BROADVISION INC, S-3, 1999-09-03

BROADVISION INC
S-3, 1999-09-03
PREPACKAGED SOFTWARE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1999

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

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

<TABLE>
<S> <C>
DELAWARE 94-3184303
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>

585 BROADWAY
REDWOOD CITY, CALIFORNIA 94063
(650) 261-5100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

PEHONG CHEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BROADVISION, INC.
585 BROADWAY, REDWOOD CITY, CALIFORNIA 94063
(650) 261-5100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

<TABLE>
<S> <C>
KENNETH L. GUERNSEY NORA L. GIBSON
JAMIE E. CHUNG DAVID A. MAKARECHIAN
VIRGINIA C. EDWARDS VAHE H. SARRAFIAN
COOLEY GODWARD LLP KIMBERLEY E. HENNINGSEN
ONE MARITIME PLAZA, 20TH FLOOR BROBECK, PHLEGER & HARRISON LLP
SAN FRANCISCO, CA 94111 TWO EMBARCADERO PLACE
(415) 693-2000 2200 GENG ROAD
PALO ALTO, CA 94303
(650) 424-0160
</TABLE>

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

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.0001 par
value per share............. 862,500 $98.9375 $85,333,594 $27,723
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 112,500 shares of common stock issuable upon exercise of the
underwriters' over-allotment option.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended, and based
upon the average high and low sales prices on August 31, 1999, as reported
on the Nasdaq National Market.

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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION. DATED SEPTEMBER 3, 1999

750,000 Shares

[LOGO] BROADVISION, INC.

Common Stock
----------------------

This is an offering of shares of common stock of BroadVision, Inc. This
prospectus relates to an offering of shares in the United States.
In addition, shares are being offered outside the United States
in an international offering. All of the 750,000 shares of common stock are
being sold by BroadVision.

The common stock is quoted on the Nasdaq National Market under the symbol
"BVSN." The last reported sale price of the common stock on September 2, 1999 on
the Nasdaq National Market was $99.31 per share. Application has been made to
list the common stock on the Neuer Markt segment of the Frankfurt Stock
Exchange.

See "Risk Factors" beginning on page 6 to read about factors you should
consider before buying shares of the common stock.
----------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial price to public..................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to BroadVision................... $ $
</TABLE>

To the extent that the underwriters sell more than shares of common
stock, the underwriters have the option to purchase up to an additional
shares from BroadVision at the initial price to public less the underwriting
discount.
----------------------

The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.

Joint Lead Managers

GOLDMAN, SACHS & CO. BANCBOSTON ROBERTSON STEPHENS
----------------------

ABN AMRO ROTHSCHILD BANC OF AMERICA SECURITIES LLC
A DIVISION OF ABN AMRO INCORPORATED

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

Prospectus dated , 1999.
<PAGE> 3

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in the common stock. You should read the entire prospectus
carefully, especially the risks of investing in the common stock discussed under
the Risk Factors.

BROADVISION

We develop, market and support application software solutions for
one-to-one relationship management across the extended enterprise. These
solutions enable businesses to use the Internet as a platform to conduct
electronic commerce, offer online customer self-service and support, deliver
targeted information and provide online financial services. Each of these
capabilities can be provided to all constituents of the extended enterprise,
including: customers, suppliers, partners, distributors and employees. The
BroadVision One-To-One product suite allows businesses to tailor their Web site
content to the needs and interests of individual users by personalizing each
visit on a real-time basis. Our applications interactively capture Web site
visitor profile information, organize the enterprise's content, target that
content to each visitor based on easily constructed business rules, and execute
transactions. We believe the benefits of these applications include enhanced
customer satisfaction and loyalty, increased business volume, greater brand
awareness, reduced costs to execute transactions and to service customers, and
enhanced employee productivity.

The emergence of the Internet as a globally accessible, interactive and
individually addressable communications and computing platform has provided
businesses with the opportunity to implement one-to-one relationship management
on a mass basis. We believe that to capitalize fully on this opportunity,
businesses require flexible, robust and scalable packaged software solutions
that are easier to develop, implement, and maintain, integrate more easily with
existing business systems, and offer faster time to market and richer
functionality than solutions built from low-level development tools.
Accordingly, we are focusing exclusively on developing packaged applications and
related services to enable effective one-to-one relationship management
throughout the extended enterprise. We currently offer our core product,
BroadVision One-To-One Enterprise, and four related application
products -- BroadVision One-To-One Retail Commerce, BroadVision One-To-One
Business Commerce, BroadVision One-To-One Financial and BroadVision One-To-One
Knowledge -- together with easy-to-use tools enabling our customers to develop
and manage their applications.

As of June 30, 1999, we have licensed our products to over 280 end-user
customers and 95 partners worldwide. These customers and partners have used our
products to implement a variety of applications, including product
merchandising, financial services and corporate knowledge management. Our
customers have commercially deployed over 150 Web sites using our products. We
target Global 2000 organizations, and our current customers include American
Airlines, Banco Santander, Electronic Arts, Hewlett-Packard, The Home Depot,
Macromedia, Nortel Networks, Solectron, TELUS, Virgin, Wal-Mart and Xerox USA.
In addition, we target pure-play Internet companies, including chipshot.com,
e-STEEL, Mercata, Outpost.com, and Pets.com.

We maintain operations worldwide to sell and support our products through a
direct sales force and reseller partners. To accelerate the acceptance of our
applications solutions, we are enhancing our products and broadening our
professional services capabilities. We have also developed key strategic
business alliances with over 95 systems integration, design, consulting and
other services organizations throughout the world, such as Andersen Consulting,
ASE/Broadiant, Cambridge Technology Partners, Ernst & Young, GranVia Internet,
Hewlett-Packard, Itochu, NTT Data, Security First and Sema.

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<PAGE> 4

CORPORATE INFORMATION

We were incorporated in Delaware in May 1993. Our principal executive
offices are located at 585 Broadway, Redwood City, California 94063, and our
telephone number in the United States is (650) 261-5100. Our Web site is located
at http://www.broadvision.com. Information contained in our Web site shall not
be deemed to be a part of this prospectus. Our corporate purpose, as set forth
in our Restated Certificate, is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of the
State of Delaware.

BroadVision(R) and BroadVision One-To-One(R) are our registered trademarks.
Trade names and trademarks of other companies appearing in this prospectus are
the property of their respective holders.

THE OFFERINGS

Common Stock:

U.S. offering................. shares

International offering........ shares

Total...................... 750,000 shares

Shares to be outstanding after
the offering.................... 26,311,291 shares

Use of Proceeds................. For general corporate purposes, principally
working capital and capital expenditures.

Nasdaq National Market symbol... "BVSN"

We have applied to list the common stock on the Neuer Markt segment of the
Frankfurt Stock Exchange under the symbol "BDN".

Shares to be outstanding after the offering is based on common stock
outstanding on July 31, 1999, and excludes as of July 31, 1999:

- 5,184,643 shares subject to outstanding options at a weighted average
exercise price of approximately $21.66 per share; and

- 60,000 shares of common stock issuable upon exercise of outstanding
warrants at an exercise price of $8.50 per share.

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<PAGE> 5

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ -----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses............................. $ -- $ -- $ 7,464 $18,973 $36,067 $15,297 $28,267
Services...................................... -- 540 3,418 8,132 14,844 6,167 13,673
------- ------- -------- ------- ------- ------- -------
Total revenues.......................... -- 540 10,882 27,105 50,911 21,464 41,940
Total cost of revenues.......................... -- 249 2,494 5,948 9,705 4,111 9,729
------- ------- -------- ------- ------- ------- -------
Gross profit.................................... -- 291 8,388 21,157 41,206 17,353 32,211
Total operating expenses........................ 1,771 4,769 19,085 28,795 39,282 17,772 26,735
------- ------- -------- ------- ------- ------- -------
Operating income (loss)......................... (1,771) (4,478) (10,697) (7,638) 1,924 (419) 5,476
Other........................................... 101 160 552 265 2,115 613 776
------- ------- -------- ------- ------- ------- -------
Net income (loss)............................... $(1,670) $(4,318) $(10,145) $(7,373) $ 4,039 $ 194 $ 6,252
======= ======= ======== ======= ======= ======= =======
Basic earnings (loss) per share................. $ (0.36) $ (0.54) $ (0.36) $ 0.17 $ 0.01 $ 0.25
======= ======== ======= ======= ======= =======
Shares used in computation -- basic earnings
(loss) per share.............................. 11,976 18,815 20,208 23,346 22,244 24,886
======= ======== ======= ======= ======= =======
Diluted earnings (loss) per share............... $ (0.36) $ (0.54) $ (0.36) $ 0.16 $ 0.01 $ 0.22
======= ======== ======= ======= ======= =======
Shares used in computation -- diluted earnings
(loss) per share.............................. 11,976 18,815 20,208 25,653 24,819 27,946
======= ======== ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
------------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 53,735 $
Working capital............................................. 72,651
Total assets................................................ 137,198
Debt and capital lease obligations, less current portion.... 2,616 2,616
Accumulated deficit......................................... (13,351) (13,351)
Total stockholders' equity.................................. 108,812
</TABLE>

Consolidated balance sheet data is presented on an actual basis and as
adjusted to give effect to the sale of the 750,000 shares of common stock we are
offering hereby, at a public offering price of $ per share, after deducting
the estimated underwriting discounts and estimated offering expenses.

Unless otherwise indicated, all information in this prospectus assumes the
underwriters' option to purchase additional shares in the offering will not be
exercised. References in this prospectus to "BroadVision", "we", "our", "us" and
the "company" refer to BroadVision, Inc.

5
<PAGE> 6

RISK FACTORS

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing us. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial also may impair our business operations.
If any of the following risks actually occur, our business could be harmed. In
that event, the trading price of our common stock could decline, and you may
lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS

FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS MAY CAUSE OUR STOCK PRICE TO
DECLINE

We expect that our future quarterly operating results will fluctuate
significantly as a result of a variety of factors, many of which are outside our
control. It is likely that our operating results in one or more future quarters
may be below the expectations of securities analysts and investors. In that
event, the trading price of our common stock would almost certainly decline.

Factors that may affect our quarterly operating results include the
following:

- the timing of introductions or enhancements of products and services by
us or our competitors;

- market acceptance of new products;

- the mix of our products sold;

- changes in pricing policies by us or our competitors;

- changes in our sales incentive plans;

- the budgeting cycles of our customers;

- customer order deferrals in anticipation of new products or enhancements
by us or our competitors;

- nonrenewal of service agreements;

- product life cycles;

- changes in strategy;

- seasonal trends;

- the mix of distribution channels through which our products are sold;

- the mix of international and domestic sales;

- the rate at which new sales people become productive; and

- changes in the level of operating expenses to support projected growth.

In addition, we anticipate that a significant portion of our revenues will
be derived from a limited number of orders. We expect that the timing of receipt
and fulfillment of any of these orders will cause our quarterly operating
results to fluctuate. We anticipate that we will make the major portion of each
quarter's product deliveries near the end of each quarter. As a result, short
delays in product deliveries at the end of a quarter could harm operating
results for that quarter.

OUR REPUTATION AND REVENUES WOULD BE HARMED IF WE EXPERIENCE ANY ISSUES WITH OUR
BROADVISION ONE-TO-ONE ENTERPRISE PRODUCT SUITE AND RELATED SERVICES

To date, substantially all of our revenues have been attributable to
license sales of the BroadVision One-To-One Enterprise product and related
packaged application products and

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<PAGE> 7

associated services. We currently expect these products and services to account
for most of our future revenues. If any of our customers are unable to
successfully develop and deploy an online marketplace using our BroadVision
One-To-One application products, our reputation could be damaged, which could
harm our business. In addition, factors negatively affecting the pricing of or
demand for the BroadVision One-To-One application products, such as increased
competition or rapid technological change, could cause our revenues to decline.

OUR FUTURE FINANCIAL PERFORMANCE IS LARGELY DEPENDENT ON THE SUCCESSFUL
UPGRADING OF OUR CURRENT PRODUCTS AND INTRODUCING NEW PRODUCTS

Our future financial performance will depend, in significant part, on our
successful development and sale of new and enhanced versions of the BroadVision
One-To-One application products and other new products. We may be unable to
upgrade and continue to market the BroadVision One-To-One application products.
We may not be able to successfully develop new products and new products may not
achieve market acceptance.

OUR LENGTHY SALES AND PRODUCT IMPLEMENTATION CYCLES COULD CAUSE DELAYS IN
REVENUE RECOGNITION AND MAKE IT DIFFICULT TO PREDICT OUR QUARTERLY RESULTS

Our sales and product implementation cycles are subject to delays over
which we have little or no control. These delays can affect the timing of
revenue recognition and make it difficult to predict our quarterly results.
Licensing our BroadVision One-to-One application products is often an
enterprise-wide decision by prospective customers. The importance of this
decision requires us to engage in a lengthy sales cycle with prospective
customers. During the sales process, we provide a significant level of education
regarding the uses and benefits of our products. Once the decision has been made
to implement our products, our customers or our Worldwide Professional Services
Organization consultants must then commit significant resources over an extended
period of time. In many cases, we expect to recognize a substantial portion of
the revenue related to the sale of our products upon the customer's deployment
or production of the products licensed from us. Delays in license transactions
due to unusually lengthy sales cycles, delays in customer production or delays
in deploying our products could harm our business and can be expected to cause
our operating results to vary significantly from quarter to quarter.

THE MARKET FOR OUR PRODUCTS AND SERVICES IS IN ITS EARLY STAGES OF DEVELOPMENT
AND MAY FAIL TO MATURE INTO A SUSTAINABLE MARKET

Our products and services facilitate online commerce and communication over
public and private networks. The market for these products and services is in
its early stages of development and is rapidly evolving, and a viable market may
fail to emerge or be sustainable. We cannot predict the level of demand and
market acceptance for our products and services, especially because acquisition
of our products and services requires a large capital or other significant
resource commitment. If the market for our products and services does not
continue to mature, our business will be harmed.

Adoption of electronic commerce and knowledge management, particularly by
those individuals and companies that have historically relied upon traditional
means of commerce and communication, will require a broad acceptance of new and
different methods of conducting business and exchanging information. Our future
revenues and profits will substantially depend on the Internet being accepted
and widely used for commerce and communication. If Internet commerce does not
continue to grow or grows more slowly than expected, our business will be
harmed. In the emerging marketplace of Internet commerce, our products and
services involve a new approach to the conduct of online business. As a result,
intensive marketing and sales efforts may be necessary to educate prospective
customers regarding the uses and benefits of our products and services, thereby
generating demand. Companies that have already invested substantial resources in
other methods of conducting business may be reluctant to adopt a new
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<PAGE> 8

approach that may replace, limit or compete with their existing systems.
Similarly, purchasers with established patterns of commerce may be reluctant to
alter those patterns or may otherwise resist providing the personal data
necessary to support our consumer profiling capability. In addition, the
security and privacy concerns of existing and potential online purchasers may
inhibit the growth of online business generally and the market's acceptance of
our products and services in particular. Accordingly, a viable market for our
products and services may not emerge or be sustainable.

A BREACH OF THE ENCRYPTION TECHNOLOGY THAT WE USE COULD EXPOSE US TO LIABILITY,
HARM OUR REPUTATION OR OTHERWISE HARM OUR BUSINESS

If any breach of our security were to occur, we would be exposed to
liability, and our reputation and business could be harmed. A significant
barrier to online commerce and communication is the secure exchange of value and
confidential information over public networks. We rely on encryption and
authentication technology, including public key cryptography technology licensed
from RSA, to provide the security and authentication necessary to effect the
secure exchange of confidential information. Advances in computer capabilities,
new discoveries in the field of cryptography or other events or developments
could cause a breach of the RSA or other algorithms that we use to protect
customer transaction data.

OUR PRODUCTS ARE ESPECIALLY SUSCEPTIBLE TO PRODUCT DEFECTS BECAUSE THEY ARE
COMPLEX

Sophisticated software products, like ours, may contain undetected errors
that will not become apparent until after the products are introduced or when
the volume of provided services increases. It is possible that, despite testing
by us and prospective customers, errors will be found in our products. Product
defects could result in all or any of the following consequences to our
business:

- loss of revenues;

- delay in market acceptance;

- diversion of development resources;

- damage to our reputation; or

- increased service and warranty costs.

WE ARE CONTINUING TO SUBSTANTIALLY EXPAND OUR BUSINESS AND OPERATIONS, AND WE
MUST EFFECTIVELY MANAGE AND SUPPORT THIS EXPANSION

We have substantially expanded our business and operations since our
inception in 1993. We expect to continue to experience periods of rapid change.
If we are unable to support this growth effectively, we will have to divert
additional resources away from expanding our business and toward internal
administration. Our past expansion has placed, and any future expansion would
place, significant demands on our administrative, operational, financial and
other resources. We expect operating expenses and staffing levels to increase
substantially in the future. In particular, we intend to continue hiring a
significant number of additional personnel this year and in later years. We also
expect to expend resources on expanding accounting and internal management
systems and implementing a variety of new systems and procedures. If our
revenues do not increase in proportion to our operating expenses, our management
systems do not expand to meet increasing demands or our management otherwise
fails to support our expansion effectively, our business will harmed.

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<PAGE> 9

WE ARE DEPENDENT ON DIRECT SALES PERSONNEL AND THIRD-PARTY DISTRIBUTION CHANNELS
TO ACHIEVE REVENUE GROWTH

To date, we have sold our products primarily through our direct sales
force. Our ability to achieve significant revenue growth in the future will
largely depend on our success in recruiting and training sufficient direct sales
personnel and establishing and maintaining relationships with distributors,
resellers and systems integrators. Our products and services require a
sophisticated sales effort targeted at the senior management of our prospective
customers. New hires require training and take time to achieve full
productivity. Our recent hires may not become as productive as necessary, and we
may be unable to hire sufficient numbers of qualified individuals in the future.
We have entered into strategic alliance agreements with certain partners,
including Hewlett-Packard, Sema and Security First, under which these partners
have agreed to resell and support our current BroadVision One-to-One product
suite. These contracts are generally terminable by either party upon 30 days
notice of an uncured material breach. Termination of the Hewlett-Packard, Sema,
Security First or other similar alliances could harm our business. We cannot be
certain that we will successfully expand our other distribution channels or that
any expansion will result in revenue increases. If we fail to expand our direct
sales force or other distribution channels, our revenues may not grow or they
may decline.

OUR CUSTOMERS MAY RELY ON THIRD-PARTY SYSTEMS INTEGRATORS FOR THE SUCCESS OF
ONLINE MARKETPLACES

Our prospective customers may rely on third-party systems integrators to
develop, deploy and manage online marketplaces. If we are unable to adequately
train a sufficient number of systems integrators or if, for any reason, a large
number of these integrators adopt a different product or technology instead of
the BroadVision One-To-One application products, our business could be harmed.

WE ARE SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

Our international activities expose us to numerous additional risks. In the
year ended December 31, 1998 approximately 42% and in the six months ended June
30, 1999 approximately 29% of our total revenues were derived from sales outside
of North America. We currently have nine offices in Europe and Asia. A key
component of our business strategy is to expand our international activities.
Reflecting our commitment to a significant international presence, we have
applied to list our shares of common stock on the Neuer Market segment of the
Frankfurt Stock Exchange. As we continue to expand internationally, we are
increasingly subject to risks of doing business internationally, including the
following:

- unexpected changes in regulatory requirements;

- export controls relating to encryption technology and other export
restrictions;

- tariffs and other trade barriers;

- difficulties in staffing and managing foreign operations;

- political and economic instability;

- fluctuations in currency exchange rates;

- reduced protection for intellectual property rights in some countries;

- cultural barriers;

- seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world; and

- potentially adverse tax consequences.

Our international sales growth will be limited if we are unable to
establish additional foreign operations, expand international sales channel
management and support, hire additional

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<PAGE> 10

personnel, customize products for local markets and develop relationships with
international service providers, distributors and system integrators. Even if we
are able to successfully expand international operations, we cannot be certain
that we will succeed in maintaining or expanding international market demand for
our products.

