable, perpetual, worldwide right and
license to use pcOrder Intellectual Property to make, use reproduce, prepare
derivative works based upon, license, export, publish, distribute, perform,
display, advertise, market, promote, service and support Trilogy Products (as
defined in the Technology Agreement) and to sublicense any third party to do
so, subject to the payment of royalties described below. However, following a
change in control of Trilogy or such time as Trilogy is no longer required by
generally accepted accounting principles to be consolidated with pcOrder for
financial reporting purposes (in either case, a "Trigger Event"), Trilogy shall
not, until the later of September 1, 2008 or the expiration of five years
following such Trigger Event, have any license to the pcOrder Intellectual
Property with respect to any Computer E-Commerce Product that utilizes
pcOrder's product content or certain tools developed by pcOrder. Following a
Trigger Event, any Trilogy license to pcOrder Intellectual Property, which
license was granted pursuant to the terms of the Technology

55
<PAGE>

Agreement prior to the happening of such Trigger Event, shall continue
indefinitely, subject to continued royalty payments. Pursuant to the Technology
Agreement, neither party is restricted from entering into or having similar
agreements with third parties or doing any activity relating to competitive
products and services (involving none of the other party's information or
intellectual property). Following a Trigger Event, pcOrder's access to Trilogy
products and its right to receive updates, changes and new releases of Trilogy
Intellectual Property shall continue until the later to occur of five years
after a Trigger Event or September 1, 2008. Notwithstanding the foregoing, to
the extent that any of the Trilogy Intellectual Property (including Trilogy
products based on such intellectual property) is not of a same, similar,
replacement or equivalent general type as Trilogy Intellectual Property
available prior to a Trigger Event, pcOrder will not have rights to such
Trilogy Intellectual Property. The Technology Agreement further provides that
where at least one employee and/or contractor of the Company in conjunction
with at least one employee and/or contractor of Trilogy cooperate toward
jointly creating, inventing or discovering new material qualifying for either
patent or copyright protection, the parties shall negotiate in good faith on a
project-by-project basis to determine to what extent such newly developed
material should be jointly owned. In the event of joint ownership, the parties
shall have an equal, undivided interest in such patent, copyright or other
intellectual property. The Company and Trilogy are each obligated to pay to the
other monthly royalties based on a percentage of license fees derived from
sales of products that incorporate, and/or data maintenance services related
to, the other party's technology; of software maintenance fees other than data
maintenance services in connection with products that incorporate the other
party's technology; and of on-line subscription service fees from products that
incorporate the other party's technology. The Technology Agreement provides
that each party will defend, indemnify and hold harmless the other party for
any claim against such other party by any third party to the extent based on an
actual or alleged: (i) failure by a party to perform its obligations under the
Technology Agreement; (ii) breach of any one or more of a party's
representations or warranties; (iii) failure by a party to comply with
government laws and regulations; (iv) intentional or grossly negligent acts or
omissions on the part of a party, and (v) to the extent a party delivers
Material (as defined in the Technology Agreement) to the other party, (1)
failure by the delivering party to either own or have sufficient rights to
deliver such Material to the other party, (2) failure by a party to either own
or have sufficient rights to grant to the other party the license it has
granted under the Technology Agreement, (3) infringement (or violation) by such
delivered Material of a third party's intellectual property rights, or (4)
failure to be Year 2000 compliant. Such indemnification obligations are subject
to the condition that the indemnified party: (a) promptly provides notice of
any claim to the indemnifying party; (b) allows the indemnifying party to
control the defense of the claim and settlement negotiations; and (c) fully
cooperates with the indemnifying party in such defense and settlement
negotiations. The Technology Agreement provides that upon either party's
request, the parties shall negotiate in good faith regarding the terms and
conditions upon which either party will perform consulting services reasonably
requested by the other party; provided, however, that such obligation shall
expire on the later of seven years following a Trigger Event or September 1,
2010. The Technology, Services and License Agreement has a perpetual term,
unless terminated earlier by either party upon 31 days prior notice of an
uncured breach by the other party, subject to extension for special
circumstances, or the bankruptcy of either of the parties.

MANAGEMENT SERVICES AGREEMENT

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<PAGE>

receiving, purchase order database administration, network administration,
audit services, human resources administration, legal services and customer
training. The provision of Mandatory Services may not be unilaterally
terminated by either party during the effectiveness of the Management Services
Agreement. The provision of Optional Services may be terminated by either party
upon 90 days notice. The Management Services Agreement provides that Trilogy
will use the same level of care in rendering services to the Company that
Trilogy uses in rendering services to itself or any of its other subsidiaries,
which will be at least equal to the care, that Trilogy has used in the past in
rendering such services to the Company. However, the selection of personnel to
perform the various services will be within the sole control of Trilogy.
Specifically, Trilogy may, without the consent or approval of the Company,
subcontract any service to be provided under the Management Services Agreement.
The Management Services Agreement terminates on June 30, 1999, and thereafter
is subject to successive one-year renewal terms upon consent of the parties.
The Management Services Agreement may be terminated: (i) by either party within
30 days of an uncured material breach by the other party; (ii) by either party
upon the liquidation or dissolution of the other party; (iii) by Trilogy
immediately upon notice to the Company if the Company fails to pay the amount
due to Trilogy under such agreement by the tenth day after notice of nonpayment
is given; or (iv) within 30 days of the date at which Trilogy ceases to own a
majority of the Company's Common Stock.

TAX ALLOCATION AGREEMENT

The Company is currently, and after the offering will be, included in
Trilogy's consolidated federal income tax group, and the Company's federal
income tax liability will be included in the consolidated federal income tax
liability of Trilogy. The Company and Trilogy have entered into a Tax
Allocation Agreement pursuant to which the Company and Trilogy will make
payments between them such that, with respect to any period, the amount of
taxes to be paid or received by the Company, subject to certain adjustments,
will be determined as though the Company were to file separate federal, state
and local income tax returns (including, except as provided below, any amounts
determined to be due as a result of a redetermination of the tax liability of
Trilogy arising from an auditor otherwise) rather than a consolidated
subsidiary of Trilogy with respect to federal, state and local income taxes.
Under the terms of the Tax Allocation Agreement, the Company, in computing its
stand alone tax liability or tax refund, will be able to utilize certain tax
items, such as net operating losses, foreign tax credits and other tax credits
(collectively, "Tax Attributes"). In addition, with respect to Tax Attributes
of the Company that come into existence after the execution of the Tax
Allocation Agreement, and under the terms of the Tax Allocation Agreement,
Trilogy will be required to make any payment to the Company as such Tax
Attributes of the Company are utilized by the Trilogy consolidated federal
income tax group. Pursuant to the Tax Allocation Agreement, Trilogy's
obligation to make any payment to the Company relating to the Company's Tax
Attributes will apply only to tax periods during which the Company (or its
affiliated subsidiaries) is a member of Trilogy consolidated federal income tax
group.

Trilogy will continue to have all the rights of a parent of a consolidated
group (and similar rights provided for by applicable state and local law with
respect to a parent of a combined, consolidated or unitary group), will be the
sole and exclusive agent for the Company in any and all matters relating to the
income, franchise and similar liabilities of the Company, will have sole and
exclusive responsibility for the preparation and filing of consolidated federal
and consolidated or combined state and local income tax returns (or amended
returns), and will have the power, in its sole discretion, to contest or
compromise any asserted tax adjustment or deficiency and to file, litigate or
compromise any claim for refund on behalf of the Company. In addition, Trilogy
has agreed to undertake to provide the aforementioned services with respect to
the Company's separate state and local returns and the Company's foreign
returns.

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<PAGE>

beneficially owns at least 80% of the total voting power and value of the
outstanding Common Stock. Each member of a consolidated group is jointly and
severally liable for the federal income tax liability of each other member of
the consolidated group. Accordingly, although the Tax Allocation Agreement
allocates tax liabilities between the Company and Trilogy, during the period in
which the Company is included in Trilogy's consolidated group, the Company
could be liable in the event that any federal tax liability is incurred, but
not discharged, by any other member of Trilogy's consolidated group. Pursuant
to the Tax Allocation Agreement, however, Trilogy is obligated to indemnify the
Company for any tax liabilities, including any liability resulting from a
distribution of the Company's stock to Trilogy's stockholders provided that it
has paid its allocated share of such liabilities to Trilogy.

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<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning the executive
officers and directors of the Company as of September 1, 1998.