OUR SUCCESS AND COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO PROTECT OUR
PROPRIETARY TECHNOLOGY

It is essential to the success of our business that we adequately protect
our proprietary technology. Although we hold a patent, issued in January 1998,
on elements of our BroadVision One-To-One Enterprise product, we cannot be
certain that this patent will provide an adequate level of intellectual property
protection. For example, we filed a lawsuit against Art Technology Group, or
ATG, on December 11, 1998, claiming infringement of U.S. Patent No. 5,710,887
and seeking injunctive relief and unspecified damages. On February 3, 1999, ATG
filed an answer and counterclaimed against us seeking judgment for
non-infringement and invalidity of the patent. Our patent claim may not succeed
or our patent may be invalidated. Trial is set for October 16, 2000.

We have also relied on copyright, trade secret and trademark law to protect
our technology. We have registered "BroadVision" and "BroadVision One-To-One" as
trademarks in the United States. It is possible that our competitors or other
companies will adopt product names similar to "One-To-One," thereby impeding our
ability to build brand identity and possibly confusing customers. We provide our
products to end users generally under nonexclusive, nontransferable licenses
during the term of the relevant agreement, which is usually in perpetuity. We
make the source code available for some portions of our products. We protect the
source code for our proprietary software both as a trade secret and as a
copyrighted work. However, disclosing the source code may increase the
likelihood of third-party misappropriation.

As a matter of company policy, we enter into confidentiality and assignment
agreements with our employees, consultants and vendors. We also control access
to and distribution of our software, documents and other proprietary
information. Notwithstanding these precautions, it may be possible for an
unauthorized third party to copy or otherwise obtain and use our software or
other proprietary information or to develop similar software independently.
Policing unauthorized use of our products is difficult, particularly because the
global nature of the Internet makes it difficult to control the ultimate
destination or security of software and other transmitted data. The laws of
other countries may afford us little or no effective protection of our
intellectual property. The steps we have taken to prevent misappropriation of
our technology, including entering into agreements for that purpose, may be
insufficient. In addition, litigation like the lawsuit against ATG may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets, to determine the validity and scope of the proprietary rights
of others or to defend against claims of infringement or invalidity. Litigation
like this, whether successful or unsuccessful, could result in substantial costs
and diversions of our management resources, either of which could harm our
business.

WE ARE SUBJECT TO CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT, WHICH COULD
DIVERT MANAGEMENT RESOURCES AND HARM OUR REPUTATION

Third parties may claim that we have infringed their patent, trademark,
copyright or other proprietary rights. It is also possible that claims will be
made for indemnification resulting from allegations of infringement. Claims like
these could divert management attention, affect our reputation and otherwise
harm our business. In addition, intellectual property claims may be asserted
against us as a result of the use by us, our customers or other third parties of
our products for the transmission, dissemination or display of information on
the Internet. Any claims, with or without merit, could be time consuming,
costly, cause product shipment delays or require that we enter into royalty or
licensing agreements. These licenses might not be available on reasonable terms,
or at all. As a result, any claim like this could harm our business.
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<PAGE> 11

THE LOSS OR MALFUNCTION OF TECHNOLOGY LICENSED FROM THIRD PARTIES COULD DELAY
OUR PRODUCT SHIPMENTS

We rely in part on technology that we license from third parties, including
relational database management systems from Oracle and Sybase, object request
broker software from IONA Technologies, database access technology from Rogue
Wave and other software. We integrate this technology with internally developed
software to perform key functions. For example, our products and services
incorporate data encryption and authentication technology licensed from RSA.
These third-party technology licenses might not continue to be available to us
on commercially reasonable terms, or at all. This technology may contain defects
that we cannot control. The loss of any of these technology licenses could cause
delays in introducing our products or services until equivalent technology, if
available, is identified, licensed and integrated. Delays in introducing our
products and services could harm our business.

OUR EXECUTIVE OFFICERS AND KEY EMPLOYEES ARE CRITICAL TO OUR BUSINESS, AND THEY
MAY NOT REMAIN WITH US IN THE FUTURE

Our performance substantially depends on the performance of our executive
officers and key employees. We rely on our ability to retain and motivate highly
qualified personnel, especially our management and highly skilled development
teams. The loss of the services of any of our executive officers or key
employees, particularly our founder and Chief Executive Officer, Dr. Pehong
Chen, could cause us to incur increased operating expenses and divert senior
management resources in searching for replacements. The loss of their services
could also harm our reputation if our customers were to become concerned about
our future operations. We do not have "key person" life insurance policies on
any of our employees. Our future success also depends on our continuing ability
to identify, hire, train and retain other highly qualified technical and
managerial personnel. Competition for these personnel is intense, especially in
the Internet industry. We have in the past experienced, and we expect to
continue to experience, difficulty in hiring and retaining sufficient numbers of
highly skilled employees as a result of our substantial growth and expansion.

OUR BUSINESS COULD BE HARMED BY YEAR 2000 COMPLIANCE ISSUES

Many currently installed computer systems and software products are not
capable of distinguishing 21st century dates from 20th century dates. As a
result, in less than a year, computer systems and software products with
embedded technology used by many companies may need to be upgraded to comply
with these "Year 2000" requirements. This type of Year 2000 error could
potentially cause system failures or miscalculations that could disrupt
operations, including among other things a temporary inability to process
transactions, issue invoices or engage in similar normal business activities.
The most likely worst-case scenarios could include hardware failure and the
failure of infrastructure services provided by government agencies and other
third parties, such as electricity, telephone service, water transport and
Internet services.

Undetected Year 2000 errors or defects could result in delay or loss of
revenue, diversion of development resources, damage to our reputation and
increased service and warranty costs. We believe that the purchasing patterns of
customers could potentially be affected by Year 2000 issues as companies expend
significant resources to correct or patch their current software systems for
Year 2000 compliance. These expenditures may result in reduced funds available
to purchase software products like ours. Other systems or software used by our
customers may not be Year 2000 compliant. The failure of noncompliant
third-party software or systems could affect the perceived performance of our
products.

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<PAGE> 12

RISKS RELATED TO THE INTERNET INDUSTRY

LIMITATIONS ON THE ONLINE COLLECTION OF PROFILE INFORMATION COULD IMPAIR THE
EFFECTIVENESS OF OUR PRODUCTS

Online users' resistance to providing personal data and laws and
regulations prohibiting use of personal data gathered online without express
consent or requiring businesses to notify their Web site visitors of the
possible dissemination of their personal data could limit the effectiveness of
our products. One of the principal features of the BroadVision One-To-One
application products is the ability to develop and maintain profiles of online
users to assist business managers in determining the nature of the content to be
provided to these online users. Typically, profile information is captured when
consumers, business customers and employees visit a Web site and volunteer
information in response to survey questions concerning their backgrounds,
interests and preferences. Profiles are augmented over time through the
subsequent collection of usage data. Although BroadVision One-To-One products
are designed to enable the development of applications that permit Web site
visitors to prevent the distribution of any of their personal data beyond that
specific Web site, privacy concerns may nevertheless cause visitors to resist
providing the personal data necessary to support this profiling capability. The
mere perception by prospective customers that substantial security and privacy
concerns exist among online users, whether or not valid, may indirectly inhibit
market acceptance of our products. In addition, new laws and regulations could
heighten privacy concerns by requiring businesses to notify Web site users that
the data captured from them while online may be used by marketing entities to
direct product messages to them. While we are not aware of any laws or
regulations like this currently in effect or in development in the United
States, other countries and political entities, including the European Union and
its member states, have adopted legal requirements imposing restrictions on the
collection, use and processing of personal data. It is possible that similar
legal requirements could be adopted in the United States. If the privacy
concerns of consumers are not adequately addressed, the effectiveness of our
BroadVision One-to-One application products could be impaired.

IF WE ARE UNABLE TO MEET THE RAPID TECHNOLOGICAL CHANGES IN ONLINE COMMERCE AND
COMMUNICATION, OUR EXISTING PRODUCTS AND SERVICES COULD BECOME OBSOLETE

Our products and services may fail to be competitive if we do not maintain
or exceed the pace of technological developments in Internet commerce and
communication. The information services, software and communications industries
are characterized by rapid technological change, changes in customer
requirements, frequent new product and service introductions and enhancements,
and evolving industry standards and practices. The introduction of products and
services embodying new technologies and the emergence of new industry standards
and practices can render existing products and services obsolete. Our future
success will depend, in part, on our ability to do the following:

- develop leading technologies;

- enhance our existing products and services;

- develop new products and services that address the increasingly
sophisticated and varied needs of our prospective customers; and

- respond to technological advances and emerging industry standards and
practices on a timely and cost-effective basis.

Internet commerce technology is complex and new products and enhancements
can require long development periods. If we are unable to develop and introduce
new products and services or enhancements in a timely manner in response to
changing market conditions or customer

12
<PAGE> 13

requirements, or if new products and services do not achieve market acceptance,
our business will suffer.

CURRENT AND POTENTIAL COMPETITORS COULD MAKE IT DIFFICULT FOR US TO ACQUIRE AND
RETAIN CUSTOMERS NOW AND IN THE FUTURE

If we fail to compete successfully with current or future competitors, we
may lose market share. The market for online interactive one-to-one applications
is rapidly evolving and intensely competitive. Our customers' requirements and
the technology available to satisfy those requirements continually change. We
expect competition in this market to persist and increase in the future. Our
primary competition includes the following:

- in-house development efforts by prospective customers or partners;

- other vendors of application software or application development
platforms and tools directed at interactive commerce and financial
services, such as ATG, InterWorld, Open Market and Vignette;

- Web content developers that develop custom software or integrate other
application software into custom solutions;

- International Business Machines; and

- Microsoft.

Compared to us, many of these and other competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources. As a result, they may be able to respond more quickly to new or
changing opportunities, technologies and customer requirements. Many of these
companies can also use their greater name recognition and more extensive
customer base to gain market share at our expense. Competitors may be able to
undertake more extensive promotional activities, adopt more aggressive pricing
policies and offer more attractive terms to purchasers than we can. Some of our
current and potential competitors, such as IBM and Microsoft, may bundle their
products to discourage users from purchasing our products. In addition,
competitors have established or may establish cooperative relationships among
themselves or with third parties to enhance their products. Accordingly, it is
possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share. Competitive pressures may make it
difficult for us to acquire and retain customers, and it may require us to
reduce the price of our products. We may be unable to compete successfully with
current or new competitors.

NEW AND EXISTING LAWS COULD EITHER DIRECTLY RESTRICT OUR BUSINESS OR INDIRECTLY
AFFECT OUR BUSINESS BY LIMITING THE GROWTH OF INTERNET COMMERCE

The adoption of any laws or regulations that restrict our methods of doing
business or limit the growth of the Internet could decrease demand for our
products and services and increase our cost of doing business. Today, there are
relatively few laws specifically directed towards online services. However, due
to the increasing popularity of the Internet generally and Internet commerce
specifically, we expect that federal, state or foreign agencies will enact laws
and regulations with respect to the Internet. These new laws and regulations
would be likely to address issues like online user privacy, pricing, content and
quality of products and services. If enacted, these laws and regulations could
limit the market for our products and services, which could harm our business.
For example, because our products involve the solicitation of personal data
regarding individual consumers, our business could be limited by laws regulating
the solicitation, collection or processing of this data. The Telecommunications
Act of 1996, enacted in January 1996, prohibits the transmission of some types
of information and content over the Internet. The prohibition's scope and the
liability associated with a Telecommunications Act violation are currently
unsettled. Legislation imposing potential liability upon us for information
13
<PAGE> 14

carried on or disseminated through our products would likely cause us to
implement costly measures to reduce our exposure to this liability or to
discontinue certain services. Our business could be harmed by the expense
involved in reacting to actual or potential liability associated with the
Telecommunications Act or other Internet-related laws and regulations. In
addition, the increased attention focused upon liability issues as a result of
the Telecommunications Act could limit the growth of Internet commerce, which
could decrease demand for our products.

The United States government regulates the export of encryption technology,
which our products incorporate. Export regulations, either in their current form
or as may be subsequently enacted, may limit our ability to distribute our
software outside the United States. Any revocation or modification of our export
authority or adoption of new laws or regulations relating to the export of
software and encryption technology could limit our international operations. The
unlawful export of our software could also harm our business. Although we take
precautions against unlawful export of our software, the global nature of the
Internet makes it difficult to effectively control the distribution of software.

THE IMPOSITION OF SALES AND OTHER TAXES ON PRODUCTS SOLD BY OUR CUSTOMERS OVER
THE INTERNET COULD HAVE A NEGATIVE EFFECT ON ONLINE COMMERCE AND, AS A RESULT,
ON DEMAND FOR OUR PRODUCTS

The imposition of new sales or other taxes could limit the growth of
Internet commerce generally and, as a result, the demand for our products.
Recent federal legislation limits the imposition of state and local taxes on
Internet-related sales. In 1998, Congress passed the Internet Tax Freedom Act,
which places a three-year moratorium on state and local taxes on:

- Internet access, unless the tax was already imposed prior to October 1,
1998; and

- discriminatory taxes on electronic commerce.

There is a possibility that Congress may not renew this legislation in
2001. If Congress chooses not to renew this legislation, state and local
governments would be free to impose taxes on electronically purchased goods.

We believe that, in accordance with current industry practice, most
companies that sell products over the Internet do not currently collect sales or
other taxes on shipments of their products into states or foreign countries
where they are not physically present. However, one or more states or foreign
countries may seek to impose sales or other tax collection obligation on
out-of-jurisdiction companies that engage in electronic commerce. A successful
assertion by one or more states or foreign countries that companies engaged in
electronic commerce should collect sales or other taxes on the sale of their
products over the Internet, even though not physically present in the state or
foreign country, could indirectly reduce demand for our products.

RISKS RELATED TO THIS OFFERING

OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE HIGHLY VOLATILE

The trading price of our common stock has been and is likely to continue to
be highly volatile. Our stock price is subject to wide fluctuations in response
to a variety of factors, including:

- quarterly variations in operating results;

- announcements of technological innovations;

- announcements of new software or services by us or our competitors;

- changes in financial estimates by securities analysts; or

- other events or factors that are beyond our control.

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<PAGE> 15

In addition, the stock market has experienced significant price and volume
fluctuations that have particularly affected the trading prices of equity
securities of many high technology companies. These fluctuations have often been
unrelated or disproportionate to the operating performance of these companies.
Any negative change in the public's perception of the prospects of Internet or
electronic commerce companies could depress our stock price regardless of our
results. Other broad market fluctuations may decrease the trading price of our
common stock. In the past, following declines in the market price of a company's
securities, securities class action litigation has often been instituted against
that company. Litigation could result in substantial costs and a diversion of
management's attention and resources.

WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS

We expect that the net proceeds from this offering, our available cash
resources, cash generated from operations, and amounts available under our
commercial credit facilities will be sufficient to meet our presently
anticipated working capital and capital expenditure requirements for at least
the next 12 months. However, we may need to raise additional funds to support
more rapid expansion, develop new or enhanced services, respond to competitive
pressures, acquire complementary businesses or technologies or respond to
unanticipated requirements. If additional funds are raised through the issuance
of equity securities, our stockholders' percentage ownership will be reduced,
they may experience additional dilution, or these newly issued equity securities
may have rights, preferences, or privileges senior to those of our current
stockholders. Additional financing may not be available when needed on terms
favorable to us, or at all. If adequate funds are not available or are not
available on acceptable terms, we may be unable to develop or enhance our
products, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements, which could harm our business.

BECAUSE WE ARE CURRENTLY UNABLE TO IDENTIFY THE SPECIFIC USES TO WHICH THE NET
PROCEEDS FROM THIS OFFERING WILL BE APPLIED, YOU WILL BE RELYING ON THE JUDGMENT
OF OUR MANAGEMENT REGARDING THE APPLICATION OF THE PROCEEDS

We have not designated any specific use for the net proceeds from our sale
of common stock described in this prospectus. Rather, we expect to use the net
proceeds for general corporate purposes, including working capital.
Consequently, our management will have significant flexibility in applying the
net proceeds of this offering. You will be relying on the judgment of our
management regarding the application of the proceeds. Our management will have
the ability to change the application of the proceeds of this offering without
stockholder approval.

BECAUSE OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A SIGNIFICANT PERCENTAGE OF OUR
COMMON STOCK, THEY WILL BE ABLE TO EXERCISE SIGNIFICANT INFLUENCE OVER US

Upon completion of this offering, our present directors and executive
officers and their affiliates will beneficially own approximately 28% of the
outstanding common stock. As a result, if these stockholders act together, they
will be able to exercise significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions like mergers and other business combinations.
This concentration of ownership may also have the effect of delaying or
preventing a change in control over us unless it is supported by our directors
and executive officers.

SOME ANTI-TAKEOVER PROVISIONS MAY AFFECT THE PRICE OF OUR COMMON STOCK

Our Restated Certificate authorizes the board of directors to issue up to
5,000,000 shares of preferred stock. The board also has the authority to
determine the price, rights, preferences and privileges, including voting
rights, of those shares without any further vote or action by the stockholders.
The rights of our stockholders will be subject to, and may be impaired by, the
15
<PAGE> 16

rights of the holders of any preferred stock that may be issued in the future.
The Restated Certificate and Restated Bylaws require that stockholder actions
occur at duly called meetings of the stockholders, do not permit cumulative
voting in the election of directors and require advance notice of stockholder
proposals and director nominations. These and other provisions contained in our
charter documents and applicable provisions of Delaware law could serve to
depress our stock price or discourage a hostile bid in which stockholders could
receive a premium for their shares. In addition, these provisions could have the
effect of making it more difficult for a third party to acquire a majority of
our outstanding voting stock or otherwise effect a change of control.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled "Prospectus Summary",
"Risk Factors", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business", contains forward-looking statements.
These statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may", "will", "should", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential", "continue" or
the negative of these terms or other comparable terminology. These statements
are only predictions. Actual events or results may differ materially. In
evaluating these statements, you should specifically consider various factors,
including the risks outlined in "Risk Factors." These factors may cause our
actual results to differ materially from any forward-looking statement.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform these statements to actual results.

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<PAGE> 17

USE OF PROCEEDS

We estimate that the net proceeds from the sale of 750,000 shares of common
stock that we are selling in this offering will be approximately $
million, based on an assumed offering price of $ per share and after
deducting the estimated underwriting discount and offering expenses payable by
us. If the underwriters exercise their option to purchase additional shares in
the offering, we estimate the net proceeds will be approximately $
million. We will receive the net proceeds from the shares being offered outside
the United States in an international offering in euros.

We anticipate using the net proceeds from this offering for working capital
and general corporate purposes. We may also use a portion of the net proceeds,
currently intended for general corporate purposes, to license, acquire or invest
in new products, technologies or businesses that are complementary to our
business. We have no present plans or commitments and we are not currently
engaged in any negotiations with respect to transactions that are material. Our
board of directors and management will have significant flexibility in applying
the net proceeds of this offering. Pending these uses, we intend to invest the
net proceeds of this offering in short-term, investment grade, interest-bearing
securities.

PRICE RANGE OF COMMON STOCK

Our common stock is quoted on the Nasdaq National Market under the symbol
"BVSN." The following table shows high and low sale prices per share of the
common stock as reported on the Nasdaq National Market for the periods
indicated:

<TABLE>
<CAPTION>
HIGH LOW
------ -------
<S> <C> <C>
FISCAL YEAR 1997
First Quarter............................................... $10.38 $ 7.50
Second Quarter.............................................. 9.13 4.38
Third Quarter............................................... 7.38 5.00
Fourth Quarter.............................................. 8.69 5.88

FISCAL YEAR 1998
First Quarter............................................... $19.00 $ 6.00
Second Quarter.............................................. 25.13 14.75
Third Quarter............................................... 29.50 10.06
Fourth Quarter.............................................. 44.25 9.25

FISCAL YEAR 1999
First Quarter............................................... $73.38 $ 27.13
Second Quarter.............................................. 73.75 39.13
Third Quarter (through September 2, 1999)................... 116.38 61.38
</TABLE>

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

On September 2, 1999, the last sale price reported on the Nasdaq National
Market was $99.31 per share. As of September 1, 1999, there were approximately
233 holders of record of our common stock.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to finance the growth and
development of our business, and we do not intend to pay any cash dividends in
the foreseeable future. Future dividends, if any, will be determined by our
board of directors.

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<PAGE> 18

CAPITALIZATION

The following table shows our capitalization as of June 30, 1999 on an
actual basis and on an as adjusted basis. The as adjusted column gives effect to
our receipt of the estimated net proceeds from the sale of 750,000 shares of
common stock we are offering at an assumed price to public of $ per share.
The outstanding share information in the table below excludes:

- 5,184,643 shares subject to outstanding options at a weighted average
exercise price of approximately $21.66 per share; and

- 60,000 shares of common stock issuable upon exercise of outstanding
warrants at an exercise price of $8.50 per share.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-------------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE DATA)
<S> <C> <C>
Debt and capital lease obligations, less current portion.... $ 2,616 $2,616
-------- ------
Stockholders' equity:
Convertible Preferred Stock, $0.0001 par value; 5,000,000
shares authorized; no shares issued or outstanding,
actual and as adjusted................................. -- --
Common Stock, $0.0001 par value; 50,000,000 shares
authorized; 25,508,391 shares issued and outstanding,
actual; 26,258,391 shares issued and outstanding, as
adjusted............................................... 3
Additional paid-in capital.................................. 109,306
Deferred compensation related to grant of stock options..... (389)
Accumulated other comprehensive income...................... 13,243
Accumulated deficit......................................... (13,351)
-------- ------
Total stockholders' equity............................. 108,812
-------- ------
Total capitalization.............................. $111,428 $
======== ======
</TABLE>

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<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the Consolidated
Financial Statements and Notes thereto, and other financial information included
elsewhere in this prospectus. The selected consolidated financial data below as
of December 31, 1996, 1997 and 1998, and for the years ended December 31, 1996,
1997 and 1998, are derived from our audited consolidated financial statements,
which are included elsewhere in this prospectus. The statement of operations
data for the years ended December 31, 1994 and 1995 and balance sheet data as of
December 31, 1994 and 1995 are derived from our audited consolidated financial
statements that are not included in this prospectus. The selected consolidated
statement of operations data for the six months ended June 30, 1998 and 1999 and
the consolidated balance sheet data as of June 30, 1999 are derived from
unaudited consolidated financial statements included elsewhere in this
prospectus. The unaudited consolidated financial statements, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation. The interim results for the six
months ended June 30, 1999 are not necessarily indicative of results to be
expected for the year ending December 31, 1999. Historical results are not
necessarily indicative of the results to be expected in the future. See Note 1
of Notes to Consolidated Financial Statements for a description of the method
used to compute basic and diluted net income (loss) per share.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- -------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses............................. $ -- $ -- $ 7,464 $18,973 $36,067 $15,297 $28,267
Services...................................... -- 540 3,418 8,132 14,844 6,167 13,673
------- ------- -------- ------- ------- ------- -------
Total revenues.......................... -- 540 10,882 27,105 50,911 21,464 41,940
Cost of revenues:
Cost of software licenses..................... -- -- 330 1,664 1,001 400 1,784
Cost of services.............................. -- 249 2,164 4,284 8,704 3,711 7,945
------- ------- -------- ------- ------- ------- -------
Total cost of revenues.................. -- 249 2,494 5,948 9,705 4,111 9,729
------- ------- -------- ------- ------- ------- -------
Gross profit.................................... -- 291 8,388 21,157 41,206 17,353 32,211
Operating expenses:
Research and development...................... 748 2,575 4,985 7,392 9,227 4,083 6,169
Sales and marketing........................... 512 1,348 12,066 18,413 26,269 12,104 17,684
General and administrative.................... 511 846 2,034 2,990 3,786 1,585 2,882
------- ------- -------- ------- ------- ------- -------
Total operating expenses................ 1,771 4,769 19,085 28,795 39,282 17,772 26,735
------- ------- -------- ------- ------- ------- -------
Operating income (loss)....................... (1,771) (4,478) (10,697) (7,638) 1,924 (419) 5,476
Other......................................... 101 160 552 265 2,115 613 776
------- ------- -------- ------- ------- ------- -------
Net income (loss)............................. $(1,670) $(4,318) $(10,145) $(7,373) $ 4,039 $ 194 $ 6,252
======= ======= ======== ======= ======= ======= =======
Net income (loss) per share:
Basic earnings (loss) per share............... $ (0.36) $ (0.54) $ (0.36) $ 0.17 $ 0.01 $ 0.25
======= ======== ======= ======= ======= =======
Shares used in computation -- basic earnings
(loss) per share............................ 11,976 18,815 20,208 23,346 22,244 24,886
======= ======== ======= ======= ======= =======
Diluted earnings (loss) per share............. $ (0.36) $ (0.54) $ (0.36) $ 0.16 $ 0.01 $ 0.22
======= ======== ======= ======= ======= =======
Shares used in computation -- diluted earnings
(loss) per share............................ 11,976 18,815 20,208 25,653 24,819 27,946
======= ======== ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------- AS OF JUNE 30,
1994 1995 1996 1997 1998 1999
------- ------ ------- -------- ------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 808 $4,311 $17,608 $ 8,277 $61,878 $53,735
Working capital....................................... 2,208 3,916 18,258 11,485 64,320 72,651
Total assets.......................................... 2,640 5,857 26,714 26,539 101,562 137,198
Debt and capital leases, less current portion......... -- 516 495 3,005 3,194 2,616
Accumulated deficit................................... (1,806) (6,124) (16,269) (23,642) (19,603) (13,351)
Total stockholders' equity............................ 2,526 4,254 21,016 15,121 81,809 108,812
</TABLE>

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<PAGE> 20

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

Except for historical information contained or incorporated by reference in
this section, the following discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ significantly
from those discussed below. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed in the "Risk
Factors" section and elsewhere in this prospectus. Any forward-looking
statements speak only as of the date such statements are made.

OVERVIEW

We develop, market and support application software solutions for
one-to-one relationship management across the extended enterprise. These
solutions enable businesses to use the Internet as a platform to conduct
electronic commerce, offer online customer self-service and support, deliver
targeted information and provide online financial services. Each of these
capabilities can be provided to all constituents of the extended enterprise,
including: customers, suppliers, partners, distributors and employees. The
BroadVision One-To-One product suite allows businesses to tailor their Web site
content to the needs and interests of individual users by personalizing each
visit on a real-time basis. Our applications interactively capture Web site
visitor profile information, organize the enterprise's content, target that
content to each visitor based on easily constructed business rules, and execute
transactions. We believe the benefits of these applications include enhanced
customer satisfaction and loyalty, increased business volume, greater brand
awareness, reduced costs to service customers and to execute transactions, and
enhanced employee productivity.

We sell our products and services worldwide through a direct sales force,
independent distributors, resellers and system integrators. We also have a
global network of strategic business relationships with key industry platform
and Web developer partners. We also engage in strategic business alliances to
assist us in marketing, selling and developing customer applications.

We also place a strategic emphasis on developing technology alliances in
order to ensure that our products are based on industry standards and that we
are positioned to take advantage of current and emerging technologies. The
benefits of this approach include enabling us to focus on our core competencies
while reducing time to market and simplifying the task of designing and
developing applications for us and our customers.

Our revenues are derived from software license fees and fees charged for
our services. We recognize software license revenues when a non-cancelable
license agreement has been signed and the customer acknowledges an unconditional
obligation to pay, the software product has been delivered, there are no
uncertainties surrounding product acceptance, the fees are fixed and
determinable and collection is considered probable. Software license revenues,
in general, are recognized upon consummation of the sale.

Our professional services include our Strategic Services Group, Interactive
Services Group, Content and Creative Services Group, Education Services Group
and Technical Support Group. Maintenance fees relating to technical support and
upgrades are recognized ratably over the contracted period. Consulting-related
services revenues are typically recognized as services are performed.

Cost of license revenues includes royalties payable to third parties for
software that is either embedded in, or bundled and sold with, our products;
commissioned agent fees paid to distributors; and the costs of product media,
duplication, packaging and other associated manufacturing costs. Cost of
services consists primarily of employee-related costs, third-party

20
<PAGE> 21

consultant fees incurred on consulting projects, post-contract customer support
and instructional training services.

Research and development expenses consist primarily of salaries,
employee-related benefit costs and consulting fees incurred in association with
the development of our products. Costs incurred for the research and development
of new software products are expensed as incurred until the time that
technological feasibility, in the form of a working model, is established, at
which point these costs are capitalized subject to recoverability. The costs we
have incurred subsequent to the establishment of a working model but prior to
general release have not been significant. To date, we have not capitalized any
software development costs. Sales and marketing expenses consist primarily of
salaries, employee-related benefit costs, commissions and other incentive
compensation, travel and entertainment and marketing-related expenditures such
as collateral materials, trade shows, public relations and creative services.
General and administrative expenses consist primarily of salaries,
employee-related benefit costs and professional service fees.

RESULTS OF OPERATIONS

The following table sets forth certain items reflected in our consolidated
statements of operations expressed as a percent of total revenues for the
periods indicated.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------- ------------
1996 1997 1998 1998 1999
------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses................................ 69% 70% 71% 71% 67%
Services......................................... 31 30 29 29 33
---- ---- ---- ---- ----
Total revenues........................... 100 100 100 100 100
---- ---- ---- ---- ----
Cost of revenues:
Cost of license revenues......................... 3 6 2 2 4
Cost of services revenues........................ 20 16 17 17 19
---- ---- ---- ---- ----
Total cost of revenues........................ 23 22 19 19 23
---- ---- ---- ---- ----
Gross profit............................. 77 78 81 81 77
---- ---- ---- ---- ----
Operating expenses:
Research and development......................... 45 27 18 19 15
Sales and marketing.............................. 111 68 52 57 42
General and administrative....................... 19 11 7 7 7
---- ---- ---- ---- ----
Total operating expenses...................... 175 106 77 83 64
---- ---- ---- ---- ----
Operating income (loss).................. (98) (28) 4 (2) 13
Other......................................... 5 1 4 3 3
---- ---- ---- ---- ----
Income (loss) before income taxes........ (93) (27) 8 1 16
Income tax benefit (expense).................. -- -- -- -- (1)
---- ---- ---- ---- ----
Net income (loss)........................ (93)% (27)% 8% 1% 15%
==== ==== ==== ==== ====
</TABLE>

21
<PAGE> 22

SIX MONTHS ENDED JUNE 30, 1998 AND 1999

REVENUES

For the six months ended June 30, 1999, total revenues increased 95% to
$41.9 million as compared to $21.5 million for the six months ended June 30,
1998. A summary of our software and services revenues by geographic region is as
follows:

<TABLE>
<CAPTION>
SOFTWARE % SERVICES % TOTAL %
-------- --- -------- --- ------- ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended June 30, 1998
Americas............................ $ 7,501 49% $ 4,314 70% $11,815 55%
Europe.............................. 5,731 37 1,073 17 6,804 32
Asia/Pacific........................ 2,065 14 780 13 2,845 13
------- --- ------- --- ------- ---
Total............................... $15,297 100% $ 6,167 100% $21,464 100%
======= === ======= === ======= ===
Six Months Ended June 30, 1999
Americas............................ $19,619 69% $10,127 74% $29,746 71%
Europe.............................. 4,830 17 2,807 21 7,637 18
Asia/Pacific........................ 3,818 14 739 5 4,557 11
------- --- ------- --- ------- ---
Total............................... $28,267 100% $13,673 100% $41,940 100%
======= === ======= === ======= ===
</TABLE>

For the six months ended June 30, 1999, software license revenues increased
85% to $28.3 million as compared to $15.3 million for the six months ended June
30, 1998. The increase in software license revenues is attributable to continued
strong market acceptance for our core competencies and technology; our strategic
focus of leveraging our partner relationships; our expanding range of products
and product functionality; and, to a lesser extent, product pricing increases
that were effective October 1, 1998. As a result, we are attracting new
customers and our existing customer base is generating additional revenues
through increased use of already-developed Web sites and the introduction of new
Web sites within the same organization.

During the six months ended June 30, 1999, we licensed approximately 82 new
end-user customers and 24 new partners, which compares with approximately 45 new
end-user customers and 11 new partners during the six months ended June 30,
1998. As of June 30, 1999, we had licensed over 280 end-user customers and 95
partners, which compares with over 195 end-user customers and 75 partners as of
December 31, 1998 and 150 end-user customers and 55 partners as of June 30,
1998.

For the six months ended June 30, 1999, total services revenues increased
122% to $13.7 million as compared to $6.2 million for the six months ended June
30, 1998. The increase in professional services revenue is a result of our
increased business volumes and a higher level of customer support revenues
derived from a larger installed customer base. We continue to add internal
headcount within our professional services organizations to support the higher
business volumes and have increased our emphasis on leveraging our integrator
partner relationships. Increasingly sophisticated and customer-specific use of
our products has recently caused accelerated demand for our professional
services. However, our strategy of developing business alliances with system
integrators and other third-party professional services organizations to support
our products may in the future result in a decline in professional services
revenues as a percentage of total revenues. Maintenance revenues continue to
increase and were $4.6 million for the six months ended June 30, 1999 as
compared to $1.9 million for the six months ended June 30, 1998.

COST OF REVENUES

In the table below, the percentage of cost of license revenues is
calculated based on total software license revenues, the percentage of cost of
services revenues is calculated based on

22
<PAGE> 23

total services revenues and the percentage of total cost of revenues is
calculated based on total revenues.

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------
1998 % 1999 %
------ --- ------ ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cost of license revenues.............................. $ 400 3% $1,784 6%
Cost of services revenues............................. 3,711 60 7,945 58
------ ------
Total cost of revenues................................ $4,111 19% $9,729 23%
====== ======
</TABLE>

Cost of software licenses increased 346% during the six months ended June
30, 1999 to $1.8 million as compared to $400,000 for the six months ended June
30, 1998. The increase in cost of software licenses, in both absolute dollar and
relative percentage terms, is principally a result of royalties paid to
third-party vendors for software used in conjunction with and sold with our
products. The higher third-party software sales add incremental revenues to our
own product sales but carry a higher cost of license factor in relation to our
own product sales. Royalty costs for third-party software embedded in our
product decreased in relative percentage terms as a result of our renegotiating
a previously existing percentage based royalty arrangement into a prepaid fixed
fee royalty for the period through 2001.

Cost of services increased 114% during the six months ended June 30, 1999
to $7.9 million as compared to $3.7 million for the six months ended June 30,
1998. The increase in cost of services in absolute dollar terms is a result of
expanded business volumes as evidenced by increased services revenues. Overall
costs increased as a result of additions to our professional services staff and
the employment of outside consultants to meet short-term consulting demands.

OPERATING EXPENSES

A summary of our operating expenses is set forth in the following table.
The percentage of expenses is calculated based on total revenues.

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------
1998 % 1999 %
------- --- ------- ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Research and development.............................. $ 4,083 19% $ 6,169 15%
Sales and marketing................................... 12,104 57 17,684 42
General and administrative............................ 1,585 7 2,882 7
------- --- ------- ---
Total operating expenses.............................. $17,772 83% $26,735 64%
======= === ======= ===
</TABLE>

Research and development expenses increased 51% during the six months ended
June 30, 1999 to $6.2 as compared to $4.1 million for the comparable period the
six months ended June 30, 1998. The increase in research and development
expenses in absolute dollar terms is primarily attributable to personnel costs
for added headcount within those operations involved in the enhancement of
existing applications and the development of our next generation of products.
Research and development expenses, as a percentage of total revenues, decreased
because revenues have increased at a higher rate relative to expenses.

Sales and marketing expenses increased 46% during the six months ended June
30, 1999 to $17.7 million as compared to $12.1 million for the six months ended
June 30, 1998. The increases in sales and marketing expenses in absolute dollar
terms reflect the cost of hiring additional sales and marketing personnel,
increased commission payments resulting from higher revenues, developing and
expanding sales distribution channels, and expanding promotional activities and
marketing-related programs. Sales and marketing expenses, as a percentage of

23
<PAGE> 24

total revenues, decreased because revenues have increased at a higher rate
relative to expenses.

General and administrative expenses increased 82% during the six months
ended June 30, 1999 to $2.9 million as compared to $1.6 million for the six
months ended June 30, 1998. The increase in general and administrative expenses
in absolute dollar terms is attributable to additional administrative and
management personnel, higher professional services fees and additional
infrastructure to support the expansion of our operations. General and
administrative expenses, as a percentage of total revenues, decreased because
revenues have increased at a higher rate relative to expenses.

INCOME TAXES

During the six month period ended June 30, 1999, we recognized tax expense
of $334,000 at an effective tax rate of approximately 5%. Due to our continuing
trend of positive earnings, we reversed a portion of our valuation allowance
against the previously deferred tax assets for which realization is considered
more likely than not.

YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

REVENUES

A summary of our software and services revenues by geographic region is as
follows:

<TABLE>
<CAPTION>
SOFTWARE % SERVICES % TOTAL %
-------- --- -------- --- ------- ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Americas....................... $ 3,071 41% $ 1,335 39% $ 4,406 41%
Europe......................... 2,257 30 1,023 30 3,280 30
Asia/Pacific................... 2,136 29 1,060 31 3,196 29
------- --- ------- --- ------- ---
Total.......................... $ 7,464 100% $ 3,418 100% $10,882 100%
======= === ======= === ======= ===
Year Ended December 31, 1997
Americas....................... $ 8,584 45% $ 4,288 53% $12,872 48%
Europe......................... 8,835 47 2,015 25 10,850 40
Asia/Pacific................... 1,554 8 1,829 22 3,383 12
------- --- ------- --- ------- ---
Total.......................... $18,973 100% $ 8,132 100% $27,105 100%
======= === ======= === ======= ===
Year Ended December 31, 1998
Americas....................... $19,301 54% $10,029 67% $29,330 58%
Europe......................... 13,879 38 3,065 21 16,944 33
Asia/Pacific................... 2,887 8 1,750 12 4,637 9
------- --- ------- --- ------- ---
Total.......................... $36,067 100% $14,844 100% $50,911 100%
======= === ======= === ======= ===
</TABLE>

1997 VERSUS 1998

For the year ended December 31, 1998, total revenues increased $23.8
million or 88% on a year-over-year basis, which consisted of software license
revenue increases of $17.1 million or 90% and professional services revenue
increases of $6.7 million or 83%.

The increase in software license revenues is attributable to continued
strong market acceptance of our core BroadVision One-To-One Enterprise product,
expanding sales volumes of three complementary packaged application products,
higher deployment license revenues and to a lesser extent, product pricing
increases that were effective October 1, 1998. Application license-related
revenues for our three complementary products increased to $10.2 million in 1998
as compared to $2.4 million in 1997, which represents a 325% increase year over
year.

24
<PAGE> 25

Deployment-related license revenues increased to $14.8 million in 1998 as
compared to $8.1 million in 1997, which represents a 83% increase year over year
and is a result of repeat business and an increasing number of live site
customers.

During the year ended December 31, 1998, we continued to expand our
strategic alliances with key industry partners to develop additional highly
specialized applications.

The increase in professional services revenue results from a higher level
of consulting related services associated with increased business volumes and a
higher level of customer support revenues derived from a larger installed
customer base. Maintenance revenues were $5.1 million in 1998 as compared to
$2.2 million in 1997. During the year ended December 31, 1998, we licensed
approximately 94 new end-user customers and 27 new partners, which compares with
approximately 70 new end-user customers and 34 new partners during the year
ended December 31, 1997. As of December 31, 1998, we had a total installed
license base of over 195 end-user customers and 75 partners, which compares with
approximately 105 end-user customers and 48 partners as of December 31, 1997.