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Ross A. Cooley.................. 57 Chairman and Chief Executive Officer
Christina C. Jones.............. 28 President and Chief Operating Officer
James J. Luttenbacher........... 43 Vice President, Chief Financial Officer and
Secretary
Joseph A. Liemandt (1).......... 30 Director
Peter J. Barris (1)(2).......... 46 Director
Linwood A. Lacy, Jr. (1)(2)..... 52 Director
Robert W. Stearns............... 47 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee

Each director holds office until the next annual meeting of stockholders and
until his successor is elected and qualified or until his earlier resignation
or removal. Each officer serves at the discretion of the Board of Directors
(the "Board"). There are no family relationships among the directors or
executive officers of the Company.

ROSS A. COOLEY has been Chairman and Chief Executive Officer of the Company
since November 1996. From 1984 to 1996, Mr. Cooley was employed by Compaq, most
recently as Senior Vice President and General Manager responsible for all North
American business and operations. Mr. Cooley is a member of the RosettaNet
Board of Directors, the computer industry's e-commerce standards effort, and a
member of its Executive Committee. During his 18-year career at IBM, Mr. Cooley
completed the Harvard Business Senior Executive Program. Mr. Cooley holds an
A.A.S. from Broome Community College.

CHRISTINA C. JONES founded the Company and has been its President and Chief
Operating Officer since June 1996. In 1989, Ms. Jones co-founded Trilogy. Prior
to founding the Company, Ms. Jones was Director of Marketing of Trilogy. Ms.
Jones holds a B.A. in Economics from Stanford University.

JAMES J. LUTTENBACHER has been the Company's Vice President and Chief
Financial Officer since March 1998. In August 1998, Mr. Luttenbacher was
appointed Secretary of the Company. From 1992 to 1998, Mr. Luttenbacher was
employed at Mentor Graphics Corporation, most recently as division manager for
a software product division focused on integrated circuit test and physical
verification applications. Mr. Luttenbacher holds a B.A. in Accounting from the
University of Michigan and a Masters of Management in finance and operations
from Kellogg Graduate School of Management at Northwestern University.

JOSEPH A. LIEMANDT has been a director of the Company since its inception.
From July 1994 to June 1996, Mr. Liemandt was President of the Company.
Mr. Liemandt founded Trilogy in 1989. Since that time, Mr. Liemandt has served
as the President, Chief Executive Officer and Chairman of Trilogy.

PETER J. BARRIS has been a director of the Company since June 17, 1998. Since
1992, Mr. Barris has been a partner, and, in 1994, was appointed a General
Partner of New Enterprise Associates, a firm that manages venture capital
investments. Mr. Barris is also a member of the Board of Directors of Mobius
Management Systems, Inc. Mr. Barris holds a B.S.E.E. from Northwestern
University and an M.B.A. from the Amos Tuck School at Dartmouth College.

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<PAGE>

LINWOOD A. LACY, JR. has been a director of the Company since August 1998. In
November 1997, Mr. Lacy retired from Micro Warehouse Incorporated where he had
served as President and Chief Executive Officer since October 1996. From 1989
to May 1996, Mr. Lacy served as the Co-Chairman and Chief Executive Officer of
Ingram Micro, Inc., a microcomputer products distributor and a then wholly-
owned subsidiary of Ingram Industries, Inc. From December 1993 to June 1995,
Mr. Lacy was also President of Ingram Industries Inc. From June 1995 until
April 1996, he was President and Chief Executive Officer of Ingram Industries
Inc., and from April 1996 to May 1996 served as its Vice Chairman. Mr. Lacy
serves as a director of Ingram Industries Inc., Entex Information Services,
Inc. and Earthlink Network, Inc. Mr. Lacy holds a B.S.ChE from the University
of Virginia and an M.B.A. in Business from the Darden Graduate School of
Business Administration at the University of Virginia.

ROBERT W. STEARNS has been a director of the Company since September 1998.
Mr. Stearns is currently a venture capitalist and management consultant. From
January 1996 to August 1998 Mr. Stearns served as the Senior Vice President,
Technology and Corporate Development of Compaq. He joined Compaq as Vice
President of Corporate Development in July 1993. Prior to his arrival at
Compaq, he was employed as a management consultant with McKinsey & Co.,
focusing on high technology clients. Mr. Stearns serves as a director of the
Houston Advanced Research Center and the Cynthia Woods Mitchell Pavilion. In
November 1996 Mr. Stearns was appointed to the Texas Science and Technology
Council and in March 1998 he became a fellow of the Aspen Institute and a
member of the Brookings Council of the Brookings Institute. Mr. Stearns holds a
B.S. in Chemistry from Brown University and a Master of Science from the
Massachusetts Institute of Technology.

BOARD COMPOSITION

The Company currently has authorized five directors. Each director is elected
for a period of one year at the Company's annual meeting of stockholders and
serves until the next annual meeting or until his successor is duly elected and
qualified. The executive officers serve at the discretion of the Board of
Directors. There are no family relationships among any of the directors or
executive officers of the Company.

BOARD COMMITTEES

In August 1998, the Board established the Audit Committee and Compensation
Committee. The Audit Committee of the Board of Directors reviews and monitors
the corporate financial reporting and the internal and external audits of the
Company, including, among other things, the Company's control functions, the
results and scope of the annual audit and other services provided by the
Company's independent accountants, and the Company's compliance with legal
matters that have a significant impact on the Company's financial condition.
The Audit Committee also consults with the Company's management and the
Company's independent accountants prior to the presentation of financial
statements to stockholders and, as appropriate, initiates inquiries into
aspects of the Company's financial affairs. In addition, the Audit Committee
has the responsibility to consider and recommend the appointment of, and to
review fee arrangements with, the Company's independent accountants. The
current members of the Audit Committee are Messrs. Liemandt, Barris and Lacy.

The Compensation Committee of the Board of Directors reviews and makes
recommendations to the Board regarding the Company's compensation policies and
all forms of compensation to be provided to executive officers and directors of
the Company, including, among other things, annual salaries and bonuses and
stock option and other incentive compensation arrangements of the Company. In
addition, the Compensation Committee reviews bonus and stock compensation
arrangements for all other employees of the Company. The current members of the
Compensation Committee are Messrs. Barris and Lacy.

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<PAGE>

DIRECTOR COMPENSATION AND OTHER ARRANGEMENTS

The Company does not currently compensate its outside directors for attending
Board of Directors or committee meetings, but reimburses directors for their
reasonable travel expenses incurred in connection with attending such meetings.
On November 1, 1996, the Company granted to Mr. Liemandt an option to purchase
100 shares of the Company's Common Stock at an exercise price of $3.00 per
share. Upon joining the Board of Directors, Messrs. Lacy, Barris and Stearns
received options to acquire 30,000 shares, 10,000 shares and 15,000 shares of
Common Stock, respectively.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the Compensation Committee of the Board of Directors
has served at any time as an officer or employee of the Company. Prior to the
establishment of the Compensation Committee, all decisions relating to
executive compensation were made by the Board of Directors. No executive
officer of the Company serves as a member of the Board of Directors or
Compensation Committee of any entity which has one or more executive officers
serving as a member of the Board of Directors or Compensation Committee.

EXECUTIVE COMPENSATION

The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and certain other
executive officers of the Company (collectively, the "Named Executive
Officers") whose salary and bonus exceeded $100,000 for services rendered in
all capacities to the Company and its subsidiaries during the fiscal year ended
December 31, 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
---------------
NAME AND PRINCIPAL POSITION SALARY
--------------------------- ---------------
<S> <C>
Ross A. Cooley.................................................. $ 1
Chairman and Chief Executive Officer
Christina C. Jones.............................................. 100,908(2)
President and Chief Operating Officer
</TABLE>
- --------

(1) Excludes an option to purchase 125,000 shares of the Company's Common Stock
at an exercise price of $3.00 per share granted to Ms. Jones in June 1998.

(2) Includes $908 of reimbursement for excess amounts paid toward the Company's
standard employee medical benefit plan.

AGGREGATE OPTION EXERCISED YEAR-END OPTION VALUES

The following table provides certain summary information regarding stock
options granted to the Named Executive Officers during the fiscal year ended
December 31, 1997.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1997(#) AT DECEMBER 31, 1997($)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ross A. Cooley.......... -- -- 425,000 450,000 -- --
Christina C. Jones...... -- -- 284,400 365,700 -- --
</TABLE>

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<PAGE>

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Ross A. Cooley, the
Company's Chairman and Chief Executive Officer, Christine C. Jones, the
Company's President and Chief Operating Officer, and James J. Luttenbacher, the
Company's Vice President, Chief Financial Officer and Secretary. Each of these
agreements has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and the following summaries are qualified in
their entirety by this reference to the full text of such agreements.