In June 1998, we re-negotiated an existing royalty arrangement with one of
our software vendors. As a result of the renegotiation, we paid the vendor a
fixed fee of $1.25 million for royalties through 2001 and certain internal
development rights through 1999. Previously, we had an existing arrangement with
this vendor whereby we made quarterly royalty payments based on a percentage of
product revenues. Concurrent with the renegotiation, we sold this vendor an
end-user software license totaling $1.25 million, inclusive of maintenance and
support. The sale to this vendor resulted in software license revenues of
approximately $1.0 million during the quarter ended June 30, 1998.

In July 1998, we finalized a strategic alliance with Security First, an
Internet financial services company. Accordingly, we sold Security First
software licenses including certain reseller rights in exchange for 181,610
shares of restricted Security First common stock that had a fair value of
approximately $4.0 million. As part of the agreement, the companies also agreed
to jointly develop and market a suite of Internet-based products based on
Security First's Internet banking products and our BroadVision One-to-One
Financial product. As a result of the transaction, we recognized license
revenues of approximately $1.9 million and deferred revenues of approximately
$2.1 million during the quarter ended September 30, 1998. The $2.1 million of
deferred revenues consisted of approximately $1.0 million of deferred software
license fees and joint development services, $949,000 for three years of
maintenance and support and $175,000 of specified training services. The
deferred software license fees and joint development services revenue will be
recognized as revenue as the joint development services are performed. The
deferred maintenance will be recognized as revenue ratably over the maintenance
term, and the deferred training services will be recognized as the training is
performed.

In addition, we entered into a $3.5 million license and maintenance
agreement with Sema in December 1998. As part of the agreement, Sema purchased
licenses to resell our existing software products and received expanded
territorial rights. The licensing agreement with this reseller resulted in
software license revenues of approximately $2.75 million during the quarter
ended December 31, 1998.

1996 VERSUS 1997

Our total annual revenues were $27.1 million in 1997 as compared to $10.9
million in 1996, which represents an increase of 149% year-over-year. Annual
software license revenues were $19.0 million in 1997 as compared to $7.5 million
in 1996, which represents an increase of 154% year-over-year. Annual
professional services revenues were $8.1 million in 1997 as compared to $3.4
million in 1996, which represents an increase of 138% year-over-year.

25
<PAGE> 26

The increase in license revenues is a result of strong market acceptance of
our core BroadVision One-to-One Enterprise product, which was augmented by the
introduction in 1997 of three complementary packaged application products. The
increase in professional services revenue is a result of higher business
volumes, greater use of our professional consultants and an expanding installed
customer base under maintenance contracts. Maintenance revenues were $2.2
million in 1997 as compared to $599,000 in 1996.

COST OF REVENUES

In the table below, the percentage of cost of license revenues is
calculated based on total software license revenues, the percentage of cost of
services revenues is calculated based on total services revenues and the
percentage of total cost of revenues is based on total revenues.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1996 % 1997 % 1998 %
------ --- ------ --- ------ ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cost of license revenues.................... $ 330 4% $1,664 9% $1,001 3%
Cost of services revenues................... 2,164 63 4,284 53 8,704 59
------ ------ ------
Total cost of revenues...................... $2,494 23% $5,948 22% $9,705 19%
====== ====== ======
</TABLE>

1997 VERSUS 1998

For the year ended December 31, 1998, cost of license revenues decreased
$663,000 or 40% on a year-over-year basis. Cost of software licenses as a
percent of license revenues was 3% in 1998 as compared to 9% in 1997. Cost of
services revenues during 1998 increased $4.4 million or 103% on a year-over-year
basis. Cost of services as a percent of services revenues was 59% in 1998 as
compared to 53% in 1997.

The decrease in cost of license revenues, in both absolute dollar and
relative percentage terms, was principally a result of lower commissioned agent
fees and third party royalty rates. We continued to expand our in-house sales
force capabilities and during 1998 direct sales that we generated were higher
and commissioned agent sales were lower relative to 1997. In addition, royalty
costs relative to total license revenues decreased as a result of our re-
negotiating a previously existing percentage based royalty arrangement into a
prepaid fixed fee royalty for a period through 2001.

The increase in cost of services revenues in absolute dollar terms during
1998 as compared to 1997 is a result of expanded business volumes as evidenced
by increased services revenues. Overall costs increased as a result of additions
to our professional services staff and the employment of outside consultants to
meet short-term consulting demands. The increase in cost of services as a
percentage of services revenues is a result of higher use of outside consultants
in relation to the extent previously used during the prior year period.

1996 VERSUS 1997

Cost of license revenues on an annual basis was $1.7 million or 9% of
related software license revenues in 1997 as compared to $330,000 or 4% of
related software license revenues in 1996. Cost of license revenues increased in
both absolute dollar and relative percentage terms during 1997 as compared to
1996 due to expanded sales volumes and higher commissioned agent fees as a
result of increased distributor sales volume. Commissioned agent fees were
$703,000 in 1997 as compared to $80,000 in 1996. To a lesser extent, an
increased number of third-party products sold with or embedded in our products
also contributed to the increases.

Cost of services revenues on an annual basis was $4.3 million or 53% of
related services revenues in 1997 as compared to $2.2 million or 63% of related
services revenue in 1996. Cost

26
<PAGE> 27

of services revenues increased 98% in absolute dollar terms during 1997 as
compared to 1996 due to expanded business volumes, as represented by the 138%
increase in total services revenues. The higher level of costs in absolute
dollar terms are attributable to additions to our consulting staff, the
employment of outside consultants to meet short-term consulting demands, an
increasing number of licenses with support or maintenance components and a
higher level of fixed costs resulting from the expansion of our services
organization to meet higher business volumes. The decrease in cost of services
revenues as a percentage of total services revenues during 1997 as compared to
1996 is principally a result of increased use of professional staff.

OPERATING EXPENSES

A summary of our operating expenses is set forth in the following table.
The percentage of expenses is calculated based on total revenues.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1996 % 1997 % 1998 %
------- --- ------- --- ------- ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Research and development........... $ 4,985 46% $ 7,392 27% $ 9,227 18%
Sales and marketing................ 12,066 111 18,413 68 26,269 52
General and administrative......... 2,034 19 2,990 11 3,786 7
------- --- ------- --- ------- --
Total operating expenses........... $19,085 176% $28,795 106% $39,282 77%
======= === ======= === ======= ==
Other income, net.................. $ 552 5% $ 265 1% $ 2,036 4%
======= === ======= === ======= ==
</TABLE>

1997 VERSUS 1998

Research and development expenses for the year were $9.2 million in 1998 as
compared to $7.4 million in 1997 which represents an increase of 25%
year-over-year. Sales and marketing expenses for the year were $26.3 million in
1998 as compared to $18.4 million in 1997 which represents an increase of 43%
year-over-year. General and administrative expenses for the year were $3.8
million in 1998 as compared to $3.0 million in 1997 which represents an increase
of 27% year-over-year. Net other income for the year was $2.0 million in 1998 as
compared to $265,000 in 1997, which represents an increase of 668%
year-over-year.

The increase in research and development expenses in absolute dollar terms
is primarily attributable to personnel costs for added headcount within those
operations involved in the enhancement of existing applications and the
development of our next generation of products. Research and development
expenses, as a percentage of total revenues, decreased because revenues have
increased at a higher rate relative to expenses.

The increases in sales and marketing expenses in absolute dollar terms
reflects the cost of hiring additional sales and marketing personnel, the
continued development of sales distribution channels and the expansion of
promotional activities and marketing-related programs. In addition, commission
rates were higher during 1998 as result of sales people exceeding their sales
quotas. Sales and marketing expenses, as a percentage of total revenues,
decreased because revenues have increased at a higher rate relative to expenses.

The increase in general and administrative expenses in absolute dollar
terms is attributable to additional administrative and management personnel,
higher professional fees and additional infrastructure to support the expansion
of our operations. General and administrative expenses, as a percentage of total
revenues, decreased because revenues have increased at a higher rate relative to
expenses.

27
<PAGE> 28

The increase in net other income is attributable to a higher level of
investment income during the year as a result of earnings on proceeds received
from a follow-on public stock offering in March 1998.

1996 VERSUS 1997

Research and development expenses for the year were $7.4 million in 1997 as
compared to $5.0 million in 1996, which represents an increase of 48%
year-over-year. Sales and marketing expenses for the year were $18.4 million in
1997 as compared to $12.1 million in 1996, which represents an increase of 53%
year-over-year. General and administrative expenses for the year were $3.0
million in 1997 as compared to $2.0 million in 1996, which represents an
increase of 47% year-over-year. Net other income for the year was $265,000 in
1997 as compared to $552,000 in 1996, which represents a decrease of 52%
year-over-year.

The increase in research and development expenses is primarily attributable
to costs associated with additional personnel within those operations for the
enhancement of existing products and the development of new products.

The overall increases in sales and marketing expenditures reflect the cost
of hiring additional sales and marketing personnel, developing and expanding
sales distribution channels, introducing new products and expanding promotional
activities.

The increases in general and administrative expenses are attributable to
the hiring of additional administrative and management personnel, increased
professional fees, additional provision for doubtful accounts and additional
infrastructure to support the expansion of our operations.

INCOME TAXES

For the year ended December 31, 1998, we recorded a net income tax benefit
of $79,000, comprised of a deferred tax benefit of $700,000 and current tax
expense of $621,000.

We recorded a deferred tax benefit during 1998 due to the reversal of a
portion of the valuation allowance previously provided against our deferred tax
assets after evaluation of all available evidence about the realizability of the
deferred tax assets. In determining that it is more likely than not that the net
deferred tax assets as of December 31, 1998 will be realized, we assumed a
limited amount of future taxable income considering all available evidence and
our profitability during 1998. We assumed only a limited amount of future
taxable income after considering factors like a history of operating losses
prior to the second quarter of 1998, the nature of our deferred tax assets, the
lack of significant firm sales backlog and the length of the sales cycle, the
competitive market in which we operate and the lack of carryback capacity to
realize the deferred tax assets.

We recorded current tax expense during 1998 primarily related to foreign
withholding and alternative minimum taxes. During 1996 and 1997, we generated
pre-tax losses of $10.1 million and $7.4 million, respectively. Due to the
uncertainty about the realizability of the deferred tax assets, we recorded a
full valuation allowance to reduce the net deferred tax assets to zero as of
both December 31, 1996 and 1997.

As of December 31, 1998, we had federal net operating loss carryforwards of
approximately $13.0 million and state net operating loss carryforwards of
approximately $5.5 million available to offset future regular and alternative
minimum taxable income. In addition, we had federal research and development
credit carryforwards of approximately $790,000 and state research and
development credit carryforwards of approximately $666,000 available to offset
future tax liabilities. Our federal net operating loss and tax credit
carryforwards expire in the years 2010 through 2012, if not used. The state net
operating loss carryforwards expire in the years 2000 through 2002.

28
<PAGE> 29

The state research and development credits can be carried forward
indefinitely. As of December 31, 1998, our foreign subsidiaries had net
operating loss carryforwards in foreign jurisdictions of approximately $5.4
million that can be used to offset future foreign income. Of these losses,
approximately $1.6 million expire in the years 2001 through 2003. Approximately
$3.8 million of these losses can be carried forward indefinitely. Federal and
state tax laws limit the use of net operating loss carryforwards in certain
situations where changes occur in the stock ownership of a company. We believe
an ownership change like this, as defined, may have occurred and, accordingly,
some of our federal and state net operating loss carryforwards may be limited in
their annual usage.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited consolidated statement of
operations data for the eight quarters ended June 30, 1999, as well as that data
expressed as a percentage of our total revenues for the period indicated. This
data has been derived from unaudited consolidated financial statements that, in
the opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such information
when read in conjunction with the Consolidated Financial Statements and Notes
thereto. The unaudited quarterly information should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included elsewhere in
this prospectus. We believe that period-to-period comparisons of our financial
results are not necessarily meaningful and should not be relied upon as an
indication of future performance.

29
<PAGE> 30

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------
SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1998 1998 1998 1998 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses.................. $ 5,513 $ 6,213 $7,279 $8,018 $9,158 $11,612 $12,783 $15,484
Services........................... 1,641 2,420 2,800 3,367 4,273 4,404 5,681 7,992
------- ------- ------ ------ ------ ------- ------- -------
Total revenues............... 7,154 8,633 10,079 11,385 13,431 16,016 18,464 23,476
Cost of revenues:
Cost of software licenses.......... 460 566 187 213 237 364 747 1,037
Cost of services................... 1,010 1,130 1,620 2,092 2,553 2,439 3,321 4,624
------- ------- ------ ------ ------ ------- ------- -------
Total cost of revenues....... 1,470 1,696 1,807 2,305 2,790 2,803 4,068 5,661
Gross profit......................... 5,684 6,937 8,272 9,080 10,641 13,213 14,396 17,815
Operating expenses:
Research and development........... 2,113 1,797 2,033 2,049 2,394 2,751 2,901 3,268
Sales and marketing................ 4,630 5,323 5,861 6,243 6,285 7,880 7,665 10,019
General and administrative......... 763 780 824 760 977 1,225 1,271 1,611
------- ------- ------ ------ ------ ------- ------- -------
Total operating expenses..... 7,506 7,900 8,718 9,052 9,656 11,856 11,837 14,898
------- ------- ------ ------ ------ ------- ------- -------
Operating income (loss).............. (1,822) (963) (446) 28 985 1,357 2,559 2,917
Other................................ 131 (123) (53) 665 769 734 378 398
------- ------- ------ ------ ------ ------- ------- -------
Net income (loss).................... $(1,691) $(1,086) $ (499) $ 693 $1,754 $ 2,091 $ 2,937 $ 3,315
======= ======= ====== ====== ====== ======= ======= =======
AS A PERCENTAGE OF REVENUES:
Revenues:
Software licenses.................. 77% 72% 72% 70% 68% 73% 69% 66%
Services........................... 23 28 28 30 32 27 31 34
------- ------- ------ ------ ------ ------- ------- -------
Total revenues............... 100 100 100 100 100 100 100 100
Cost of revenues:
Cost of software licenses.......... 6 7 2 2 2 2 4 4
Cost of services................... 14 13 16 18 19 16 18 20
------- ------- ------ ------ ------ ------- ------- -------
Total cost of revenues....... 20 20 18 20 21 18 22 24
Gross profit......................... 80 80 82 80 79 82 78 76
Operating expenses:
Research and development........... 30 21 20 18 18 17 16 14
Sales and marketing................ 65 61 58 55 47 49 41 43
General and administrative......... 11 9 8 7 7 8 7 7
------- ------- ------ ------ ------ ------- ------- -------
Total operating expenses..... 106 91 86 80 72 74 64 64
------- ------- ------ ------ ------ ------- ------- -------
Operating income (loss).............. (26) (11) (4) -- 7 8 14 12
Other, net........................... 2 (2) (1) 6 6 5 2 2
------- ------- ------ ------ ------ ------- ------- -------
Net income (loss).................... (24)% (13)% (5)% 6% 13% 13% 16% 14%
======= ======= ====== ====== ====== ======= ======= =======
</TABLE>

We expect to experience significant fluctuations in future quarterly
operating results that may be caused by many factors including, among others,
the timing of introductions or enhancements of products and services by us or
our competitors, the length of our sales cycle, market acceptance of new
products, the pace of development of the market for online commerce, the mix of
our products sold, the size and timing of significant orders and the timing of
customer production or deployment, demand for our products, changes in pricing
policies by us or our competitors, changes in our sales incentive plans,
budgeting cycles of our customers, customer order deferrals in anticipation of
new products or enhancements by us or our competitors, cancellation of orders
prior to customer deployment or during the warranty period, nonrenewal of
service agreements, product life cycles, software defects and other product
quality problems, changes in strategy, changes in key personnel, the extent of
international expansion, seasonal trends, the mix of distribution channels
through which our products are sold, the mix of international and domestic
sales, changes in the level of operating expenses to support projected growth,
and general economic conditions. We anticipate that a significant portion of our
revenues will be derived from a limited number of orders. We expect that the
timing of receipt and fulfillment of any of these orders will cause our
quarterly operating results to fluctuate. We

30
<PAGE> 31

anticipate that we will make the major portion of each quarter's product
deliveries near the end of each quarter. As a result, short delays in product
deliveries at the end of a quarter could harm operating results for that
quarter. In addition, we intend, in the near term, to increase significantly our
personnel, including our domestic and international direct sales force. The
timing of this expansion and the rate at which new sales people become
productive could also cause our quarterly operating results to fluctuate.

Due to these and other factors, our quarterly revenues and operating
results are difficult to forecast accurately. We believe that period-to-period
comparisons of our operating results may not be meaningful, and you should not
rely upon them as any indication of future performance. It is likely that the
our operating results in one or more future quarters may be below the
expectations of securities analysts and investors. In that event, the trading
price of our common stock would almost certainly decline.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity along with selected ratios are set forth below:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1997 1998 JUNE 30, 1999
------- ------- ------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash, cash equivalents and short-term
investments........................... $19,720 $10,473 $61,878 $72,558
Working capital......................... $18,258 $11,485 $64,320 $72,651
Current assets: current liabilities..... 4.6:1 2.4:1 4.9:1 3.9:1
</TABLE>

At June 30, 1999, we had $72.6 million of cash, cash equivalents and liquid
short-term investments, which represents an increase of $10.7 million as
compared to December 31, 1998. We currently have no significant capital
commitments other than obligations under equipment and operating leases and $3.1
million of outstanding term debt under our existing credit facility with our
commercial bank. We have funded our operations by cash generated from
operations, the private placement of common and preferred stock and public
offerings of our common stock. Through May 1996, private placements provided net
proceeds totaling $15.5 million and a public stock offering during June 1996
netted for us proceeds of $20.7 million and during March 1998 netted for us
proceeds of $53.7 million.

Cash provided by operating activities was $1.4 million in the year ended
December 31, 1998 and $11.0 million for the six months ended June 30, 1999. Cash
used for operating activities was $8.4 million in the year ended December 31,
1996 and $8.7 million in the year ended December 31, 1997. Cash used for
investing activities was $4.4 million in the year ended December 31, 1996, $3.6
million in the year ended December 31, 1997, $6.6 million in the year ended
December 31, 1998 and $22.8 million for the six months ended June 30, 1999. This
cash was primarily directed at capital expenditures and the acquisition of
long-term strategic investments. Cash provided by financing activities was $26.1
million in the year ended December 31, 1996, $2.9 million in the year ended
December 31, 1997, $58.8 million in the year ended December 31, 1998 and $3.6
million for the six months ended June 30, 1999, and consists primarily of
proceeds from the issuance of stock and, to a lesser extent, proceeds from
borrowings.

We have invested approximately $2.9 million in the year ended December 31,
1996, $6.0 million in the year ended December 31, 1997, $4.5 million in the year
ended December 31, 1998 and $3.9 million during the six months ended June 30,
1999, in property and equipment, consisting of computer and software, leasehold
improvements and furniture and fixtures. We currently expect that total
investments in property and equipment for 1999 will be approximately $9.0
million. We did not purchase any long-term investments in 1996, 1997 or in the
six months

31
<PAGE> 32

ended June 30, 1999. In the year ended December 31, 1998 we invested $8.3
million in long-term investments, consisting of nonmarketable and marketable
equity securities. We have funded these investments by cash generated from
operations and the sale of our equity.

RECENT DEVELOPMENTS AND OUTLOOK

To date, we have achieved good market acceptance for our products and have
experienced continued revenue growth. We anticipate that international revenues
will continue to account for a significant amount of total revenues, and we
expect to continue to commit significant time and financial resources to the
maintenance and ongoing development of direct and indirect international sales
and support channels. Our Asia/Pacific operations have experienced reduced
growth rates over recent years as a result of the generally weak economic
conditions of that region. As a result we expect that any significant growth in
international revenues will most likely come from European operations. We cannot
assure you that we will be able to maintain or increase international or
domestic market acceptance for our suite of products.

We expect that research and development, sales and marketing, and general
and administrative expenses will continue to increase in absolute dollar terms
as we continue to expand our business.

YEAR 2000 COMPLIANCE

BACKGROUND AND RISKS -- Many currently installed computer systems and
software and devices with imbedded technology are coded to two digits for time
sensitive dating purposes. Beginning with the year 2000, these date code fields
will need to be coded to four digits in order to distinguish between 21st
century dates and 20th century dates. For example, computer programs that have
date-sensitive software may incorrectly recognize a date using "00" as the year
1900 rather than the year 2000. As a result, computer systems, software products
and devices with embedded technology used by many companies may need to be
upgraded to comply with these "Year 2000" requirements. This type of Year 2000
error could potentially cause system failures or miscalculations that could
disrupt operations, including a temporary inability to process transactions,
issue invoices or engage in similar normal business activities. Although we
believe that our products are Year 2000 compliant, undetected Year 2000 errors
or defects could result in delay or loss or revenue, diversion of development
resources, damage to our reputation and increased service and warranty costs. We
believe that the purchasing patterns of customers could potentially be affected
by Year 2000 issues as companies expend significant resources to correct or
patch their current software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase software products
like ours. Other systems or software used by our customers may not be Year 2000
compliant. The failure of noncompliant third-party software or systems could
affect the perceived performance of our products.

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<PAGE> 33

STATE OF READINESS -- We use various financial and managerial information
systems within our operations in the United States, Europe and Asia, which we
believe to be or will be Year 2000 compliant by the end of 1999. As part of our
normal course of business, we analyze our information system requirements in
relation to our business operating goals and strategic objectives, and we are
implementing new systems during 1999 that will be Year 2000 compliant. We have
also analyzed our other systems and our material suppliers and vendors for Year
2000 issues and we believe they are or will be Year 2000 compliant by the end of
1999. These other systems include non-information technology systems and
services used by us in our business operations, such as power,
telecommunications, security and general facilities.

COSTS FOR YEAR 2000 COMPLIANCE -- Costs that we may incur pertaining to
Year 2000 compliance issues include identification, assessment, remediation and
testing efforts, as well as potential costs to be incurred by us with respect to
Year 2000 issues of third parties. To date, the costs we have incurred related
to Year 2000 issues have been minimal, even in cases where non-compliant
information technology systems were redeployed or replaced.

CONTINGENCY PLANS -- We have a contingency plan for handling Year 2000
problems that are not detected and corrected prior to their occurrence, and we
are continuing to assess our Year 2000 exposure areas in order to determine what
additional steps, beyond those identified by our internal review to date, are
advisable. Our contingency plan includes adequate internal resources that would
be available to analyze, assess and direct remediation efforts to address
potential issues, back-up systems that do not rely on computers, and alternative
sources of supply. We presently believe that the Year 2000 issue will not pose
significant operational problems for us. However, any failure of ours to
adequately address any unforeseen Year 2000 issue could harm our business. In
addition, if all of the Year 2000 issues are not properly identified, or
adequate assessment, remediation and testing are not timely effected with
respect to Year 2000 problems that are identified, we cannot assure you that the
Year 2000 issue would not harm our results of operations or our relationships
with customers, vendors, partners or others. Additionally, we cannot assure you
that the Year 2000 issues of other entities will not harm our systems or results
of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standard, or SFAS, No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by SFAS No. 137,
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Accordingly, we will adopt SFAS No. 133, as amended, beginning on January 1,
2001. SFAS No. 133 establishes standards for the accounting and reporting of
derivative instruments and hedging activities, including certain derivative
instruments embedded in other contracts. Under SFAS No. 133, entities are
required to carry all derivative instruments at fair value on their balance
sheets. The accounting for changes in the fair value (i.e., gains or losses) of
a derivative instrument depends on whether it has been designated and qualifies
as part of a hedging activity and the underlying purpose for it. We do not
believe that the adoption of SFAS No. 133 will have a significant impact on our
consolidated financial statements or related disclosures.

In December 1998, the Accounting Standards Executive Committee of the AICPA
issued SOP 98-9 Software Revenue Recognition, With Respect to Certain
Transactions, which requires recognition of revenue using the "residual method"
in a multiple-element arrangement when fair value does not exist for one or more
of the delivered elements in the arrangement. Under the "residual method", the
total fair value of the undelivered elements is deferred and subsequently
recognized in accordance with SOP 97-2. We do not expect a material change to
our revenue accounting as a result of the provisions of SOP 98-9.

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<PAGE> 34

BUSINESS

OVERVIEW

We develop, market and support application software solutions for
one-to-one relationship management across the extended enterprise. These
solutions enable businesses to use the Internet as a platform to conduct
electronic commerce, offer online customer self-service and support, deliver
targeted information and provide online financial services. Each of these
capabilities can be provided to all constituents of the extended enterprise,
including: customers, suppliers, partners, distributors and employees. The
BroadVision One-To-One product suite allows businesses to tailor their Web site
content to the needs and interests of individual users by personalizing each
visit on a real-time basis. Our applications interactively capture Web site
visitor profile information, organize the enterprise's content, target that
content to each visitor based on easily constructed business rules, and execute
transactions. We believe the benefits of these applications include enhanced
customer satisfaction and loyalty, increased business volume, greater brand
awareness, reduced costs to service customers and to execute transactions, and
enhanced employee productivity.

INDUSTRY BACKGROUND

ONE-TO-ONE RELATIONSHIP MANAGEMENT ON THE INTERNET

The Internet has changed the nature of business operations and competition
by creating more efficient marketplaces. Information is much more readily
available than ever before. Companies, their customers, suppliers, partners,
distributors, employees and others now have the means to instantaneously share
information, automate business processes and conduct business on a global scale.
Since business customers and consumers have the ability to change vendors at the
click of a button, the need for differentiation and thus the need to personalize
business interactions has greatly increased.

In the past, personalization of products or services was expensive and
inefficient for business customers. Companies had to rely on mass market
channels or expensive face-to-face interactions. Moving from a mass market
channel down to the level of one-to-one is now possible with the advent of the
Internet and the ability to react to customers', partners' and employees'
information and self-service needs in real time. More specifically, with the
Internet, business managers have the ability to capture visitor profile
information, observations and feedback interactively, and to dynamically target
useful information to visitors based on this data. One-to-one relationship
management allows a company to use its knowledge of its customers, suppliers,
partners, distributors and employees to provide personalized interactions and
thus strengthen relationships and loyalty and create and sustain competitive
advantage. One-to-one relationship management provides the foundation for
delivering individually tailored products, services, information, incentives and
transactions. Whether an Internet application is designed primarily for
conducting commerce or providing customer self-service, it offers businesses an
opportunity to extend front-office services or deliver knowledge in a
personalized and cost-effective way to all constituents of the extended
enterprise. In particular, business managers can use advanced Internet
technologies to engage in personalized dialogues with millions of customers.

THE TECHNOLOGY GAP ON THE INTERNET

Managing personalized customer relationships and a high volume of online
transactions and defining business rules are highly complex processes for
business managers. In addition, Web sites are generally cumbersome for business
managers to operate. Business rules and content, such as product and pricing
data, financial policies, promotions and advertising campaigns, are often
"hard-coded" into programs and virtually impossible for non-technical managers
to change

34
<PAGE> 35

dynamically. Many of today's Web development tool kits that assist in Web site
development do not offer capabilities for easily maintaining site content and
page generation logic. Most applications are not scalable and require ongoing
tuning and re-engineering to keep up with visitor growth and changes in Internet
technology. Generally, with currently available applications, business managers
do not have the capability to react to market conditions with real-time control
and management of Web sites, but instead are often constrained by slow "change
request" processes that take technical specialists days or even weeks to
implement. Developing and maintaining custom applications reduces the resources
available for core business initiatives.

PACKAGED APPLICATIONS FOR ONE-TO-ONE RELATIONSHIP MANAGEMENT

The inefficiencies of using in-house development and support for one-to-one
relationship management have fueled the need for sophisticated packaged
application solutions. These packaged applications provide an attractive
alternative to in-house or third-party custom application development, enabling
companies to get to market more quickly with a solution that can be more readily
maintained and extended as the business evolves. Packaged applications can be a
particularly attractive alternative to in-house or third-party custom
applications development if they can be easily integrated into a company's
existing infrastructure and tailored to the vertical segment in which the
business operates.

To realize the potential of one-to-one relationship management, packaged
applications must support the following activities:

- Attract, retain and service visitors that range from the casual to the
sophisticated by providing dynamic content, interactive dialogues and
communities of interest in a friendly, easy-to-use Web site environment;

- Provide non-technical business managers with the ability to define and
modify the application's business rules and content in real time;

- Develop and maintain visitor profiles, observe and remember interactions
and engage in ongoing personalized dialogues while empowering individuals
to control the privacy of their personal data;

- Dynamically target personalized content, products and incentives to
correspond to profile data in order to motivate visitors to interact and
conduct transactions;

- Integrate and interact with back office systems to fully utilize a
company's data and information resources;

- Fulfill financial and information transactions with secure electronic
commerce processes; and

- Offer a consistent end-user experience across multiple customer touch
points such as interactive voice response systems and call centers.

We believe that this trend toward packaged solutions is typical of the
evolution of many uses of business automation software, including accounting,
manufacturing, human resources and sales force management systems.

OUR SOLUTION

We offer a suite of packaged applications and related services to enable
effective one-to-one relationship management. The BroadVision One-To-One product
suite enables companies to capitalize on the Internet, intranets and extranets
for selling, marketing and supporting all of their business constituents:
customers, suppliers, partners, distributors, employees and others. Our products
enable these businesses to organize dynamic profiles of Web site users from
volunteered data and observed behavior, deliver highly specialized content in
response to these

35
<PAGE> 36

profiles and securely execute transactions. Business managers are able to modify
business rules and content in real time, offering a personalized experience to
each visitor. Because of the open architecture of our applications, they are
easily integrated with our customers' existing systems and easily expanded as
our customers' needs and businesses grow.

We believe our products enhance our customers' revenue opportunities by
enabling them to build long-term relationships. Their Web site visitors are
engaged by highly personalized real-time interactions and the ability to
transact business securely and are encouraged to remain on the Web site and make
return visits. Our applications also improve the cost-effectiveness of one-to-
one relationship management by enabling non-technical managers to modify
business rules and content in real time and by helping to reduce costs of
customer acquisition and retention, business development and technical support.
In addition, the packaged solution nature of our products decreases our
customers' time to market and allows them to easily manage and expand their Web
sites in a cost-effective manner. Our targeted applications, BroadVision One-
To-One Retail Commerce, BroadVision One-To-One Business Commerce, BroadVision
One-To-One Financial and BroadVision One-To-One Knowledge, have the specific
benefits of addressing personalization needs in the areas of Internet commerce,
Internet financial services and corporate information distribution and
development.

OUR STRATEGY

Our objective is to establish our one-to-one real-time relationship
management solution as the standard for Web sites worldwide. In order to achieve
that objective, we have adopted the following key elements of our strategy:

BECOME THE STANDARD FOR ONE-TO-ONE RELATIONSHIP MANAGEMENT SOLUTIONS. We
intend to establish the BroadVision One-To-One product suite as the standard for
Internet-based one-to-one relationship management across the extended
enterprise. We believe that the growth of one-to-one relationship management
will be driven by complete packaged application solutions that allow businesses
to capitalize more fully on the Internet as a business venue for interacting
with the constituents of their extended enterprise. We believe that we offer the
most complete solution available today for extended one-to-one relationship
management. We intend to maintain our leadership position and become the
standard by continuing to enhance our technology through heavy investment in
research and development activities, incorporating industry-leading components
into our products and employing our technology and human resources as a source
of ongoing technological advantage.

DEVELOP AND ENHANCE OUR TARGETED APPLICATION SOLUTIONS. We will continue to
leverage our core BroadVision One-To-One Enterprise product and our experience
gained from each customer engagement to enhance our application products and
services focused on specific horizontal and vertical markets. Utilizing our
expanding libraries of reusable application objects and templates and working
closely with customers and strategic partners, we believe our products can
deliver targeted application solutions for one-to-one relationship management
that are faster, are of higher quality and have a lower total cost of ownership
than those of our competitors. We currently deliver targeted application
solutions for business-to-consumer and business-to-business commerce, for
financial services and for knowledge management. We intend to remain nimble and
flexible in developing other packaged application products in the general area
of one-to-one relationship management in response to market opportunities that
may arise.

PROVIDE A WIDE RANGE OF PROFESSIONAL SERVICES FOR OUR CUSTOMERS. We will
continue to provide a wide range of professional services to help our customers
develop, integrate, design, implement and support their Web sites. We believe
that our professional services are a critical component of our solutions and
that they have a significant role in ensuring that our customers use our
products successfully and effectively. The demand for our professional services
continues to expand rapidly, and we will leverage our systems integrator
partners in providing

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<PAGE> 37

professional services to our customers. We will also continue to expand our own
professional services capabilities to meet this demand.

EXPAND AND LEVERAGE ALLIANCES WITH KEY BUSINESS PARTNERS. To accelerate the
acceptance of our products and to promote the adoption of the Web as a
commercial marketplace, we have developed cooperative alliances with leading
systems integrators, Internet technology vendors and Web site developers. As of
June 30, 1999, we have signed business alliances with over 95 systems
integration, design, consulting and other services organizations worldwide,
which has expanded our sales and support infrastructure and post-sales
implementation capabilities while broadening market awareness of our products.
We believe that these alliances will provide additional sales and marketing
channels for our products, enable us to more rapidly incorporate additional
functions and platforms into our products and facilitate the successful
deployment of customer applications.

By leveraging our business alliances we intend to:

- increase the number of personnel available to perform application design
and development services for our customers;

- expand our distribution channels; and

- provide additional marketing expertise in certain industry segments while
providing technical expertise in the development of reusable objects and
templates.

We will continue to place an emphasis on establishing additional alliances as
new technologies and standards emerge, although we cannot assure you that we
will be successful in establishing or maintaining such alliances.

GROW OUR INTERNATIONAL PRESENCE. To capitalize on the emergence of the
Internet as a global network, we have established worldwide distribution
capabilities with direct or distributor sales personnel in 43 cities worldwide.
We intend to continue to certify providers of professional services for our
products in these and other countries. Our partners include multinational
systems integrators, as well as partners with a single-country scope of
operations. Our product architecture is designed to support multiple languages.
We are currently shipping versions of our BroadVision One-To-One Enterprise
product that support the display of content and interface in Arabic, Chinese,
Hebrew, Japanese, Korean, Slovakian and Turkish as well as most Western European
languages.

Our strategies involve substantial risk. We cannot assure you that we will
be successful in implementing our strategies or that our strategies, even if
implemented, will lead to successful achievement of the our objectives. If we
are unable to implement our strategies effectively, our business may be harmed.

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<PAGE> 38

PRODUCTS

We develop, market and support a suite of packaged applications for
one-to-one relationship management and associated software tools for use in
customizing and maintaining solutions built with these applications.

The table below summarizes certain features of our packaged application
products:
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
PRODUCT NAME PRODUCT DESCRIPTION
- -------------------------------------------------------------------------------------------------------

Core Application Product:
BroadVision One-To-One Enterprise The core product. Packaged application
solution for rapid development and real-
time operation of large-scale,
personalized Internet, intranet and
extranet business applications. Each of
the following targeted application
products includes the functionality of
BroadVision One-To-One Enterprise.
- -------------------------------------------------------------------------------------------------------
Targeted Application Products:
BroadVision One-To-One Retail Commerce Packaged application solution for
electronic retail commerce.
BroadVision One-To-One Business Commerce Packaged application solution for
business-to-business commerce.
BroadVision One-To-One Financial Packaged application solution for online
financial services companies.
BroadVision One-To-One Knowledge Packaged application solution for online
knowledge management.
</TABLE>

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

The table below summarizes certain features of our tool products:
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
PRODUCT NAME PRODUCT DESCRIPTION
- -------------------------------------------------------------------------------------------------------
BroadVision One-To-One Design Center PC-based tool enabling application
developers and Web authors to quickly and
easily build dynamic Web page templates.
- -------------------------------------------------------------------------------------------------------
BroadVision One-To-One Command Center PC-based tool enabling business managers
to monitor state of Web applications,
interactively change business rules using
wizards in real time and generate reports.
- -------------------------------------------------------------------------------------------------------
BroadVision One-To-One Publishing Center Browser-based tool enabling content
developers and editors to manage the
publishing of new content to the Web site.
- -------------------------------------------------------------------------------------------------------
BroadVision One-To-One Instant Publisher Browser-based tool for casual content
developers.
</TABLE>

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

BROADVISION ONE-TO-ONE APPLICATION PRODUCTS

Our five application products -- BroadVision One-To-One Enterprise,
BroadVision One-To-One Retail Commerce, BroadVision One-To-One Business
Commerce, BroadVision One-To-One Financial and BroadVision One-To-One
Knowledge -- provide a spectrum of complementary capabilities offering numerous
business functions and supporting the needs of companies in different
industries.

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<PAGE> 39

BROADVISION ONE-TO-ONE ENTERPRISE. Our base product that provides the
technology platform on top of which the targeted market BroadVision One-To-One
application products are built. This flexible relationship management system
contains cross-industry functionality such as profile and content management,
adapters to third-party systems, and matching technologies and algorithms. It
utilizes an open, scalable application architecture for Web session management,
secure user authentication and authorization, dynamic and personalized page
generation and transaction handling.

BROADVISION ONE-TO-ONE RETAIL COMMERCE. Our enterprise-class application
solution that enables fast-moving, high transaction volume companies to
immediately change their products, prices, promotions and other content to
better meet user needs, even on a user's first visit to a Web site. Full
commerce transaction capabilities include persistent shopping carts, shopping
lists, real-time pricing, automatic tax calculation, shipping and handling cost
computation, payment processing, and order fulfillment and management.

BROADVISION ONE-TO-ONE BUSINESS COMMERCE. Our enterprise-class application
solution that allows companies to effectively integrate with their business
customers' existing systems. BroadVision One-To-One Business Commerce enhances
the ability of a company to support business-to-business transactions by
providing pricing, shipping and handling, tax calculation, payment processing,
customer service, security and order processing capabilities.

BROADVISION ONE-TO-ONE FINANCIAL. Our enterprise-class financial services
application solution that enables banks, brokerages, mutual fund companies and
other financial institutions to rapidly deploy personalized financial services
applications that enable customers to access their account information and
perform a rich set of secure transactions within and between accounts using the
Internet. BroadVision One-To-One Financial provides customers with a Web site
that offers customized interactions that enable financial institutions to
differentiate themselves while enhancing customer relationships.

BROADVISION ONE-TO-ONE KNOWLEDGE. Our enterprise-class application solution
designed to increase the productivity of corporate knowledge workers, including
sales and marketing professionals, channel business partners and executive
management. Optimized for rapid deployment over corporate intranets and
extranets, this application enables individuals and work groups to organize
information into flexible, interactive knowledge channels accessible through Web
browsers. These interactive channels automate the intelligent distribution of
information for employees and partners on a one-to-one, just-in-time basis
throughout an enterprise.

KEY CAPABILITIES OF OUR APPLICATION PRODUCTS

We designed all of these applications products for use in mission-critical,
high-performance environments by customers with demanding architecture,
deployment and maintenance requirements. Some of the key capabilities of the
applications include:

BROAD APPLICABILITY -- robust functionality to support
business-to-business, business-to-consumer and business-to-employee
relationship management, including personalized marketing and
communications, selling and commerce transaction handling and customer
self-service.

EASE OF USE -- separation of the business logic from the applications,
allowing non-technical business managers to modify business rules and
content in real time.

SCALABILITY -- ability to support large numbers of simultaneous users
accessing the system over the Internet, intranets or extranets.

MODULAR COMPONENT ARCHITECTURE BASED ON OPEN STANDARDS -- object-oriented
application code written in C++, Java and JavaScript allowing developers
and system integrators to use, integrate, modify, adapt or extend the
applications with minimal impact on other areas

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<PAGE> 40

to create a rapidly customized product that meets the specific business
requirements of a particular corporate customer. Support for the CORBA
standard for object-oriented computing permits distribution of the
application across multiple processors. This design enables high-volume
performance, flexible application deployment and easy integration with
other third-party or legacy applications.