COOLEY EMPLOYMENT AGREEMENT. The Company and Ross A. Cooley are parties to an
employment agreement dated November 1, 1996 and an amendment effective
November 1, 1997 (the "Cooley Agreement"), which provides for an employment
period of four years at an annual salary of not less than $1.00. In addition,
Mr. Cooley is eligible to participate in the Company's management incentive
compensation plan as may be in effect from time to time. Mr. Cooley, in his
capacity as the Company's Chairman of the Board and Chief Executive Officer,
currently performs various executive and leadership functions, including
development of the Company's strategic and operational plans, strategic
planning, executive management of new customer and new account relationship
activities and recruitment of senior management personnel. Pursuant to the
Cooley Agreement, Mr. Cooley has been granted a stock option of 875,000 shares
of the Company's Common Stock at an exercise price of $3.00 per share, of which
425,000 shares became exercisable at the time the Cooley Agreement was entered
into and an additional 100,000 of such shares shall become exercisable upon
each of November 1, 1998, November 1, 1999 and November 1, 2000. The remaining
150,000 shares under such stock option grant shall become exercisable upon
November 1, 2003, provided, however, that in the event the Company shall have
made a public offering of its securities prior to November 1, 1998, then 50,000
shares shall become exercisable on each of November 1, 1999 and November 1,
2000, provided in each case that the Cooley Agreement is in effect on such
date. Under the terms of the Company's 1996 Stock Option Plan, in the event of
a Change of Control (as defined in such Plan), all unvested shares under such
option become immediately exercisable. The Cooley Agreement may be terminated
by the Company or Mr. Cooley at any time. If the Cooley Agreement is terminated
by the Company for Cause (as defined therein) or by Mr. Cooley for reasons
other than as a result of a Change in Control (as defined therein) of the
Company, no further rights to compensation or benefits shall accrue to
Mr. Cooley. If the Cooley Agreement is terminated by the Company without Cause
or by Mr. Cooley as a result of a Change of Control of the Company, Mr. Cooley
shall not be entitled to any additional compensation under the terms of the
Cooley Agreement, but shall have such rights relating to the exercise of then
unexercised stock options as are provided in his Stock Option Agreement. During
his employment by the Company and for a period of two years following the
Company's termination of his employment, Mr. Cooley shall not (i) solicit any
customers of the Company, (ii) induce or attempt to induce any Customer or
withdraw, curtail or cancel its business with the Company or in any manner
modify or fail to enter into any actual or potential business relationship with
the Company, (iii) recruit or solicit any employee or vendor of the Company to
cease his, her or its relationship with the Company or (iv) permit his name to
be used by or engage in any business competing with the business of the
Company.

JONES EMPLOYMENT AGREEMENT. The Company and Christina C. Jones are parties to
an employment agreement dated November 1, 1996 (the "Jones Agreement"), which
provides for an employment period of four years at an annual salary of not less
than $100,000. In addition, Ms. Jones is eligible to participate in any
management incentive compensation plan which the Company may have from time to
time. Pursuant to the Jones Agreement, Ms. Jones has been granted a stock
option to purchase up to 650,000 shares of the Company's Common Stock at an
exercise price of $3.00 per share (the "Option"). As a condition to the grant
of the Option, Ms. Jones entered into a Option Cancellation Agreement with
Trilogy which terminated a Stock Option Agreement dated February 10, 1994
between Trilogy and Ms. Jones pursuant to which Ms. Jones had been granted a
stock option to purchase shares of Trilogy Class B Common Stock at an exercise
price of $1.50 per share. Under the

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<PAGE>

terms of the Company's 1996 Stock Option Plan, in the event of a Change of
Control (as defined in such Plan), all unvested shares under the Option become
immediately exercisable. The Jones Agreement may be terminated by the Company
at any time and by Ms. Jones for Good Reason (as defined therein). The
definition of Good Reason includes, among other things, a Change of Control (as
defined therein) of the Company. If the Jones Agreement is terminated by the
Company for Cause (as defined therein), no further rights to compensation or
benefits shall accrue to Ms. Jones. If the Jones Agreement is terminated by the
Company without Cause or by Ms. Jones for Good Reason, including upon a Change
of Control, Ms. Jones shall continue to receive employee benefits and monthly
payments equal to one-twelfth of her then-current annual salary for a period of
twelve months following the effective date of such termination. During her
employment by the Company and for a period of two years following the Company's
termination of her employment, Ms. Jones shall not (i) solicit any customers of
the Company, (ii) induce or attempt to induce any Customer to withdraw, curtail
or cancel its business with the Company or in any manner modify or fail to
enter into any actual or potential business relationship with the Company,
(iii) recruit or solicit any employee or vendor of the Company or Trilogy to
cease his, her or its relationship with the Company or with Trilogy or (iv)
permit her name to be used by or engage in any business competing with the
business of the Company.

LUTTENBACHER EMPLOYMENT AGREEMENT. The Company and James J. Luttenbacher are
parties to an employment agreement dated February 12, 1998 (the "Luttenbacher
Agreement"), which provides for an employment period of four years at an annual
salary of not less than $175,000. In addition, Mr. Luttenbacher is eligible to
participate in any management incentive compensation plan which the Company may
have from time to time for an amount up to 50% of his then-current annual
salary. Mr. Luttenbacher received a bonus of $5,000 upon commencement of his
employment with the Company. Pursuant to the Luttenbacher Agreement, Mr.
Luttenbacher has been granted a stock option to purchase up to 150,000 shares
of the Company's Common Stock at an exercise price of $3.00 per share. Under
the terms of the Company's 1996 Stock Option Plan, in the event of a Change of
Control (as defined in such Plan), all unvested shares under such option become
immediately exercisable. The Luttenbacher Agreement may be terminated by the
Company or Mr. Luttenbacher at any time. If the Luttenbacher Agreement is
terminated by the Company for Cause (as defined therein) or by Mr. Luttenbacher
for reasons other than as a result of a Change in Control (as defined therein)
of the Company, no further rights to compensation or benefits shall accrue to
Mr. Luttenbacher. If the Luttenbacher Agreement is terminated by the Company
without Cause or by Mr. Luttenbacher as a result of a Change in Control (as
defined therein) of the Company, Mr. Luttenbacher shall continue to receive
employee benefits and monthly payments equal to one-twelfth of his then-current
annual salary for a period of six months following the effective date of such
termination. During his employment by the Company and for a period of two years
following the Company's termination of his employment, Mr. Luttenbacher shall
not (i) solicit any customers of the Company, (ii) induce or attempt to induce
any Customer to withdraw, curtail or cancel its business with the Company or in
any manner modify or fail to enter into any actual or potential business
relationship with the Company, (iii) recruit or solicit any employee or vendor
of the Company to cease his, her or its relationship with the Company or (iv)
permit his name to be used by or engage in any business competing with the
business of the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware provides that a
director of a corporation will not be personally liable for monetary damages
for breach of such individual's fiduciary duties as a director except for
liability (i) for any breach of such director's duty of loyalty to the Company
or to its stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases as provided in
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which a director derives an improper personal benefit.

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<PAGE>

The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers, and may indemnify its officers, employees and other
agents, to the full extent permitted by law. The Company believes that
indemnification under its Bylaws covers at least negligence and gross
negligence on the part of an indemnified party. The Company's Bylaws also
permit the Company to advance expenses incurred by an indemnified party in
connection with the defense of any action or proceeding arising out of such
party's status or service as a director, officer or employee or other agent of
the Company. Such indemnified party shall repay such advances if it is
ultimately determined that such party is not entitled to indemnification.

The Company has entered into separate indemnification agreements with each of
its directors and officers. These agreements require the Company, among other
things, to indemnify such director or officer, against expenses (including
attorneys' fees), judgments, fines and settlements (collectively,
"Liabilities") paid by such individual in connection with any action, suit or
proceeding arising out of such individual's status or service as a director or
officer of the Company (other than Liabilities arising from willful misconduct
or conduct that is knowingly fraudulent or deliberately dishonest) and to
advance expenses incurred by such individual in connection with any proceeding
against such individual with respect to which such individual may be entitled
to indemnification by the Company. The Company believes that its Certificate of
Incorporation and Bylaw provisions and indemnification agreements are necessary
to attract and retain qualified persons as directors and officers. The Company
also maintains directors' and officers' liability insurance.

At present the Company is not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of the Company in which
indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.

1996 STOCK OPTION PLAN

The Company's 1996 Stock Option Plan (the "1996 Plan") was approved by the
Board of Directors and stockholders in September 1996. The 1996 Plan provides
for the grant of options intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options. A total of 3,000,000 shares of Common Stock have
been reserved for issuance under the 1996 Plan. As of June 30, 1998, 66,925
shares of Common Stock had been issued upon exercise of options granted under
the 1996 Plan, 2,557,111 shares remained reserved for future issuance upon the
exercise of outstanding options, and 375,964 shares remained available for
future grant.

The Board of Directors or a committee designated by the Board has the power,
subject to the limitations contained in the 1996 Plan, to prescribe the terms
and conditions of any option granted under the 1996 Plan, including the total
number of share to be offered to each optionee. The maximum term of any stock
option granted under the 1996 Plan is ten years, except that with respect to
incentive stock options granted to a person possessing more than 10% of the
combined voting power of the Company (a "10% Stockholder"), the term of such
stock options shall be for no more than five years. The exercise price of
incentive stock options granted under the 1996 Plan must be at least 100% of
the fair market value of the Common Stock on the grant date except that the
exercise price of incentive stock options granted to a 10% Stockholder must be
at least 110% of such fair market value on the date of grant. The aggregate
fair market value on the date of grant of the Common Stock for which incentive
stock options are exercisable for the first time by an employee during any
calendar year may not exceed $100,000. Nonqualified stock options may be
granted in exchange for previously granted stock options having an exercise
price higher than the options received in such exchange. In the event of a
Change of Control (as defined in the 1996 Plan), all of the options granted
under the 1996 Plan shall become immediately exercisable. The Board may amend
the 1996 Plan at any time, except that

64
<PAGE>

certain amendments require stockholder approval. The 1996 Plan will terminate
in September 2006, unless earlier terminated by the Board of Directors.

AGREEMENT REGARDING GRANT OF OPTIONS

Pursuant to an agreement (the "GE Agreement") between the Company and General
Electric Capital Information Technology Solutions ("GE Capital"), GE Capital
has the right (the "Right") to require the Company to grant GE Capital an
option to purchase up to 320,000 shares of restricted Common Stock of the
Company. The Right is triggered upon the happening of certain events, including
an initial public offering by the Company of its Common Stock. In the event GE
Capital exercises such Right, the GE Option will expire at 11:59 pm on the
first date of such public offering. If GE Capital is granted and exercises the
GE Option, the shares of Common Stock issued pursuant to the exercise of the GE
Option will be restricted stock and will not be subject to any registration
rights.

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<PAGE>

CERTAIN TRANSACTIONS

AGREEMENTS WITH EXECUTIVE OFFICERS

The Company has entered into employment agreements with Mr. Cooley, Ms. Jones
and Mr. Luttenbacher. See "Management--Employment Agreements".

AGREEMENTS BETWEEN THE COMPANY AND TRILOGY

ASSET TRANSFER AGREEMENT

In August 1996, the Company and Trilogy entered into an Asset Transfer
Agreement, as amended in August 1998 (the "Asset Transfer Agreement"), pursuant
to which Trilogy transferred the assets and liabilities of its pcOrder.com
division to the Company. In exchange for the transferred assets, the Company
issued to Trilogy 900 shares of the Company's common stock, $0.01 par value per
share, establishing the Company as a wholly-owned subsidiary of Trilogy (such
shares were subsequently split into 11,520,000 shares of Common Stock).
Pursuant to the Asset Transfer Agreement, the parties made customary
representations and warranties regarding their business and operations, and
each agreed to indemnify the other in the event of any damages arising from the
other's breach of any such representation or warranty. In addition, Trilogy
agreed not to engage in, directly or indirectly, any business directly in
competition with the Company for a period of three years after the effective
date of the Asset Transfer Agreement. Further, during such three year period,
Trilogy also agreed not to hire or recruit any person who was, at the effective
date of the Asset Transfer Agreement or within the 12 month period preceeding
such effective date, an employee of the pcOrder.com division of Trilogy.
Trilogy has the right, and to the extent Trilogy transfers the shares held by
it, other holders of these shares have the right, on no more than five
occasions after this offering, to require the Company to register the shares of
Common Stock held by such stockholders within 180 days of such request. The
Company is obligated to indemnify such stockholders and underwriters, if any,
against liability due to information in the registration statement furnished by
the Company. Trilogy's registration rights expire eight years after the
effective date of the Asset Transfer Agreement. Additionally, holders of the
transferred shares have the right to sell any shares held by such stockholder
in this offering. The right to sell any of its shares in connection with this
offering has been waived by Trilogy.

TECHNOLOGY, SERVICES AND LICENSE AGREEMENT

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<PAGE>

to make, use reproduce, prepare derivative works based upon, license, export,
publish, distribute, perform, display, advertise, market, promote, service and
support Trilogy Products (as defined in the Technology Agreement) and to
sublicense any third party to do so, subject to the payment of royalties
described below. However, following a change in control of Trilogy or such time
as Trilogy is no longer required by generally accepted accounting principles to
be consolidated with pcOrder for financial reporting purposes (in either case,
a "Trigger Event"), Trilogy shall not, until the later of September 1, 2008 or
the expiration of five years following such Trigger Event, have any license to
the pcOrder Intellectual Property with respect to any Computer E-Commerce
Product that utilizes pcOrder's product content or certain tools developed by
pcOrder. Following a Trigger Event, any Trilogy license to pcOrder Intellectual
Property, which license was granted pursuant to the terms of the Technology
Agreement prior to the happening of such Trigger Event, shall continue
indefinitely, subject to continued royalty payments. Pursuant to the Technology
Agreement, neither party is restricted from entering into or having similar
agreements with third parties or doing any activity relating to competitive
products and services (involving none of the other party's information or
intellectual property). Following a Trigger Event, pcOrder's access to Trilogy
products and its right to receive updates, changes and new releases of Trilogy
Intellectual Property shall continue until the later to occur of five years
after a Trigger Event or September 1, 2008. Notwithstanding the foregoing, to
the extent that any of the Trilogy Intellectual Property (including Trilogy
products based on such intellectual property) is not of a same, similar,
replacement or equivalent general type as Trilogy Intellectual Property
available prior to a Trigger Event, pcOrder will not have rights to such
Trilogy Intellectual Property. The Technology Agreement further provides that
where at least one employee and/or contractor of the Company in conjunction
with at least one employee and/or contractor of Trilogy cooperate toward
jointly creating, inventing or discovering new material qualifying for either
patent or copyright protection, the parties shall negotiate in good faith on a
project-by-project basis to determine to what extent such newly developed
material should be jointly owned. In the event of joint ownership, the parties
shall have an equal, undivided interest in such patent, copyright or other
intellectual property. The Company and Trilogy are each obligated to pay to the
other monthly royalties based on a percentage of license fees derived from
sales of products that incorporate, and/or data maintenance services related
to, the other party's technology; of software maintenance fees other than data
maintenance services in connection with products that incorporate the other
party's technology; and of on-line subscription service fees from products that
incorporate the other party's technology. The Technology Agreement provides
that each party will defend, indemnify and hold harmless the other party for
any claim against such other party by any third party to the extent based on an
actual or alleged: (i) failure by a party to perform its obligations under the
Technology Agreement; (ii) breach of any one or more of a party's
representations or warranties; (iii) failure by a party to comply with
government laws and regulations; (iv) intentional or grossly negligent acts or
omissions on the part of a party, and (v) to the extent a party delivers
Material (as defined in the Technology Agreement) to the other party, (1)
failure by the delivering party to either own or have sufficient rights to
deliver such Material to the other party, (2) failure by a party to either own
or have sufficient rights to grant to the other party the license it has
granted under the Technology Agreement, (3) infringement (or violation) by such
delivered Material of a third party's intellectual property rights, or (4)
failure to be Year 2000 compliant. Such indemnification obligations are subject
to the condition that the indemnified party: (a) promptly provides notice of
any claim to the indemnifying party; (b) allows the indemnifying party to
control the defense of the claim and settlement negotiations; and (c) fully
cooperates with the indemnifying party in such defense and settlement
negotiations. The Technology Agreement provides that upon either party's
request, the parties shall negotiate in good faith regarding the terms and
conditions upon which either party will perform consulting services reasonably
requested by the other party; provided, however, that such obligation shall
expire on the later of seven years following a Trigger Event or September 1,
2010. The Technology, Services and License Agreement has a perpetual term,
unless terminated earlier by either party's 31 days prior notice of an uncured
breach, subject to extension for special circumstances, or the bankruptcy of
either of the parties.