SECURE TRANSACTION PROCESSING -- secure handling of a wide-range of
commerce and financial services transactions including order pricing and
discount/incentive handling, tax computation, shipping and handling
charges, payment authorization, credit card processing, order tracking,
news and stock feeds -- through a combination of built-in functionality and
integration with other products.

MULTIPLE PLATFORMS -- availability of versions for multiple operating
systems, including Sun Solaris, Microsoft Windows NT and HP-UX. Databases
supported include Oracle, Sybase, Informix and Microsoft SQL Server.

MULTILINGUAL -- availability of content display and interface in Arabic,
Chinese, Hebrew, Japanese, Korean, Slovakian, Turkish and most Western
European languages.

BROADVISION ONE-TO-ONE TOOLS

Our application products are customized and maintained using tools that are
licensed to customers separately from the application products. Inherent to the
functionality of our applications is a set of building blocks comprised of
customizable components, application templates and rule sets that are
instrumental in rapidly building and easily maintaining BroadVision One-To-One
application products. A description of our tools products is as follows:

BROADVISION ONE-TO-ONE DESIGN CENTER. A PC-based tool integrated with
Macromedia(R)'s Dreamweaver 2 that offers Web authors and Internet application
developers faster time to market by shortening the development cycle. It also
requires fewer specialized skills and reduces overall development and
maintenance costs. This tool gives the Web author direct access to our powerful
personalization and functional components through a series of wizards in the
Dreamweaver visual development environment. These wizards generate server-side
JavaScript, which is the primary programming language for our applications. By
making simple point and click choices, the Web author can visually construct a
complete, dynamic application without having to write HTML or JavaScript. In
addition, because the wizards directly access information on our development
server, the code is generated correctly the first time, reducing human error.
The result is increased productivity and accuracy.

BROADVISION ONE-TO-ONE COMMAND CENTER. A PC-based tool that allows
non-technical business managers to make rapid changes to the Web site without
programmer intervention. With this tool, business managers can define rules
incorporating "if-then" relationships to match content to users based on profile
information, transaction history, session behavior and other data. They can also
develop business rules that evaluate user information gathered during previous
interactions and use it to target products and services during subsequent
interactions. Also, business managers can make real-time changes to content and
generate management reports that monitor the activity on their Web site,
enabling the evaluation of the effectiveness of content and services being
offered on the site.

BROADVISION ONE-TO-ONE PUBLISHING CENTER. A Java- and Web-based tool that
allows a distributed and remote team of non-technical content experts to manage
most aspects of site content collaboratively, including creating, editing,
staging, production and archiving. This tool provides personal and shared
in-boxes that enable teams of content creators to collaborate in developing
content. A programming calendar facilitates staging, scheduling and coordination
of content publishing. This tool provides the ability to preview content prior
to publishing, to control

40
<PAGE> 41

access to publishing and to capture content classification information. It
supports content created with HTML editors, Microsoft Office products and Lotus
Domino.

BROADVISION ONE-TO-ONE INSTANT PUBLISHER. A Java- and Web-based tool
designed for casual content contributors. It provides simple, personalized
publishing forms, so that casual contributors can leverage the functionality of
the BroadVision One-To-One Publishing Center without becoming expert users.

OTHER PRODUCTS

In addition to our proprietary products, we have entered into agreements
that enable us to resell third-party software products from Bluegill,
CyberSource, Informix, Interwoven, IONA Technologies, Macromedia, Net
Perceptions, Oracle, Sybase and Verity. These are sublicensed to end users and
either incorporated in or sold as options to our products. License revenue from
these third-party products was insignificant and constituted less than 2% of
total software product license revenues in each of the years ended December 31,
1996, 1997 and 1998 and approximately 4% in the six months ended June 30, 1999.

PRODUCT DEVELOPMENT

We believe that our future success will depend in large part on our ability
to enhance the BroadVision One-To-One product suite, develop new products,
maintain technological leadership and satisfy an evolving range of customer
requirements for large-scale interactive online relationship management
applications. Our product development organization is responsible for product
architecture, core technology, product testing and quality assurance, writing
product user documentation and expanding the ability of BroadVision One-To-One
products to operate with the leading hardware platforms, operating systems,
database management systems and key electronic commerce transaction processing
standards. Since inception, we have made substantial investments in product
development and related activities. Certain technologies have been acquired and
integrated into BroadVision One-To-One products through licensing arrangements.

As of June 30, 1999, there were 75 employees in our product development
organization. Our research and development expenses were $5.0 million in the
year ended December 31, 1996, $7.4 million in the year ended December 31, 1997,
$9.2 million in the year ended December 31, 1998, and $6.2 million in the six
months ended June 30, 1999. To date, we have not capitalized any software
development costs as products are made available for general release relatively
concurrent with the establishment of technological feasibility. We expect to
continue to devote substantial resources to our product development activities.

PROFESSIONAL SERVICES

Our Worldwide Professional Services Organization provides a broad range of
consulting services in support of all of our products. This organization
provides business application expertise, technical know-how and product
knowledge to complement our products and to provide solutions that meet customer
business requirements. By using our services, customers are able to build a
customized application solution to maximize the benefits of one-to-one
relationship management. A summary of the professional services that we provide
is as follows:

STRATEGIC SERVICES. We provide business strategy and process consulting to
assist customers in defining and planning profitable online businesses. Services
include in-depth needs analysis, customer segmentation, site storyboarding and
preparation of detailed plans and procedures necessary to achieve timely and
successful implementation of our software products. Strategic Services
consulting is generally offered on a time and materials basis.

INTERACTIVE SERVICES. We provide technical services for development of
customized BroadVision One-To-One applications, custom interfaces, data
conversions and system integra-

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<PAGE> 42

tion. These consultants participate in a wide range of activities, including
requirements definition and application design, development and implementation.
These consultants also provide advanced technology services focused on
application development for custom objects and templates and database
administration and tuning. Interactive Services consulting is generally offered
on a time and materials basis.

CONTENT AND CREATIVE SERVICES. This group specializes in content
management, sourcing, workflow processes and user-interface design. The group is
made up of BroadVision One-To-One product design experts and a variety of
leading design houses. This unique team combines extensive interactive design
and marketing experience to build effective user interfaces. Content and
Creative Services consulting is generally offered on a time and materials basis.

EDUCATION SERVICES. These services are offered to customers either at our
education facilities or at the customers' locations, as either standard or
customized classes. These classes are priced at either fixed daily rates or on a
per-class basis.

TECHNICAL SUPPORT. Under our standard maintenance agreement, we provide
telephone support and upgrade rights to new releases (including patch releases
as necessary) and product enhancements. The annual maintenance fee for these
services is based upon a percentage of the then-current list price for the
licensed software fee, payable annually in advance.

STRATEGIC ALLIANCES

A significant element of our sales strategy is to engage in strategic
business alliances to assist us in marketing, selling and developing customer
applications. As of June 30, 1999, we have developed key strategic business
alliances with over 95 systems integration, design, consulting and other
services organizations throughout the world, including Andersen Consulting,
ASE/Broadiant, Cambridge Technology Partners, Ernst & Young, Hewlett-Packard,
Itochu, GranVia Internet, NTT Data, Security First and Sema.

In April 1999, we announced a strategic alliance with Hewlett-Packard.
Hewlett-Packard has agreed to resell and support the current BroadVision
One-To-One product suite and to co-develop, sell and support integrated
business-portal solutions that will act as the interface to next generation
e-services for enterprise customers. Hewlett-Packard is leveraging its
approximately 5,000 person global sales force to resell and support the current
BroadVision One-To-One product suite. The new co-developed products are being
developed to run on multiple platforms and to enable enterprise customers to
deploy quickly and easily a series of advanced, personalized business-portal
solutions that provide integrated commerce, marketing and customer-relationship
management across Web sites, e-mail, call centers, PCs, kiosks, mobile phones
and personal digital assistants.

Additionally, we have developed key technology partnerships with leading
Internet focused companies in areas complementary to our solutions, such as data
analysis and reporting, enterprise application integration, enterprise Web
management, call center management, voice recognition, payment processing,
auctioning and XML. These technology partnerships enhance our ability to base
our products on industry standards and to take advantage of current and emerging
technologies. These alliances include companies such as Andromedia, BroadBase
Software, CyberCash, Genesys Systems, Hewlett-Packard, Interwoven, Nuance
Communications, Moai Technologies, OnDisplay, PaylinX, Pegasystems and Security
First. Our technology partnerships support our strategy of integrating
throughout the extended enterprise, from multiple touchpoints such as Nuance's
voice recognition/voice response technology, to integration with enterprise
applications using technology such as Active Software's ActiveWorks.

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<PAGE> 43

CUSTOMERS AND MARKETS

As of June 30, 1999, we have licensed our products to over 280 end-user
customers and 95 partners. As of June 30, 1999, our products were commercially
deployed in over 150 live Web sites. We have targeted a number of markets that
we believe to be especially conducive to one-to-one relationship management
applications such as financial services, manufacturing, media and publishing,
retail and distribution, technology, telecommunications, and transportation. Our
primary target customers are Global 2000 organizations that are at the forefront
of building innovative Internet applications to increase revenues and reduce
operational costs. We also target pure-play Internet companies that have built
or are building their core businesses on the Internet. In the year ended
December 31, 1998, no customer accounted for more than 10% of our total revenues
and, during the six months ended June 30, 1999, one customer accounted for
approximately 11% of our total revenues.

The following table sets forth a representative list of our customers
organized by industry segment.

<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------
TARGET INDUSTRY SAMPLE APPLICATIONS SAMPLE CUSTOMERS
- ----------------------------------------------------------------------------------------
Financial services and Home banking Bank Austria
insurance Online brokerage Banque Cantonale de Geneve
Obtaining information on and Credit Suisse
selecting: The Hartford
-Loans ING Bank
-Mutual funds USAA
-Insurance
-Knowledge management
- ----------------------------------------------------------------------------------------
High technology and Knowledge management Hewlett-Packard
manufacturing Business-to-business Macromedia
purchasing Nortel Networks
Business-to-consumer Solectron
purchasing Xerox
- ----------------------------------------------------------------------------------------
Internet Electronic storefronts chipshot.com
Mercata
Outpost.com
Pets.com
- ----------------------------------------------------------------------------------------
Retail and distribution Online shopping Circuit City
Interactive catalogues The Home Depot
OfficeMax
Sears Roebuck
Wal-Mart
- ----------------------------------------------------------------------------------------
Travel and leisure Reservations Air Miles
Travel planning American Airlines
Brand projection, loyalty
programs and affinity
marketing
- ----------------------------------------------------------------------------------------
Telecommunications Commerce: Telia
Business-to-business and TELUS
business-to-consumer Vodafone
Online services
Self-service (call centers)
- ----------------------------------------------------------------------------------------
</TABLE>

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<PAGE> 44

SALES AND MARKETING

We market our products primarily through a direct sales organization with
operations in North America, Europe and Asia/Pacific. On June 30, 1999, our
direct sales organization included 109 sales representatives, managers and sales
support. We have a sales office at our headquarters in Redwood City, California
and have North American sales offices in Atlanta, Boston, Chicago, Dallas, Los
Angeles, Minneapolis and New York City and a sales and service office in
Washington D.C. for the U.S. Federal Government. We have sales offices in
London, England; Paris, France; Wanchai, Hong Kong; Munich, Germany; Milan,
Italy; Tokyo, Japan; Amsterdam, The Netherlands; Wheelock Place, Singapore; and
Basel, Switzerland.

A component of our strategy is continued expansion of our international
activities. We intend to broaden our presence in international markets by
expanding our international sales force and by entering into additional
distribution agreements. We also contract with third-party resellers,
distributors and systems integrators in North America, South America, Europe and
Asia. We intend to increase our use of this distribution channel.

Initial sales activities typically include a demonstration of BroadVision
One-To-One product suite capabilities at the prospect's site, followed by one or
more detailed technical reviews, often presented at our headquarters. The sales
process usually involves collaboration with the prospective customer in order to
specify the scope of the application. Our professional services organization
typically plays a key role in helping customers to design, and then develop,
their applications.

Our marketing efforts are targeted at:

- product strategy development and product management;

- building market awareness through press and analysts;

- producing and maintaining marketing information and sales tools;

- generating and developing customer leads; and

- sourcing and managing relationships with systems integrators, value-added
resellers, creative design and advertising agencies and technology
partners.

As of June 30, 1999, 40 employees were engaged in a variety of marketing
activities, including preparing marketing research, product planning and
collateral marketing materials, managing press coverage and other public
relations, identifying potential customers, attending trade shows, seminars and
conferences, establishing and maintaining close relationships with recognized
industry analysts and maintaining our Web site.

COMPETITION

The market for one-to-one relationship management applications is rapidly
evolving and intensely competitive. We expect competition to persist and
intensify in the future. Our primary competition currently includes the
following:

- in-house development efforts by prospective customers or partners;

- other vendors of application software or application development
platforms and tools directed at interactive commerce and financial
services, like ATG, InterWorld, Open Market and Vignette;

- Web content developers that develop custom software or integrate other
application software into custom solutions;

- International Business Machines; and

- Microsoft.

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<PAGE> 45

The principal competitive factors affecting the market for our products are:

- depth and breadth of functionality offered;

- ease of application development;

- time required for application development;

- reliance on industry standards;

- product reliability;

- proven track record;

- scalability;

- maintainability;

- personalization and other features;

- product quality;

- price; and

- customer support.

We believe that we presently compete favorably with respect to each of these
factors. However, our market is still evolving, and we cannot assure you that we
will be able to compete successfully with current or future competitors.

TECHNOLOGY

We believe that the technical demands of interactive one-to-one
relationship management on the Internet require an architectural design that is
standards based, open, interoperable and flexible. We have designed our current
product suite as a modular, component based architectural solution for building
dynamic, scalable and extensible Internet applications. By emphasizing reusable
methods, separation of application logic, business rules and data, and adherence
to open standards, the BroadVision One-To-One product suite provides an
efficient architecture for customers and partners to build, modify, and control
applications, as well as to integrate them with external business systems. We
believe this architecture also provides a robust foundation on which we can
rapidly develop new products.

We believe our advanced technology enables the delivery of robust, scalable
and innovative one-to-one relationship management solutions into the market
faster and at a lower cost than alternatives. Our technology consists of the
following key elements:

ADHERENCE TO INDUSTRY STANDARDS

Adherence to industry standards protects a customer's investment by
providing compatibility with existing applications, enabling ease of
modification and reducing the need for software to be rewritten. We have
invested substantially in developing our architecture to comply with CORBA, a
standard for applications software design and development widely adopted in the
commercial software industry. Applications that are CORBA-compliant can run on
either single computers with one or more processors or across large networks,
allow replication and relocation of object servers to improve system
performance, are platform independent, and have strongly defined application
programming interfaces through the use of the Interface Definition Language
specified by CORBA.

We are also strongly committed to Java and Java-based technologies such as
Enterprise Java Beans, and our application templates are written in JavaScript.
Most of our programs are written in C++ and Java, widely accepted standard
programming languages for developing

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<PAGE> 46

object-oriented applications. In addition to CORBA, C++ and Java, we use other
widely accepted standards in developing our products, including SQL (Structured
Query Language) for accessing relational database management systems, CGI
(Common Gateway Interface) and HTTP (Hypertext Transfer Protocol) for Internet
access, NSAPI (Netscape Application Programming Interface) for access to
Netscape's Internet servers, SSL (Secure Socket Layer) for secure transmissions
over networks and the RC2 and MD5 encryption algorithms supplied by RSA. Our
application products can be operated in conjunction with relational database
management systems provided by Informix, Microsoft, Oracle and Sybase.

N-TIER ARCHITECTURE

Our application products utilize a modular, N-tier architecture that
logically separates application presentation, business rules and data. Between
each of these tiers are session manager and adapters to integrate to external
business systems interface technologies, described below, that establish
seamless interoperability between application components. This architecture
partitions applications across:

- A front-end tier that manages the application presentation and interface
to Web site visitors;

- Application engine tiers that manage the one-to-one life cycle
activities -- community, profiling, targeting and transactions -- and the
business rules that define the interactive characteristics and behavior
of one-to-one relationship management applications. This layer utilizes a
lightweight component model, which can be distributed across multiple
logical and physical processors, thus enabling the N-tier design of the
application; and

- A back-end tier that integrates underlying database management systems
with external business systems that perform specialized relationship
management functions.

SESSION MANAGER

We have developed proprietary "session manager" technology designed to
manage the high volume of dynamic interactions that occur in online sessions
between many concurrent Web site visitors and a relationship management
application. The session manager enables three key activities:

- Maintaining user profile information between visitors and sites so that
each current and future interaction can trigger a response appropriate to
the objectives of both visitor and site provider;

- Interpreting application objects and templates in real time and
retrieving profile data and business rules to dynamically generate HTML
code that tailors content, Web pages and interactions to the needs and
interests of individual Web site visitors; and

- Enabling application scalability by allowing Web site providers to add
additional software processes or hardware processors to their Web systems
to support more concurrent Web site visitors without incurring
performance degradation or additional overhead in application
maintenance.

COMPONENTS AND APPLICATION TEMPLATES

We believe that the costs and time associated with Internet application
development and maintenance can be substantially reduced with our technology for
object-oriented application development. This technology consists primarily of
customizable components and application templates. Utilized in combination with
our structured development methodology, these technologies are designed to help
customers and partners create libraries of reusable program components that
increase application quality and reduce cost and time-to-market of new and

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<PAGE> 47

maintained applications. In addition, application templates, written in
JavaScript, enable business managers to define and implement business rules
through the BroadVision One-To-One Command Center on a real-time basis. Our
consultants currently use these technologies to develop application solutions
for customers, and our Education Services Group offers training classes to
customers and partners on the use of components and application templates.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

Our success and ability to compete are dependent to a significant degree on
our proprietary technology. We rely on a combination of patent, copyright,
trademark, service mark, trade secret laws and contractual restrictions to
protect our proprietary rights in products and services. We hold a patent issued
on January 20, 1998 to us, covering certain elements of our BroadVision
One-To-One Enterprise product. This patent is the subject of a lawsuit described
in "Risk Factors -- Our success and competitive position depends on our ability
to protect our proprietary technology." We have registered "BroadVision" and
"BroadVision One-To-One" as trademarks in the United States. We cannot assure
you that the steps taken by us will prevent misappropriation of our technology
or that agreements entered into for that purpose will be enforceable.

In addition, litigation like the lawsuit against ATG may be necessary in
the future to enforce our intellectual property rights, to protect our trade
secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. We also
cannot guarantee that infringement or other claims will not be asserted or
prosecuted against us in the future whether resulting from our intellectual
property or licenses from third parties. Such claims or litigation, whether
successful or unsuccessful, could result in substantial costs and diversions of
resources, either of which could harm our business.

We rely upon certain software that we license from third parties, including
relational database management systems from Oracle and Sybase, object request
broker software from IONA Technologies, database access technology from Rogue
Wave Software and other software that is integrated with internally developed
software and used in our software to perform key functions. In this regard, all
of our services incorporate data encryption and authentication technology
licensed from RSA. There can also be no assurance that our third-party
technology licenses will continue to be available to us on commercially
reasonable terms, if at all. The loss of or inability to maintain any of these
technology licenses could result in delays in introduction of our products and
services until equivalent technology, if available, is identified, licensed and
integrated, which could have a material adverse effect on our business.

EMPLOYEES

As of June 30, 1999, we employed a total of 358 full-time employees,
including 149 in sales and marketing, 75 in product development, 93 in
professional services and client support, and 41 in finance, administration and
operations. We employed 271 full-time employees as of December 31, 1998, 188
full-time employees as of December 31, 1997 and 148 full-time employees as of
December 31, 1996.

We believe that our future success depends on attracting and retaining
highly skilled personnel. Competition for such personnel is intense, and we
cannot assure you that we will continue to be able to attract and retain
high-caliber employees.