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<PAGE>

MANAGEMENT SERVICES AGREEMENT

The Company and Trilogy entered into a Management Services Agreement,
effective as of July 1, 1998, which amended and superseded a Services Agreement
previously entered into by the parties, pursuant to which Trilogy will provide
certain administrative and corporate support services to the Company. Trilogy
has agreed to provide to the Company certain services ("Mandatory Services")
including tax administration, payroll, payroll accounting, banking, corporate
finance, recruiting and employee training services to the Company. In addition,
Trilogy has agreed to provide the Company certain additional services
("Optional Services"), including hardware purchasing, shipping and receiving,
purchase order database administration, network administration, audit services,
human resources administration, legal services and customer training. The
provision of Mandatory Services may not be unilaterally terminated by either
party during the effectiveness of the Management Services Agreement. The
provision of Optional Services may be terminated by either party upon 90 days
notice. The Management Services Agreement provides that Trilogy will use the
same level of care in rendering services to the Company that Trilogy uses in
rendering services to itself or any of its other subsidiaries, which will be at
least equal to the care, that Trilogy has used in the past in rendering such
services to the Company. However, the selection of personnel to perform the
various services will be within the sole control of Trilogy. Specifically,
Trilogy may, without the consent or approval of the Company, subcontract any
service to be provided under the Management Services Agreement. The Management
Services Agreement terminates on June 30, 1999, and thereafter is subject to
successive one-year renewal terms upon consent of the parties. The Management
Services Agreement may be terminated: (i) by either party within 30 days of an
uncured material breach by the other party; (ii) by either party upon the
liquidation or dissolution of the other party; (iii) by Trilogy immediately
upon notice to the Company if the Company fails to pay the amount due to
Trilogy under such agreement by the tenth day after notice of nonpayment is
given; or (iv) within 30 days of the date at which Trilogy ceases to own a
majority of the Company's Common Stock.

TAX ALLOCATION AGREEMENT

The Company is currently, and after the offering will be, included in
Trilogy's consolidated federal income tax group, and the Company's federal
income tax liability will be included in the consolidated federal income tax
liability of Trilogy. The Company and Trilogy have entered into a Tax
Allocation Agreement pursuant to which the Company and Trilogy will make
payments between them such that, with respect to any period, the amount of
taxes to be paid or received by the Company, subject to certain adjustments,
will be determined as though the Company were to file separate federal, state
and local income tax returns (including, except as provided below, any amounts
determined to be due as a result of a redetermination of the tax liability of
Trilogy arising from an auditor otherwise) rather than a consolidated
subsidiary of Trilogy with respect to federal, state and local income taxes.
Under the terms of the Tax Allocation Agreement, the Company, in computing its
stand alone tax liability or tax refund, will be able to utilize certain tax
items, such as net operating losses, foreign tax credits and other tax credits
(collectively, "Tax Attributes"). In addition, with respect to Tax Attributes
of the
Company that come into existence after the execution of the Tax Allocation
Agreement, and under the terms of the Tax Allocation Agreement, Trilogy will be
required to make any payment to the Company as such Tax Attributes of the
Company are utilized by the Trilogy consolidated federal income tax group.
Pursuant to the Tax Allocation Agreement, Trilogy's obligation to make any
payment to the Company relating to the Company's Tax Attributes will apply only
to tax periods during which the Company (or its affiliated subsidiaries) is a
member of Trilogy consolidated federal income tax group.

68
<PAGE>

income tax returns (or amended returns), and will have the power, in its sole
discretion, to contest or compromise any asserted tax adjustment or deficiency
and to file, litigate or compromise any claim for refund on behalf of the
Company. In addition, Trilogy has agreed to undertake to provide the
aforementioned services with respect to the Company's separate state and local
returns and the Company's foreign returns.

The Tax Allocation Agreement will remain in effect until the expiration of
any open years for which pcOrder has filed as a member of the Trilogy
consolidated group. In general, the Company will be included in Trilogy's
consolidated group for federal income tax purposes for so long as Trilogy
beneficially owns at least 80% of the total voting power and value of the
outstanding Common Stock. Each member of a consolidated group is jointly and
severally liable for the federal income tax liability of each other member of
the consolidated group. Accordingly, although the Tax Allocation Agreement
allocates tax liabilities between the Company and Trilogy, during the period in
which the Company is included in Trilogy's consolidated group, the Company
could be liable in the event that any federal tax liability is incurred, but
not discharged, by any other member of Trilogy's consolidated group. Pursuant
to the Tax Allocation Agreement, however, Trilogy is obligated to indemnify the
Company for any tax liabilities, including any liability resulting from a
distribution of the Company's stock to Trilogy's stockholders provided that it
has paid its allocated share of such liabilities to Trilogy.

69
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of June 30, 1998, and as adjusted to reflect
the sale of shares offered hereby, by (i) each person who is known by the
Company to own beneficially more than five percent of the Common Stock, (ii)
each of the Company's Named Officers and directors, and (iii) all current
officers and directors as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)
---------------------
5% BENEFICIAL OWNERS,
DIRECTORS NUMBER OF SHARES BEFORE AFTER
& NAMED EXECUTIVE OFFICERS BENEFICIALLY OWNED(1) OFFERING OFFERING
- -------------------------- --------------------- ---------- ----------
<S> <C> <C> <C>
Trilogy Software, Inc. ....... 12,800,000 99.5%
6034 West Courtyard Drive
Austin, TX 78730
Joseph A. Liemandt(2)......... 12,800,050 99.5
6034 West Courtyard Drive
Austin, TX 78730
Ross A. Cooley(3)............. 425,000 3.2
Christina C. Jones(4)......... 406,300 3.1
James J. Luttenbacher......... 25,000 *
Peter J. Barris............... -- *
Linwood A. Lacy, Jr........... -- *
Robert W. Stearns............. -- *
All Directors and Officers as
a Group (7 persons)(5)....... 13,656,350 99.7%
</TABLE>

- --------
* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of June 30, 1998 are
deemed outstanding. Percentage of beneficial ownership is based upon
12,866,925 shares of Common Stock outstanding prior to this offering and
shares of Common Stock outstanding after this offering, as of June 30,
1998 and assuming no exercise of the Underwriters' overallotment option or
the GE Option. To the Company's knowledge, except as set forth in the
footnotes to this table and subject to applicable community property laws,
each person named in the table has sole voting and investment power with
respect to the shares set forth opposite such person's name.
(2) Includes 50 shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1998. In addition, includes 12,800,000 shares
held by Trilogy Software, Inc., of which Mr. Liemandt is President and
Chief Executive Officer. Mr. Liemandt disclaims beneficial ownership of
Trilogy Software, Inc.'s shares.
(3) Includes 425,000 shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1998.
(4) Includes 406,300 shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1998.

(5) Pursuant to the GE Agreement, GE has the Right to require the Company to
grant GE Capital an option to purchase up to 320,000 shares of restricted
stock of the Company. The Right is triggered upon the happening of certain
events, including an initial public offering by the Company of its Common
Stock. In the event GE Capital exercises such Right, the GE Option will
expire at 11:59 p.m. on the first date of such public offering. See
"Management--Agreement Regarding Grant of Options".

(6) Includes (i) 831,350 shares issuable upon exercise of stock options
exercisable within 60 days of June 30, 1998 and (ii) 12,800,000 shares
owned by Trilogy (see footnote 2).

70
<PAGE>

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, par value $0.01 per share, and 3,200,000 shares of Preferred
Stock, par value $0.01 per share. Upon consummation of this offering, no shares
of Preferred Stock and shares of Common Stock ( shares if the
Underwriters' overallotment option is exercised in full) will be outstanding.
The following summary is qualified in its entirety by this reference to the
Company's Certificate of Incorporation and Bylaws, copies of which are filed as
exhibits to the Registration Statement of which this Prospectus is a part.

COMMON STOCK

As of June 30, 1998, there were 12,866,925 shares of Common Stock
outstanding, 12,800,000 of which were held by Trilogy and the remaining 66,925
shares were held by 13 individuals. The holders of Common Stock are entitled to
one vote per share on a non-cumulative basis on all matters to be voted upon by
the stockholders. The holders of Common Stock are entitled to receive ratably
such noncumulative dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of Preferred Stock, if any,
then outstanding. The Common Stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are
fully paid and nonassessable, and the shares of Common Stock to be issued upon
completion of this offering will be fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors has the authority, without further action by the
stockholders, to issue the Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting any series of Preferred Stock or the designation of such series,
without further vote or action by the stockholders. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the stockholders and may
adversely affect the voting and other rights of the holders of Common Stock.
The issuance of Preferred Stock with voting and conversion rights may have the
effect of decreasing the market price of the Common Stock, and may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. At present, the Company has no plans to issue any
shares of Preferred Stock.

CERTAIN ANTI-TAKEOVER, LIMITED LIABILITY AND INDEMNIFICATION PROVISIONS;
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to Section 203 of the Delaware General Corporation
Law, as amended ("Section 203"), which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder, unless (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction that resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee

71
<PAGE>

participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer, or
(iii) on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock that is not owned by the interested
stockholder.

Section 203 defines business combinations to include (i) any merger or
consolidation involving the corporation or any majority-owned subsidiary of the
corporation and any other person or entity, (ii) subject to certain exceptions,
any sale, transfer, pledge or other disposition of 10% or more of the assets of
the corporation or any majority-owned subsidiary of the corporation involving
the interested stockholder, (iii) subject to certain exceptions, any
transaction that results in the issuance or transfer by the corporation or any
majority-owned subsidiary of the corporation of any stock of the corporation to
the interested stockholder, (iv) any transaction involving the corporation or
any majority-owned subsidiary of the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of the
corporation or any majority-owned subsidiary of the corporation beneficially
owned by the interested stockholder, or (v) the receipt by the interested
stockholder of the benefit of any loans, advances, guarantees, pledges or other
financial benefits provided by or through the corporation or any majority-owned
subsidiary of the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more or the
outstanding voting stock of the corporation and any entity or person affiliated
with or controlling or controlled by such entity or person.

LIMITATION OF DIRECTOR LIABILITY

The Certificate of Incorporation of the Company limits the liability of
directors of the Company (in their capacity as directors but not in their
capacity as officers) to the Company or its stockholders to the fullest extent
permitted by Delaware law. Specifically, directors of the Company will not be
personally liable for monetary damages for breach of a director's fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, which relates to unlawful payments of dividends or unlawful stock
repurchases or redemptions, or (iv) for any transaction from which the director
derived an improper personal benefit.

INDEMNIFICATION ARRANGEMENTS

The Bylaws of the Company provide that the directors and officers of the
Company shall be indemnified and provide for the advancement to any such
indemnified director or officer of expenses in connection with actual or
threatened proceedings and claims arising out of their status as director or
officer of the Company as such to the fullest extent permitted by the Delaware
General Corporation Law. Prior to consummation of this offering, the Company
will enter into indemnification agreements with each of its directors and
officers that will provide them with rights to indemnification and expense
advancement to the fullest extent permitted under the Delaware General
Corporation Law.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is . The Transfer
Agent's address is and telephone number is .

72
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have of Common Stock
outstanding (assuming no exercise of the Underwriters' over-allotment option
and no exercise of outstanding options under the Company's Option Plans). Of
such shares, the shares sold in this offering will be freely transferable
without restriction or further registration under the Securities Act, except
for any shares held by an existing "affiliate" of the Company, as that term is
defined by the Securities Act (an "Affiliate"), which shares will be subject to
the resale limitations of Rule 144 adopted under the Securities Act. As of the
date of this Prospectus, 12,914,239 "restricted shares" as defined in Rule 144
will be outstanding. Of such shares, and without consideration of the
contractual restrictions described below, no shares would be available for
immediate sale in the public market without restriction pursuant to Rule
144(k). Beginning 90 days after the date of this Prospectus, and without
consideration of the contractual restrictions described below, no shares would
be eligible for sale in reliance upon Rule 144 and 89,239 shares would be
eligible for sale in reliance upon Rule 701. In addition, options to purchase
approximately 179,402 shares will be vested and exercisable and eligible for
sale in Reliance upon Rule 701.

In general, under Rule 144 as currently in effect, beginning 90 days after
the offering, a person (or persons whose shares are aggregated) who owns shares
that were purchased from the Company (or any Affiliate) at least one year
previously, including that person who may be deemed an Affiliate of the
Company, is entitled to sell within any three-month period a number of shares
that does not exceed the greater of (i) 1% of the then outstanding shares of
the Common Stock (approximately 0 shares immediately after the offering) or
(ii) the average weekly trading volume of the Common Stock on the Nasdaq
National Market during the four calendar weeks preceding the date on which
notice of the sale is filed with the Securities and Exchange Commission (the
"Commission"). Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an Affiliate of the Company at any
time during the 90 days preceding a sale, and who owns shares within the
definition of "restricted securities" under Rule 144 that were purchased from
the Company (or any Affiliate) at least two years previously, would be entitled
to sell such shares under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, public information requirements or notice
requirements.

Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its
employees, directors, officers, consultants or advisers prior to the date the
issuer becomes subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), pursuant to written compensatory
benefit plans or written contracts relating to the compensation of such
persons. In addition, the Commission has indicated that Rule 701 will apply to
typical stock options granted by an issuer before it becomes subject to the
reporting requirements of the Exchange Act, along with the shares acquired upon
exercise of such options (including exercises after the date of this
Prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this Prospectus, may be sold (i) by persons
other than Affiliates, subject only to the manner of sale provisions of Rule
144, and (ii) by Affiliates under Rule 144 without compliance with its one-year
holding period requirement.

The officers, directors and Trilogy have agreed not to sell any of their
shares of Common Stock for 180 days after the date of this Prospectus without
the prior written consent of the representatives of the Underwriters. As a
result of these contractual restrictions and subject to the provisions of Rules
144(k), 144 and 701, as applicable, 12,914,239 shares subject to restriction
will be eligible for sale 180 days after the date of this Prospectus. See
"Underwriting".

73
<PAGE>

The Company has agreed not to offer, sell or otherwise dispose of any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or any rights to acquire Common Stock for a
period of 180 days after the date of this Prospectus, without the prior written
consent of the representatives of the Underwriters, subject to certain limited
exceptions. See "Underwriting".

The Company intends to file a registration statement under the Securities Act
covering approximately 3,378,686 shares of Common Stock reserved for issuance
under the Option Plan. See "Management--1996 Stock Option Plan". Such
registration statement is expected to be filed within 90 days after the date of
this Prospectus and will automatically become effective upon filing. Following
such filing, shares registered under such registration statement will, subject
to the Lock-Up Agreements, Rule 144 volume limitations applicable to Affiliates
and the lapsing of the Company's repurchase rights, be available for sale in
the open market upon the exercise of vested options 90 days after the effective
date of this Prospectus. At June 30, 1998, options to purchase 2,557,111 shares
were issued and outstanding under the 1996 Plan. See "Risk Factors--Shares
Eligible for Future Sale".

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Morrison & Foerster LLP, Palo Alto, California. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by Venture Law Group, A Professional Corporation, Menlo Park,
California.

EXPERTS

The financial statements of the Company at December 31, 1996 and 1997 and
June 30, 1998, and for each of the three years in the period ended December 31,
1997 and the six months ended June 30, 1998, appearing in this Prospectus and
the Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and
in the Registration Statement, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

74
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form S-
1 under the Securities Act with respect to the Common Stock offered hereby (the
"Registration Statement"). This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this Prospectus concerning the
contents of any contract or any other document are not necessarily complete;
reference is made in each instance to the copy of such contract or any other
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in all respects by such reference to such exhibit. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the Commission's principal office in Washington,
D.C., and copies of all or any part thereof may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, 13th Floor, New York, New York 10048 after payment of fees prescribed
by the Commission. The Commission also maintains a Web site which provides
online access to reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
at the address http://www.sec.gov.

75
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................... F-2
Balance Sheets.............................................................. F-3
Statements of Operations.................................................... F-4
Statements of Stockholders' Equity (Deficit)................................ F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders of pcOrder.com, Inc.

We have audited the accompanying balance sheets of pcOrder.com, Inc. (the
Company), a subsidiary of Trilogy Software, Inc. and its predecessor entities
including Trilogy Development Group, Inc., as of December 31, 1996 and 1997
and June 30, 1998, and the related statements of operations, stockholders'
equity (deficit) and cash flows for each of the three years in the period
ended December 31, 1997 and the six months ended June 30, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of pcOrder.com, Inc. at
December 31, 1996 and 1997 and June 30, 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 and the six months ended June 30, 1998 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

Austin, Texas
August 11, 1998,
except for Note 10, as to which the
date is September 4, 1998

F-2
<PAGE>

PCORDER.COM, INC.