Our employees are not represented by any collective bargaining unit. We
have never experienced a work stoppage and consider our employee relations to be
good.

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<PAGE> 48

FACILITIES

Our principal administration, research and development, sales, consulting
and support facilities are located in Redwood City, California, where we occupy
approximately 60,000 square feet pursuant to a lease that expires in 2007. In
the year ended December 31, 1998, our rent for this facility was $1.1 million.
During March 1999, we entered into a lease agreement through December 2007 for
an additional 55,000 square feet of office space adjacent to our corporate
headquarters building in Redwood City, California. Our European headquarters are
located in Bottmingen, Switzerland, where we lease approximately 2,282 square
feet.

We also rent space in various cities to support our sales and field support
activities, including Irvine, CA; Hare Hatch, England; Courbevoie, France; Koln,
Germany; Munchen, Germany; Atlanta, GA; Wanchai, Hong Kong; Schaumburg, IL;
Tokyo, Japan; Newton, MA; Bethesda, MD; Amersfoort, The Netherlands; New York,
NY; Wheelock Place, Singapore; Madrid, Spain; Dallas, TX; and Ashburn, VA. We
believe that our existing facilities are adequate to meet our needs for the
foreseeable future.

SUBSIDIARIES

The following is a list of our wholly owned subsidiaries and their
registered addresses:

- BroadVision Asia Pacific Ltd., organized under the Companies Ordinance of
Hong Kong and whose registered address is Room 3203, 32/Fl Central Plaza,
18 Harbour Road, Wanchai, Hong Kong.

- BroadVision B.V., organized under the laws of The Netherlands and whose
registered address is Huizermaatweg 530, 1276 LM Huizen, The Netherlands.

- BroadVision Srl, organized under the laws of Italy and whose registered
address is Via Conservatorio 22, 20122 Milano, Italy.

- BroadVision France S.A., organized under the laws of France and whose
registered address is 3 rue Houssaye, 75008, Paris, France.

- BroadVision Deutschland GmbH, organized under the laws of Germany and
whose registered address is Prinzregentenstrasse 20, 80538 Munchen,
Germany.

- BroadVision Switzerland, A.G., organized under the laws of Switzerland
and whose registered address is Fiechthagstrasse 4, 4103 Bottmingen,
Switzerland.

- BroadVision U.K., Ltd., organized under the laws of England and Wales and
whose registered address is Hare Hatch Grange, Bath Road, Hare Hatch,
Berkshire, RG10 9SA, United Kingdom.

LEGAL PROCEEDINGS

On December 11, 1998, we filed a lawsuit against ATG in the Northern
District of California. The complaint alleges that ATG is infringing our U.S.
Patent No. 5,710,887 and seeks injunctive relief and unspecified damages. On
February 3, 1999, ATG filed an answer and counterclaim against us in which ATG
seeks judgment for non-infringement and invalidity of the patent. Trial is set
for October 16, 2000. While the outcome of this lawsuit cannot be predicted with
certainty, we currently expect that this lawsuit will not materially adversely
affect our business. See "Risk Factors -- Our success and competitive position
depends on our ability to protect our proprietary technology" for a description
of the risks associated with this lawsuit.

We are not a party to any other litigation or arbitration proceedings that
would have, or during the last two fiscal years have had, a material effect on
our business.

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<PAGE> 49

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL

The following table sets forth certain information regarding our directors,
executive officers and key personnel as of July 31, 1999.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Pehong Chen....................... 41 Chairman of the Board, Chief Executive Officer and
President
Randall C. Bolten................. 46 Chief Financial Officer and Vice President, Operations
Clark W. Catelain................. 52 Vice President, Engineering
Eric J. Golin..................... 39 Vice President, Chief Technology Officer
Michael A. Kennedy................ 36 Vice President of Global Strategic Alliances
Giuseppe Kobayashi................ 43 Vice President and General Manager of Asia/Pacific
Operations
Francois Stieger.................. 50 Vice President and General Manager of European
Operations
James W. Thanos................... 50 Vice President and General Manager, Americas
Perry W. Thorndyke................ 50 Vice President, Business Development
Sandra J. Vaughan................. 33 Vice President, Marketing
Kenneth L. Guernsey............... 47 Secretary
David L. Anderson(1)(2)........... 55 Director
Yogen K. Dalal(1)(2).............. 49 Director
Todd A. Garrett................... 51 Director
Koh Boon Hwee(2).................. 48 Director
Carl Pascarella................... 46 Director
</TABLE>

- -------------------------
(1) Member of the Audit Committee

(2) Member of the Compensation Committee

PEHONG CHEN has served as our Chairman of the Board, Chief Executive
Officer and President since our incorporation in May 1993. From 1992 to 1993,
Dr. Chen served as the Vice President of Multimedia Technology at Sybase, a
supplier of client-server software products. Dr. Chen founded and, from 1989 to
1992, served as President of Gain Technology, a provider of multimedia
applications development systems, which was acquired by Sybase. He received a
B.S. in Computer Science from National Taiwan University, an M.S. in Computer
Science from Indiana University and a Ph.D. in Computer Science from the
University of California at Berkeley.

RANDALL C. BOLTEN has served as our Chief Financial Officer and Vice
President, Operations, since September 1995. From 1994 to 1995, Mr. Bolten
served as a financial consultant to various entrepreneurial enterprises. From
1992 to 1994, Mr. Bolten served as Chief Financial Officer of BioCad
Corporation, a supplier of drug discovery software products. From 1990 to 1992,
Mr. Bolten served as Chief Financial Officer, Business Development Unit and then
Vice President, Finance of Teknekron, a company engaged in the management of
various high technology companies. He received an A.B. in Economics from
Princeton University and an M.B.A. from Stanford University.

CLARK W. CATELAIN has served as our Vice President, Engineering, since June
1995. From 1989 to May 1995, Mr. Catelain served as the Senior Vice President,
Engineering of Gupta, a supplier of client-server database products. Mr.
Catelain received a B.S. in Mathematics and Computer Science from Purdue
University.

ERIC J. GOLIN has served as our Vice President, Chief Technology Officer
since June 1999. From September 1997 to June 1999, Dr. Golin served as our Vice
President of Worldwide

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<PAGE> 50

Professional Services. From September 1994 to September 1997, Dr. Golin served
as our Senior Architecture Engineer and later as Senior Director, Engineering.
From September 1993 to September 1994, Dr. Golin was a principal architect for
OpenVision Technology. From September 1989 to September 1993, Dr. Golin was
Assistant Professor of Computer Science at the University of Illinois at
Urbana-Champaign. Dr. Golin received an B.S., M.S. and a Ph.D. in Computer
Science from Brown University.

MICHAEL A. KENNEDY has served as our Vice President, Global Strategic
Alliances, since September 1997. From September 1995 to August 1997, Mr. Kennedy
served as Senior Director, Marketing. From August 1993 to August 1995, Mr.
Kennedy served as Director, New Media Business Development for Oracle, supplier
of database software. From December 1989 to July 1993, Mr. Kennedy served as
Senior Product Marketing Manager for Oracle. Mr. Kennedy received a B.S. in
Computer Science from the Aberdeen University, Scotland.

GIUSEPPE KOBAYASHI has served as our Vice President and General Manager of
Asia/Pacific Operations since January 1995. From 1994 to the present, Mr.
Kobayashi has also served as consultant to Wind River Systems, a supplier of
software development systems. During 1993, Mr. Kobayashi was General Manager,
Japan Operations, Gain Group at Sybase. During 1992, Mr. Kobayashi was General
Manager of Operations at Gain Technology. From 1990 to 1992, Mr. Kobayashi
served as Managing Director of Asia Pacific Operations at Teradata, a supplier
of database software. Mr. Kobayashi holds a B.S. in Computer Science from the
University of San Francisco.

FRANCOIS STIEGER has served as our Vice President and General Manager of
European Operations since January 1996. From July 1994 to December 1995, Mr.
Stieger was employed as Senior Vice President, Europe and Middle East, for
OpenVision Technologies, a supplier of distributed systems management products
and services. From 1993 to 1994, Mr. Stieger served as Vice President, Europe of
the Gain Division of Sybase. From 1987 to 1992, Mr. Stieger served as Vice
President, Europe, Central and Southern region of Oracle, a supplier of
relational database software. Mr. Stieger holds a Diplome Universitaire De
Technologie in Mathematics and Mechanics from the University of Strasbourg.

JAMES W. THANOS has served as our Vice President and General Manager,
Americas since January 1998. From January 1995 to January 1998, Mr. Thanos
served as Vice President of North American Operations of Aurum Software, a sales
force automation company. From May 1994 to January 1995, Mr. Thanos served as
Vice President of Sales of Digital Equipment Corporation. From January 1993 to
December 1994, Mr. Thanos served as Vice President of Sales of Harvest Software,
an optical character recognition software company. From December 1988 to January
1993, Mr. Thanos served as Vice President of Sales Operations of Metaphor, a
decision support software company. Mr. Thanos holds a B.A. in International
Relations from Johns Hopkins University.

PERRY W. THORNDYKE has served as our Vice President, Business Development
since May 1998. From July 1997 to May 1998, Dr. Thorndyke served as our Vice
President, Marketing. From August 1996 to July 1997, Dr. Thorndyke served as our
Vice President, Business and Channel Development. From February 1995 to January
1996, Dr. Thorndyke served as a management consultant to the Vice President,
Marketing for Quintus, a supplier of client/server solutions for customer
information management. From February 1994 to January 1995, Dr. Thorndyke served
as an management consultant on technology strategy for customer information
management systems to independent software vendors and user organizations. From
May 1992 to January 1994, Dr. Thorndyke served as Vice President and Division
Manager for retail banking systems at Wells Fargo Bank. From 1990 to May 1992,
Dr. Thorndyke served as Director of Marketing and Business Development at
Metaphor Computer Systems, a supplier of client-server software applications for
PC-based support decision products. Dr. Thorndyke received a B.A. in Computer

50
<PAGE> 51

and Information Sciences from Yale University and a Ph.D. in Cognitive
Psychology from Stanford University.

SANDRA J. VAUGHAN has served as our Vice President, Marketing since May
1998. From June 1996 to April 1998, Ms. Vaughan served as Senior Director and
later as our Vice President, Corporate Marketing. From 1993 to 1996, Ms. Vaughan
served as Group Director, North America Field Marketing of Sybase. From 1989 to
1993, Ms. Vaughan served as Director, Customer Programs of Oracle. Ms. Vaughan
received a B.S. in Managerial Economics from the University of California,
Davis.

KENNETH L. GUERNSEY has served as our Secretary since May 1995. From 1988
to the present, Mr. Guernsey has been a partner in the law firm of Cooley
Godward LLP, where he served as Managing Partner from April 1990 to October
1996. Mr. Guernsey received a B.S. in Mathematics and an M.B.A. and a J.D. from
the University of California, Los Angeles.

DAVID L. ANDERSON has served as one of our directors since November 1993.
Since 1974, Mr. Anderson has been a managing director of Sutter Hill Ventures, a
venture capital investment firm. Mr. Anderson currently serves on the board of
directors of Cytel, Dionex and Molecular Devices. He holds a B.S. in Electrical
Engineering from the Massachusetts Institute of Technology and an M.B.A. from
Harvard University.

YOGEN K. DALAL has served as one of our directors since November 1993. He
joined Mayfield Fund, a venture capital investment firm, in September 1991 and
has been a general partner of several venture capital funds affiliated with
Mayfield Fund since November 1992. Dr. Dalal holds a B.S. in Electrical
Engineering from the India Institute of Technology, Bombay, and an M.S. and a
Ph.D. in Electrical Engineering and Computer Science from Stanford University.

TODD A. GARRETT has served as one of our directors since January 1999.
Since 1985, Mr. Garrett has held various key executive positions with Proctor &
Gamble, including Vice President, Asia-Pacific, Vice President, U.S. Beauty
Care, Group President, President of Worldwide Strategic Planning, Beauty Care
Products and Senior Vice President. Since October 1996, he has served as Chief
Information Officer of Proctor & Gamble. Mr. Garrett holds a B.A. in
Psychology/Sociology from the University of Rochester and an M.B.A. from Xavier
University.

KOH BOON HWEE has served as one of our directors since February 1996. Since
1991, Mr. Koh has been Executive Chairman of the Wuthelam Group of Companies, a
diversified Singapore company with subsidiaries engaged in, among other things,
real estate development, hotel management and high technology. Since 1992, he
has also served as Chairman of the Board of Singapore Telecommunications. Mr.
Koh currently serves on the Board of Directors of Excel Machine Tools, Raffles
Medical Group and Qad. Mr. Koh holds a B.S. in Mechanical Engineering from the
University of London and an M.B.A. from Harvard University.

CARL PASCARELLA has served as one of our directors since September 1997.
Since August 1993, Mr. Pascarella has been President and Chief Executive Officer
of Visa USA. From January 1983 to August 1993, he was Assistant Chief General
Manager of the Asia-Pacific region of Visa USA. Before joining Visa USA, Mr.
Pascarella was Vice President of the International Division of Crocker National
Bank. He also served as Vice President of Metropolitan Bank at BankersTrust. Mr.
Pascarella holds a B.A. in Business Administration from the University of
Buffalo and an M.B.A. from Harvard University.

Each of our directors may be contacted at 585 Broadway, Redwood City,
California 94063.

Our board of directors is responsible for managing us in accordance with
the provisions of our Restated Certificate, Restated Bylaws and applicable law.
The number of directors on our board of directors is established by the board of
directors.

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<PAGE> 52

COMPENSATION OF DIRECTORS

Directors currently do not receive any cash compensation from us for their
services as members of the board of directors although they are reimbursed for
certain expenses in connection with attendance at board and committee meetings.

To date we have granted each of our non-employee directors an option to
purchase between 50,000 and 80,000 shares of our common stock. The options were
granted to each non-employer director upon the later of the closing of our
initial public offering or his election as a director. We may grant our
non-employee directors additional options in the future. To date in 1999, the
only non-employee director who has been granted an option is Mr. Garrett who was
granted a stock option to purchase 80,000 shares of our common stock at an
exercise price of $30.50 per share. The option vests 25% on the one-year
anniversary of the vesting commencement date and monthly thereafter over a
three-year period.

DIRECTORS' INTERESTS

The beneficial ownership of our common stock by each of our directors is
disclosed in the "Principal Stockholders" table.

We have not granted any loans or provided any guarantees for the benefit of
any director.

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<PAGE> 53

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to us with respect
to beneficial ownership of our common stock as of July 31, 1999 by (1) each of
our directors; (2) our Chief Executive Officer and our four other most highly
compensated executive officers for the fiscal year ended December 31, 1998; (3)
all of our executive officers and directors as a group; and (4) each stockholder
known by us to be the beneficial owner of more than 5% of our common stock.

<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
BENEFICIALLY OWNED
NUMBER OF ---------------------
SHARES BENEFICIALLY PRIOR TO AFTER THE
NAME OWNED(1) OFFERING OFFERING
---- ------------------- -------- ---------
<S> <C> <C> <C>
Pehong Chen(2)..................................... 6,375,000 24.0% 23.3
c/o BroadVision, Inc.
585 Broadway
Redwood City, CA 94063
GeoCapital Corp.................................... 1,782,100 7.0 6.8
767 Fifth Ave. 45th Floor
New York, NY 10153
Pilgrim Baxter & Associates........................ 1,298,300 5.1 4.9
825 Duportail Road
Wayne, PA 19087
David L. Anderson(3)............................... 255,236 1.0 *
Randall C. Bolten(4)............................... 204,651 * *
Clark W. Catelain(5)............................... 203,700 * *
Koh Boon Hwee(6)................................... 193,541 * *
Sandra J. Vaughan(7)............................... 113,290 * *
Yogen K. Dalal(8).................................. 92,189 * *
Todd A. Garrett(9)................................. 80,000 * *
Carl Pascarella(10)................................ 50,000 * *
All directors and executive officers as a group (9
persons)(11)..................................... 7,567,607 28.0 27.2
</TABLE>

- -------------------------
* Less than one percent

(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, we
believe that each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned. Applicable percentages are based on 25,561,291 shares outstanding on
July 31, 1999 and 26,311,291 shares of common stock outstanding after the
completion of this offering, adjusted as required by rules promulgated by
the Commission and assuming no exercise of the underwriters' over-allotment
option. 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 exercisable within 60 days are
deemed outstanding. These shares, however, are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.

(2) Includes 1,000,000 shares of common stock issuable upon the exercise of a
stock option exercisable within 60 days of July 31, 1999, subject to
repurchase of unvested shares. Excludes 300,000 shares of common stock held
in trust by independent trustees for the benefit of Dr. Chen's children.

53
<PAGE> 54

(3) Includes 42,384 shares of common stock owned by Sutter Hill Ventures, a
California Limited Partnership, over which Mr. Anderson, a director of
ours, exercises voting and investing power as a managing director of Sutter
Hill Ventures LLC, the general partner of Sutter Hill. Includes 126,446
shares of common stock held in a retirement trust over which Mr. Anderson
exercises voting and investing power. Includes 36,406 shares of common
stock owned by Anvest L.P., over which Mr. Anderson exercises voting and
investing power. Mr. Anderson disclaims beneficial ownership of the shares
of common stock held by the other persons and entities associated with
Sutter Hill, except to the extent of his pecuniary interest therein.
Includes 50,000 shares of common stock issuable upon the exercise of a
stock option exercisable within 60 days of July 31, 1999, subject to
repurchase of unvested shares.

(4) Includes 114,835 shares of common stock held in trust by Mr. Bolten and his
wife for their benefit and 47,983 shares of common stock issuable upon the
exercise of stock options exercisable within 60 days of July 31, 1999,
subject to repurchase of unvested shares.

(5) Includes 95,900 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of July 31, 1999, subject to repurchase
of unvested shares.

(6) Includes 64,433 shares of common stock held by Seven Seas Group Ltd., in
which Mr. Koh holds a controlling interest, and 50,000 shares of common
stock issuable upon the exercise of a stock option exercisable within 60
days of July 31, 1999, subject to repurchase of unvested shares.

(7) Includes 90,333 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of July 31, 1999, subject to repurchase
of unvested shares.

(8) Includes 46,733 shares of common stock held in a family trust over which
Mr. Dalal exercises voting and investing power. Includes 2,500 shares of
common stock held in a retirement trust over which Mr. Dalal exercises
voting and investing power, 50,000 shares of common stock issuable upon the
exercise of stock options exercisable within 60 days of July 31, 1999,
subject to repurchase of unvested shares.

(9) Includes 80,000 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of July 31, 1999, subject to repurchase
of unvested shares.

(10) Includes 50,000 shares of common stock issuable upon the exercise of a
stock option exercisable within 60 days of July 31, 1999, subject to
repurchase of unvested shares.

(11) Includes the information contained in the notes above, as applicable.

54
<PAGE> 55

DESCRIPTION OF CAPITAL STOCK

DEVELOPMENT OF COMMON STOCK

Since we amended and restated our Certificate of Incorporation on June 26,
1996 and upon the completion of this offering, our authorized capital stock has
consisted of 50,000,000 shares of common stock, par value $0.0001 per share, and
5,000,000 shares of preferred stock, par value $0.0001 per share.

Upon the closing of our initial public offering in June 1996, we had
19,619,104 shares of common stock outstanding. Since that time and as of July
31, 1999, we have issued the following additional shares of common stock: (i)
1,698,498 (net of repurchases) shares upon the exercise of outstanding options;
(ii) 631,088 shares pursuant to our 1996 Employee Stock Purchase Plan; (iii)
33,750 shares pursuant to the exercise of outstanding warrants; (iv) 3,455,850
shares pursuant to a follow-on offering of our common stock that closed in March
1998; and (v) 123,001 shares to S1 pursuant to our strategic alliance in October
1998.

As of July 31, 1999 there were 25,561,291 shares of common stock
outstanding held of record by 265 stockholders.