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1996 1997 1998
------ ------ --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ -- $2,207 $ 6,583
Accounts receivable, net of allowance of $113 in
1996, $281 in 1997 and $412 in 1998................. 2,449 2,277 7,128
Deferred tax assets.................................. 597 -- --
Other current assets................................. 4 -- --
------ ------ -------
Total current assets............................... 3,050 4,484 13,711
Property and equipment, net........................... 291 494 1,796
Deferred tax assets................................... 94 -- --
------ ------ -------
Total assets....................................... $3,435 $4,978 $15,507
====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable..................................... $ 226 $ 178 $ 263
Accrued expenses..................................... 392 541 755
Accrued payroll and related liabilities.............. 268 610 622
Payable to parent.................................... 255 432 2,616
Deferred revenue..................................... 2,162 4,212 12,799
------ ------ -------
Total current liabilities.......................... 3,303 5,973 17,055
Commitments and contingencies
Stockholders' equity (deficit):
Preferred Stock, $.01 par value; 3,200 shares
authorized; no shares issued or outstanding......... -- -- --
Common Stock, $.01 par value; 50,000 shares
authorized; issued and outstanding, 12,800 in 1996,
12,800 in 1997 and 12,867 in 1998................... 128 128 129
Additional paid-in capital........................... 210 211 2,072
Deferred stock compensation.......................... -- -- (1,435)
Retained earnings (deficit).......................... (206) (1,334) (2,314)
------ ------ -------
Total stockholders' equity (deficit)............... 132 (995) (1,548)
------ ------ -------
Total liabilities and stockholders' equity
(deficit)......................................... $3,435 $4,978 $15,507
====== ====== =======
</TABLE>

See accompanying notes.

F-3
<PAGE>

PCORDER.COM, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -------------------
1995 1996 1997 1997 1998
------- ------- -------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software applications and
content..................... $ 3,388 $ 5,182 $ 8,869 $ 3,655 $ 7,113
Service...................... 335 700 1,720 859 2,470
------- ------- -------- ------- -------
Total revenues............. 3,723 5,882 10,589 4,514 9,583
------- ------- -------- ------- -------
Costs of revenues:
Software applications and
content..................... 1,579 1,749 2,588 989 2,130
Service...................... 192 185 988 361 1,054
------- ------- -------- ------- -------
Total cost of revenues..... 1,771 1,934 3,576 1,350 3,184
------- ------- -------- ------- -------
Gross profit................. 1,952 3,948 7,013 3,164 6,399
Operating expenses:
Research and development..... 660 1,168 1,129 504 1,785
Selling and marketing........ 577 2,555 4,793 2,171 4,116
General and administrative... 116 726 1,792 565 1,296
Amortization of deferred
stock compensation.......... -- -- -- -- 227
------- ------- -------- ------- -------
Total operating expenses... 1,353 4,449 7,714 3,240 7,424
------- ------- -------- ------- -------
Operating income (loss)........ 599 (501) (701) (76) (1,025)
Interest income................ -- -- -- -- 45
------- ------- -------- ------- -------
Income (loss) before income
taxes......................... 599 (501) (701) (76) (980)
Income tax provision (benefit). 207 (191) 427 47 --
------- ------- -------- ------- -------
Net income (loss).............. $ 392 $ (310) $ (1,128) $ (123) $ (980)
======= ======= ======== ======= =======
Basic and diluted net income
(loss) per share.............. $ 0.03 $ (0.02) $ (0.09) $ (0.01) $ (0.08)
======= ======= ======== ======= =======
Weighted average shares
outstanding................... 12,800 12,800 12,800 12,800 12,803
======= ======= ======== ======= =======
</TABLE>

See accompanying notes.

F-4
<PAGE>

PCORDER.COM, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL DEFERRED RETAINED
------------- PAID-IN STOCK EARNINGS
SHARES AMOUNT CAPITAL COMPENSATION (DEFICIT) TOTAL
------ ------ ---------- ------------ --------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994................... 1,280 $ 1 $ -- $ -- $ (288) $ (287)
Effect of asset transfer
agreement.............. 11,520 127 210 -- -- 337
Net income.............. -- -- -- -- 392 392
------ ---- ------ ------- ------- -------
BALANCE AT DECEMBER 31,
1995................... 12,800 128 210 -- 104 442
Net loss................ -- -- -- -- (310) (310)
------ ---- ------ ------- ------- -------
BALANCE AT DECEMBER 31,
1996................... 12,800 128 210 -- (206) 132
Exercise of stock
options................ -- -- 1 -- -- 1
Net loss................ -- -- -- -- (1,128) (1,128)
------ ---- ------ ------- ------- -------
BALANCE AT DECEMBER 31,
1997................... 12,800 128 211 -- (1,334) (995)
Exercise of stock
options................ 67 1 199 -- -- 200
Deferred stock
compensation related to
stock options.......... -- -- 1,662 (1,662) -- --
Amortization of deferred
stock compensation..... -- -- -- 227 -- 227
Net loss................ -- -- -- -- (980) (980)
------ ---- ------ ------- ------- -------
BALANCE AT JUNE 30,
1998................... 12,867 $129 $2,072 $(1,435) $(2,314) $(1,548)
====== ==== ====== ======= ======= =======
</TABLE>

See accompanying notes.

F-5
<PAGE>

PCORDER.COM, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -------------------
1995 1996 1997 1997 1998
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............. $ 392 $ (310) $(1,128) $(123) $ (980)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation................ 124 346 459 176 385
Amortization of deferred
stock compensation......... -- -- -- -- 227
Changes in operating assets
and liabilities:
Accounts receivable........ 828 (2,194) 172 (99) (4,851)
Other current assets....... -- (4) 4 1 --
Deferred tax assets........ (207) (483) 691 (116) --
Accounts payable........... -- 226 (48) 115 85
Accrued expenses........... -- 392 149 57 214
Accrued payroll and related
liabilities............... -- 268 342 (59) 12
Payable to parent.......... -- -- 432 291 2,184
Deferred revenue........... (2) 1,112 2,050 621 8,587
------- ------- ------- ----- -------
Net cash provided by (used in)
operating activities......... 1,135 (647) 3,123 864 5,863
INVESTING ACTIVITIES
Purchase of property and
equipment.................... -- (359) (662) (376) (1,687)
------- ------- ------- ----- -------
Net cash used in investing
activities................... -- (359) (662) (376) (1,687)
FINANCING ACTIVITIES
Change in payable to parent... (1,135) 1,006 (255) (28) --
Proceeds from exercise of
stock options................ -- -- 1 -- 200
------- ------- ------- ----- -------
Net cash provided by (used in)
financing activities......... (1,135) 1,006 (254) (28) 200
------- ------- ------- ----- -------
Increase in cash and cash
equivalents.................. -- -- 2,207 460 4,376
Cash and cash equivalents at
beginning of period.......... -- -- -- -- 2,207
------- ------- ------- ----- -------
Cash and cash equivalents at
end of period................ $ -- $ -- $ 2,207 $ 460 $ 6,583
======= ======= ======= ===== =======
</TABLE>

See accompanying notes.

F-6
<PAGE>

PCORDER.COM, INC.

NOTES TO FINANCIAL STATEMENTS

(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)

1. BUSINESS

pcOrder.com, Inc., (the "Company") is a substantially wholly-owned
subsidiary of Trilogy Software, Inc. and its predecessor entities including
Trilogy Development Group, Inc. ("parent" or "Trilogy"). The Company commenced
operations as a separate business unit within Trilogy on July 1, 1993 and was
incorporated as a separate entity on July 18, 1994. The Company provides
electronic commerce technology and tailored solutions to the manufacturers,
distributors and resellers of computer products primarily in the U.S. The
Company's products include software applications and support for those
applications. The software applications consist of an integrated application
suite that includes cataloging, quoting, pricing, availability, and product
configuration. Content for these applications in the form of detailed product
databases containing configuration, pricing, availability and specifications
are also provided and updated by the Company. Customers can choose to have the
Company host the software applications or install them at their site. In
addition, the Company provides consulting services to help customers build and
integrate electronic commerce capabilities to meet their specified needs.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM FINANCIAL STATEMENTS

The financial information for the six months ended June 30, 1997 is
unaudited but includes all adjustments, consisting only of normal, recurring
adjustments which the Company considers necessary to present fairly the
Company's results of operations. Results for the six months ended June 30,
1998 are not necessarily indicative of the results to be expected for the
entire fiscal year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates, and such
differences may be material to the financial statements.

REVENUE RECOGNITION

The Company has adopted Statement of Position 97-2, Software Revenue
Recognition ("SOP 97-2") and SOP 98-4, Deferral of the Effective Date of a
Provision of SOP 97-2 ("SOP 98-4") as of January 1, 1998. SOP 97-2 and 98-4
provide guidance for recognizing revenue on software transactions and
supersede SOP 91-1. The adoption of SOP 97-2 and 98-4 did not have a material
impact on the Company's financial results.

Software applications revenue consists of subscription based or perpetual
licensing fees under arrangements which provide customers with the right to
use the respective product(s) and software maintenance fees. The Company
generally sells the right to use its products under subscription based license
arrangements which provide the customer with unlimited access to any new
versions or releases and technical support at no additional charge over the
term of the arrangement. Revenue for subscription based arrangements is
recognized ratably over the term of the agreement and recognition commences
when persuasive evidence of an agreement exists, delivery and implementation
of the product has occurred, the fee is fixed or determinable and
collectibility is probable. The Company may also sell the right to use its
products under a perpetual license arrangement. Revenue from perpetual
licenses is recognized when persuasive evidence of an arrangement exists,
delivery and implementation of the product has occurred, the fee is fixed or
determinable, and collectibility is probable. Revenue recognized from
perpetual license arrangements represented 23%, 33%, 7% and 7% of total
revenues in 1995, 1996, 1997 and 1998, respectively. The Company also sells
software

F-7
<PAGE>

PCORDER.COM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)

maintenance which provides technical support and the right to unspecified
upgrades on an if-and-when available basis. Revenue from software maintenance
arrangements is recognized ratably over the term of the agreement and
commences once deployment of the product has occurred.

Content revenues consist of fees charged for content access, entry, updates
and maintenance (collectively, "content maintenance"). Content maintenance
provides the customer with constantly updated information within the catalog
database, especially information that is specific to the customer's product
offerings. Content fees are recognized ratably over the term of the
arrangement generally commencing upon initial content entry.

Service fees consist of integration, customization and training and are
generally recognized as the services are performed, upon completion of
specific contractual events or based on an estimated percentage of completion
as work progresses. Services generally occur at the inception of a
subscription or license arrangement to provide installation, integration,
and/or customization to deploy the software products as well as training of
customer personnel.

Customer advances and billed amounts due from customers in excess of revenue
recognized are recorded as deferred revenue.

PRODUCT DEVELOPMENT AND DATABASE MAINTENANCE COST

The Company's policy is to capitalize eligible computer software costs upon
achievement of technological feasibility, which the Company has defined as
completion of a working model, subject to net realizable value considerations.
As of June 30, 1998, no significant costs have met this criteria and,
accordingly, the Company has charged all software development costs to expense
as incurred in the accompanying statements of operations.

Research and development expenses are expensed as incurred.

Costs to maintain the Company's proprietary database are expensed as
incurred and are included as a cost of software applications and content
revenues.

NET INCOME (LOSS) PER SHARE

The Company follows the provisions of Statement of Financial Accounting
Standards No.128, Earnings Per Share ("SFAS 128"). Basic net income (loss) per
share is computed by dividing net income (loss) available to Common
Stockholders by the weighted average number of common shares outstanding
during the period. Diluted net income (loss) per share is calculated using the
weighted average number of outstanding shares of Common Stock plus Dilutive
Common Stock equivalents. For the years ended December 31, 1995, 1996 and 1997
and the six months ended June 30, 1997, there was no impact from common stock
equivalents under the treasury stock method. For the six months ended June 30,
1998, 671,000 common equivalent shares are excluded from the diluted
calculation as they are anti-dilutive. Accordingly, basic and diluted net
income (loss) per share are the same for all periods presented.

In February 1998, the SEC issued Staff Accounting Bulletin No. 98 ("SAB 98")
which requires issuances of common stock, options and warrants for nominal
consideration in periods preceding an initial public offering to be included
in the calculations of earnings per share as if they were outstanding for all
periods presented. To date, the Company has had no issuances of common stock,
options or warrants for nominal consideration.

F-8
<PAGE>

PCORDER.COM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)

COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive
Income, which will be required to be adopted by the Company in the year ended
December 31, 1998. The Company adopted SFAS 130 in the six months ended June
30, 1998. There was no impact to the Company as a result of the adoption of
SFAS 130, as there were no significant differences between net income (loss)
and comprehensive income for all periods presented.

CASH AND CASH EQUIVALENTS

Cash equivalents consist primarily of cash deposits and money market
investments with original maturities of ninety days or less when purchased.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation on property and
equipment is computed using the straight-line method over the estimated useful
lives of 18 months to 5 years.

SEGMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131"). SFAS 131 is effective for the
year ended December 31, 1998. The Company expects that implementation of this
standard will not have a material effect on its financial disclosures.

INCOME TAXES

The Company's operations are included in consolidated income tax returns
filed by Trilogy. The Company has entered into a tax allocation agreement with
Trilogy covering the period of time the Company has been and continues to be
included in Trilogy's consolidated tax returns. The income tax provision
(benefit) in the accompanying financial statements has been computed as
follows:

In the case of an income tax provision, the Company recognizes the amount
of expense as if the Company had filed separate income tax returns with the
liability shown as a payable to Trilogy.

In the case of an income tax benefit, the Company recognizes the amount of
benefit the consolidated group obtained through utilization of net
operating losses and/or other tax attributes.

The liability method is used for accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse.

FINANCIAL PRESENTATION

Certain prior year amounts have been reclassified to conform to the 1998
presentation.

F-9
<PAGE>

PCORDER.COM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)

3. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Cash and accounts receivable potentially expose the Company to
concentrations of credit risk, as defined by Statement of Financial Accounting
Standards No. 105, Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk. Excess cash is placed with highly rated financial institutions. The
Company provides credit, in the normal course of business, to a number of
customers geographically dispersed throughout the U.S. The Company performs
ongoing credit evaluations of its customers and maintains allowances for
potential credit losses. The Company generally requires certain up-front
payments from customers, and customers can be denied access to the product in
the event of non-payment.

The following table summarizes the changes in the allowance for doubtful
accounts for 1995, 1996, 1997, and 1998 (in thousands):

<TABLE>
<S> <C>
Balance at January 1, 1995............................................. $ 0
Additions charged to costs and expenses.............................. 40
Write-off of uncollectible accounts.................................. 0
----
Balance at December 31, 1995........................................... 40
Additions charged to costs and expenses.............................. 165
Write-off of uncollectible accounts.................................. (92)
----
Balance at December 31, 1996........................................... 113
Additions charged to costs and expenses.............................. 315
Write-off of uncollectible accounts.................................. (147)
----
Balance at December 31, 1997........................................... 281
Additions charged to costs and expenses.............................. 174
Write-off of uncollectible accounts.................................. (43)
----
Balance at June 30, 1998............................................... $412
====
</TABLE>

Sales to individual customers constituting 10% or more of total revenues for
each period end were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------ -----------------
1995 1996 1997 1997 1998
------ ----- ----- ----------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Customer No. 1.......................... $2,209 $ 958 $ -- $ -- $ --
Customer No. 2.......................... 1,305 935 -- -- --
Customer No. 3.......................... -- 1,397 4,070 2,197 2,085
Customer No. 4.......................... -- 1,588 -- -- --
Customer No. 5.......................... -- -- -- -- 1,265
Customer No. 6.......................... -- -- -- -- 1,156
</TABLE>

4. RELATED PARTY TRANSACTIONS

In 1994, the Company entered into a master license agreement with Trilogy to
use, modify, embed, translate, market, reproduce, sublicense, distribute, and
prepare derivatives of Trilogy's product portfolio. The Company is also a
nonexclusive authorized reseller of Trilogy's product portfolio. In
consideration for such rights, the Company paid Trilogy a one-time fee of
$500,000 ($350,000 in

F-10
<PAGE>

PCORDER.COM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)

1995 and $150,000 in years prior). Under this agreement, the Company committed
to pay royalties annually to Trilogy as follows:

. 30% of the license fees derived from sales of the Company's product
during 1994 and 1995.

. 20% of the license fees derived from sales of the Company's product in
1996 and subsequent years.

. 9% of software maintenance fees from the Company's product and related
products.

. 6% of subscription fees from the Company's product and related products.

Such royalties amounted to approximately $390,000, $312,000, $583,000 and
$430,000 in the years ended December 31, 1995, 1996 and 1997 and the six
months ended June 30, 1998, respectively and are included in cost of software
applications and content revenues.

The Company operates under a services agreement with Trilogy whereby Trilogy
provides certain services on behalf of the Company as follows:

. Management services in the form of on-going support in business
operations.

. Financial services support in the form of insurance and risk management,
tax reporting assistance and payroll processing.

. Human resources support in the form of advice and assistance with respect
to compensation, employee benefits and other employee matters.

. Certain administrative services.

The above services agreement may be modified as deemed necessary, upon
mutual consent between Trilogy and the Company.

Prior to 1998, the Company subleased its office space from Trilogy in
accordance with a facility agreement.

In consideration of receipt of the above services and facilities, the
Company must reimburse Trilogy for its pro rata share of the total cost of
such services and facilities based upon its pro rata share of total full-time
equivalent employees and its pro rata share of total space occupied,
respectively. The Company was charged by Trilogy for such services and
facilities approximately $293,000, $455,000, $443,000 and $168,000 in the
years ended December 31, 1995, 1996 and 1997 and the six months ended June 30,
1998, respectively.