COMMON STOCK

The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any outstanding shares of the preferred
stock, the holders of common stock are entitled to receive ratably such
dividends as may be declared by the board of directors out of funds legally
available for that purpose. In the event of a liquidation, dissolution, or
winding up of the company, holders of the common stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preferences of any outstanding shares of preferred stock. Holders of common
stock have no preemptive rights and no right to convert their common stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are, and
all shares of common stock to be outstanding upon the completion of this
offering will be, fully paid and nonassessable.

PREFERRED STOCK

Pursuant to the Restated Certificate, the board of directors has the
authority, without further action by the stockholders, to issue up to 5,000,000
shares of preferred stock in one or more series and to fix the designations,
powers, preferences, privileges, and relative participating, optional, or
special rights and the qualifications, limitations, or restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of redemption
and liquidation preferences, any or all of which may be greater than the rights
of the common stock. The board of directors, without stockholder approval, can
issue preferred stock with voting, conversion, or other rights that could impair
the voting power and other rights of the holders of common stock. Preferred
stock could thus be issued quickly with terms calculated to delay or prevent a
change in control or make removal of management more difficult. Additionally,
the issuance of preferred stock may have the effect of decreasing the market
price of the common stock and may adversely affect the voting and other rights
of the holders of common stock. There are no shares of preferred stock
outstanding and we have no current plans to issue any of the preferred stock.

WARRANTS

As of July 31, 1999, we had outstanding warrants to purchase 60,000 shares
of common stock at a weighted average exercise price of approximately $8.50 per
share. The warrants, which expire in June 2002 and February 2007, contain
provisions for the adjustment of the exercise price and the aggregate number of
shares issuable upon the exercise of the warrants
55
<PAGE> 56

under certain circumstances, including stock dividends, stock splits,
reorganizations, reclassifications, and consolidations.

OPTIONS

As of July 31, 1999, options to purchase a total of 4,184,751 shares of
common stock were outstanding under our Equity Incentive Plan, and 29,801 shares
of common stock were available for grant under the Equity Incentive Plan.

EMPLOYEE STOCK PURCHASE PLAN

As of July 31, 1999, we have 509,162 shares reserved for future issuance
under the Employee Stock Purchase Plan. The Purchase Plan permits eligible
employees to purchase common stock equivalent to a percentage of the employee's
earnings, not to exceed 15%, at a price equal to 85% of the fair market value of
the common stock at dates specified by the board of directors as specified in
the Purchase Plan. Under the Purchase Plan, we issued 228,000 shares to
employees in the year ended December 31, 1998.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF CHARTER DOCUMENTS AND DELAWARE LAW

CHARTER DOCUMENTS

The Restated Certificate and Restated Bylaws include a number of provisions
that may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of our company, including the
following:

- the Restated Certificate provides that all stockholder action must be
effected at a duly called meeting of stockholders and not by a consent in
writing;

- the Restated Bylaws provide that special meetings of the stockholders may
be called only by the Chairman of the board of directors, the Chief
Executive Officer, the board of directors pursuant to a resolution
adopted by the board of directors or by the holders of not less than 10%
of the outstanding voting stock;

- the Restated Certificate does not include a provision for cumulative
voting for directors whereby a minority stockholder holding a sufficient
percentage of a class of shares could ensure the election of one or more
directors; and

- the Restated Bylaws establish procedures, including advance notice
procedures, with regard to the nomination of candidates or election as
directors and stockholder proposals.

DELAWARE TAKEOVER STATUTE

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. For purposes of Section 203, a
"business combination" includes a merger, asset sale, or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns or, within three years prior, did own 15% or more of the
corporation's voting stock.

STOCKHOLDER MEETINGS

The Restated Certificate provides that stockholders may not take action by
written consent but only at duly called annual or special meetings of
stockholders.

56
<PAGE> 57

The Restated Bylaws provide that stockholder meetings shall be held at the
place, either within or without the State of Delaware, date and time as may be
designated by the board of directors. If the board of directors does not
designate a place, the meetings shall be held at our principal place of
business. The annual meeting of stockholders for the election of directors and
for other business as may properly be brought before it shall be held on the
date and time as set forth in the notice of meeting.

Special meetings of the stockholders may be called at any time for any
purpose by the Chairman of the board of directors, the Chief Executive Officer,
a majority of the board of directors or the holders of shares of not less than
10% of the outstanding voting stock. Special meeting shall be held at the place,
date and time as designated by the board of directors and specified in the
notice of meeting.

NOTICE OF MEETINGS

Except as otherwise provided by law, written notice of each meeting of
stockholders, whether annual or special, shall be given not less than 10 nor
more than 60 days before the date of the meeting to each stockholder entitled to
vote at the meeting. The notices of all meetings shall state the place, date and
hour of the meeting. The notice of a special meeting shall state, in addition,
the purpose for which the meeting is called.

RECORD DATE

Except as otherwise provided by law, only those persons in whose names
shares stand on our stock records on the record date shall be entitled to vote
at any meeting of stockholders. The record date shall be as set forth in the
notice of meeting.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTORS NOMINATIONS

Stockholders seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors at an annual
meeting of stockholders, must provide timely notice in writing to our Secretary.
To be timely, a notice must be delivered to or mailed and received at our
principal executive offices not later than the 60th day nor earlier than the
90th day prior to the first anniversary of the preceding year's annual meeting.
However, if no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than 30 days from the date contemplated
at the time of the previous year's proxy statement, to be timely, a notice must
be received not earlier than the 90th day nor later than the 60th day prior to
the annual meeting, provided that if less than 70 days prior public announcement
of the meeting date is made, notice must be received not later than the 10th day
following the date on which notice of the meeting date is publicly announced.

AUTHORIZED BUT UNISSUED SHARES

Our authorized but unissued shares are available for future issuance
without stockholder approval. These additional shares may be used for a variety
of corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued shares could render more difficult or discourage an
attempt to obtain control of our company by means of a proxy contest, tender
offer, merger or otherwise.

STOCK CERTIFICATES

Stockholders are entitled to certificates, in the form as may be prescribed
by our Restated Certificate and by law, certifying the number and class of
shares owned by the stockholder. Each certificate shall be signed by, or in our
name by, the Chairman of the Board of Directors, or the

57
<PAGE> 58

President or a Vice President, and the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary.

LISTING

Our common stock is approved for quotation on the Nasdaq National Market
under the symbol "BVSN." We have applied to list our common stock on the Neuer
Markt segment of the Frankfurt Stock Exchange under the symbol "BDN".

TRANSFER AGENT AND REGISTRAR

American Securities Transfer Incorporated has been appointed as the
transfer agent and registrar for the common stock. Its telephone number in the
United States is (800) 962-4284.

PAYING AND DEPOSITARY AGENTS; NOTICES

In addition to our Secretary, and
its branches will serve as paying and depositary agents with respect to the
deposit of shares of our common stock in order to exercise the right to attend a
stockholders' meeting and all other measures regarding common stock that may be
taken free of charge when presenting a share certificate.

Stockholder notices will be published in one German national newspaper
approved for official notices by the Frankfurt Stock Exchange.

TRANSFERABILITY, DELIVERABILITY AND CLEARING

Except as otherwise established by agreement and subject to applicable law,
shares may be transferred on our books by the surrender to us or to our transfer
agent, of the certificate representing such shares properly endorsed and with
such proof of authority or the authenticity of signature as we or our transfer
agent may reasonably require.

Shares of our common stock traded on the Neuer Markt will be represented by
one or more global share certificates deposited with The Depository Trust
Company, or DTC, who will hold these shares for Deutsche Borse Clearing AG, or
DBC. On or about , 1999, the global share certificates
representing shares of our common stock traded on the Neuer Markt will be
deposited with DTC. Shares of our common stock are expected to be accepted for
clearance through DTC. Shares of our common stock may be credited at the option
of Neuer Markt investors either to a German bank's DBC account or to the
accounts of participants with DBC.

The German securities identification number or WKN of our common stock is
901 599. The international securities identification number or ISIN of our
common stock is . The CUSIP number of our common stock is 111412
10 2.

LEGAL MATTERS

The validity of the shares of common stock we are offering under this
prospectus will be passed upon for us by our counsel, Cooley Godward LLP, San
Francisco, California and certain other legal matters will be passed upon for us
by our counsel, Hengeler Mueller Weitzel Wirtz, Frankfurt, Germany. Certain
legal matters in connection with this offering will be passed upon for the
underwriters by Brobeck, Phleger & Harrison LLP, Palo Alto, California and
Deringer Tessin Herrman Sedemund, Frankfurt, Germany.

EXPERTS

Our consolidated balance sheets as of December 31, 1996, 1997 and 1998, and
the related statements of operations, stockholders' equity and cash flows for
each of the years in the three-

58
<PAGE> 59

year period ended December 31, 1998, have been included in the registration
statement in reliance upon the report of KPMG LLP, independent auditors and upon
the authority of that firm as experts in accounting and auditing.

AVAILABLE INFORMATION

We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and in accordance with the Exchange Act we file
reports, proxy statements and other information with the Securities and Exchange
Commission. These reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the Commission's Regional Offices located at Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Reports,
proxy statements and other information that we file electronically with the
Commission are available at the Commission's Web site at http://www.sec.gov. The
common stock is listed on the Nasdaq National Market, and reports, proxy
statements and other information concerning us may also be inspected at the
offices of the National Association of Securities Dealers, Inc. 1735 K. Street,
N.W., Washington, D.C. 20006.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act with respect to the shares of
common stock we are offering under this prospectus. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits to the registration statement. For further information with respect to
us and the common stock we are offering under this prospectus, reference is made
to the registration statement and the exhibits and schedules filed as a part of
the registration statement. The registration statement may be inspected without
charge at the Securities and Exchange Commission's principal office at 450 Fifth
Street, Washington D.C. 20549, and copies of all or any part thereof may be
obtained from the Public Reference Section, Securities and Exchange Commission,
450 Fifth Street, N.W., Washington D.C. 20549, upon payment of the prescribed
fees.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents have been filed by us with the Commission and are
incorporated herein by reference:

1. Annual Report on Form 10-K for the fiscal year ended December 31, 1998;

2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;

3. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, as
amended;

4. Proxy Statement for our 1999 Annual Meeting; and

5. The description of the common stock contained in our Registration
Statement on Form 8-A.

All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus and prior to the termination
of the offering shall be deemed to be incorporated by reference herein and to be
a part hereof from the date of filing such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this
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<PAGE> 60

prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.

This prospectus incorporates documents by reference that are not presented
in the prospectus or delivered with the prospectus. We will provide without
charge to each person to whom this prospectus has been delivered, and who so
requests, a copy of any and all of the documents referred to above that have
been or may be incorporated by reference into this prospectus and deemed to be
part of the prospectus. We will not provide exhibits to such requested documents
unless the exhibits are specifically incorporated by reference in such
documents. You should direct any requests to Corporate Secretary, BroadVision,
Inc., 585 Broadway, Redwood City, California 94063, telephone number in the
United States (650) 261-5100.

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<PAGE> 61

BROADVISION, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 62

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
BroadVision, Inc.:

We have audited the accompanying consolidated balance sheets of
BroadVision, Inc. and subsidiaries as of December 31, 1996, 1997 and 1998, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BroadVision,
Inc. and subsidiaries as of December 31, 1996, 1997 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles.

KPMG LLP

Mountain View, California
January 26, 1999

F-2
<PAGE> 63

BROADVISION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30,
1996 1997 1998 1999
------- ------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash, and cash equivalents....................... $17,608 $ 8,277 $ 61,878 $ 53,735
Restricted cash.................................. -- 1,400 -- --
Short-term investments, restricted in 1997....... 2,112 796 -- 18,823
Accounts receivable, less allowance for doubtful
accounts of $191, $671, $788 and $1,018 for
December 31, 1996, 1997 and 1998 and June 30,
1999, respectively............................ 3,332 8,783 15,361 21,479
Prepaids and other............................... 317 566 3,589 3,820
------- ------- -------- --------
Total current assets..................... 23,369 19,822 80,828 97,857
Property and equipment, net........................ 3,024 6,467 8,034 9,978
Long-term investments.............................. -- -- 11,546 28,286
Other assets....................................... 321 250 1,154 1,077
------- ------- -------- --------
Total assets............................. $26,714 $26,539 $101,562 $137,198
======= ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 958 $ 1,863 $ 2,243 $ 3,336
Accrued expenses................................. 2,526 2,168 4,933 7,312
Unearned revenue................................. 409 532 1,918 3,298
Deferred maintenance............................. 924 2,552 6,157 10,165
Current portion of capital lease obligations..... 294 773 709 547
Current portion of long-term debt................ -- 449 548 548
------- ------- -------- --------
Total current liabilities................ 5,111 8,337 16,508 25,206
Capital lease obligations.......................... 495 803 270 16
Long-term debt..................................... -- 2,202 2,924 2,600
Deferred income taxes.............................. -- -- -- 529
Other liabilities.................................. 92 76 51 35
------- ------- -------- --------
Total liabilities........................ 5,698 11,418 19,753 28,386
------- ------- -------- --------
Commitments
Stockholders' equity:
Convertible preferred stock, $0.0001 par value;
5,000 shares authorized; none issued and
outstanding................................... -- -- -- --
Common stock, $0.0001 par value; 50,000 shares
authorized; 19,908, 20,343, 24,796 and 25,508
shares issued and outstanding at December 31,
1996, 1997 and 1998 and June 30, 1999,
respectively.................................. 2 2 2 3
Additional paid-in capital....................... 39,316 40,366 98,767 109,306
Deferred compensation............................ (2,033) (1,605) (555) (389)
Accumulated other comprehensive income........... -- -- 3,198 13,243
Accumulated deficit.............................. (16,269) (23,642) (19,603) (13,351)
------- ------- -------- --------
Total stockholders' equity............... 21,016 15,121 81,809 108,812
------- ------- -------- --------
Total liabilities and stockholders'
equity................................. $26,714 $26,539 $101,562 $137,198
======= ======= ======== ========
</TABLE>

See accompanying notes to consolidated financial statements

F-3
<PAGE> 64

BROADVISION, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ ------------------
1996 1997 1998 1998 1999
-------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses................. $ 7,464 $18,973 $36,067 $15,297 $28,267
Services.......................... 3,418 8,132 14,844 6,167 13,673
-------- ------- ------- ------- -------
Total revenues............ 10,882 27,105 50,911 21,464 41,940
Cost of revenues:
Cost of license revenues.......... 330 1,664 1,001 400 1,784
Cost of service revenues.......... 2,164 4,284 8,704 3,711 7,945
-------- ------- ------- ------- -------
Total cost of revenues.... 2,494 5,948 9,705 4,111 9,729
-------- ------- ------- ------- -------
Gross profit.............. 8,388 21,157 41,206 17,353 32,211
Operating expenses:
Research and development.......... 4,985 7,392 9,227 4,083 6,169
Sales and marketing............... 12,066 18,413 26,269 12,104 17,684
General and administrative........ 2,034 2,990 3,786 1,585 2,882
-------- ------- ------- ------- -------
Total operating
expenses................ 19,085 28,795 39,282 17,772 26,735
-------- ------- ------- ------- -------
Operating income (loss)... (10,697) (7,638) 1,924 (419) 5,476
Other income, net................... 552 265 2,036 613 1,110
-------- ------- ------- ------- -------
Income (loss) before
income taxes............ (10,145) (7,373) 3,960 194 6,586
Income tax benefit (expense)........ -- -- 79 -- (334)
-------- ------- ------- ------- -------
Net income (loss)......... $(10,145) $(7,373) $ 4,039 $ 194 $ 6,252
======== ======= ======= ======= =======
Basic earnings (loss) per share..... $ (0.54) $ (0.36) $ 0.17 $ 0.01 $ 0.25
======== ======= ======= ======= =======
Diluted earnings (loss) per share... $ (0.54) $ (0.36) $ 0.16 $ 0.01 $ 0.22
======== ======= ======= ======= =======
Shares used in computing basic
earnings (loss) per share......... 18,815 20,208 23,346 22,244 24,886
======== ======= ======= ======= =======
Shares used in computing diluted
earnings (loss) per share......... 18,815 20,208 25,653 24,819 27,946
======== ======= ======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements

F-4
<PAGE> 65

BROADVISION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL OTHER
--------------- ---------------- PAID-IN DEFERRED COMPREHENSIVE ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION INCOME DEFICIT
------ ------ ------- ------ ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of December 31, 1995... 8,601 $ 1 6,308 $1 $ 11,412 $(1,036) $ -- $ (6,124)
Net loss and comprehensive loss.... -- -- -- -- -- -- -- (10,145)
Issuance of Series C convertible
preferred ($2.00 per share)....... 3 -- -- -- 6 -- -- --
Issuance of Series E convertible
preferred ($8.00 per share)....... 634 -- -- -- 5,055 -- -- --
Conversion of Series A, B, C and E
preferred to common stock......... (9,238) (1) 9,258 1 -- -- -- --
Issuance of common stock from
public offering, net of costs..... -- -- 3,360 -- 20,755 -- -- --
Issuance of stock under employee
stock purchase plan............... -- -- -- -- 394 -- -- --
Issuance of common stock from
exercise of options............... -- -- 1,112 -- 205 -- -- --
Common stock repurchased........... -- -- (130) -- (21) -- -- --
Deferred compensation on stock
options........................... -- -- -- -- 1,510 (1,510) -- --
Amortization of deferred
compensation...................... -- -- -- -- -- 513 -- --
------ --- ------- -- -------- ------- ------- --------
Balances as of December 31, 1996... -- -- 19,908 2 39,316 (2,033) -- (16,269)
Net loss and comprehensive loss.... -- -- -- -- -- -- -- (7,373)
Issuance of stock under employee
stock purchase plan............... -- -- 242 -- 979 -- -- --
Issuance of common stock from
exercise of options............... -- -- 255 -- 81 -- -- --
Common stock repurchased........... -- -- (62) -- (10) -- -- --
Amortization of deferred
compensation...................... -- -- -- -- -- 428 -- --
------ --- ------- -- -------- ------- ------- --------
Balances as of December 31, 1997... -- -- 20,343 2 40,366 (1,605) -- (23,642)
Comprehensive income:
Net income........................ 4,039
Unrealized gain on equity
securities...................... 3,198
Total comprehensive
income.....................
Issuance of common stock from
public offering, net of costs..... -- -- 3,456 -- 53,745 -- -- --
Issuance of common stock for
long-term investments............. -- -- 123 -- 1,322 -- -- --
Issuance of common stock from
exercise of warrants.............. -- -- 29 -- -- -- -- --
Issuance of stock under employee
stock purchase plan............... -- -- 228 -- 1,599 -- -- --
Issuance of common stock from
exercise of options............... -- -- 633 -- 2,190 -- -- --
Common stock repurchased........... -- -- (16) -- (2) -- -- --
Deferred compensation forfeited due
to voluntary terminations......... -- -- -- -- (693) 693 -- --
Deferred compensation on stock
options........................... -- -- -- -- 240 (240) -- --
Amortization of deferred
compensation...................... -- -- -- -- -- 597 -- --
------ --- ------- -- -------- ------- ------- --------
Balances as of December 31, 1998... -- -- 24,796 2 98,767 (555) 3,198 (19,603)
Comprehensive income:
Net income (unaudited)............ 6,252
Unrealized gain on equity
securities (unaudited).......... 10,045
Total comprehensive income
(unaudited)................
Issuance of common stock under
employee stock purchase plan
(unaudited)....................... -- -- 157 -- 1,709 -- -- --
Issuance of common stock from
exercise of options (unaudited)... -- -- 555 1 2,663 -- -- --
Income tax benefits from stock
options exercised (unaudited)..... -- -- -- -- 6,167 -- -- --
Amortization of deferred
compensation (unaudited).......... -- -- -- -- -- 166 -- --
------ --- ------- -- -------- ------- ------- --------
Balances as of June 30, 1999
(unaudited)....................... -- $-- 25,508 $3 $109,306 $ (389) $13,243 $(13,351)
====== === ======= == ======== ======= ======= ========

TOTAL
COMPREHENSIVE STOCKHOLDERS'
INCOME (LOSS) EQUITY
------------- -------------
<S> <C> <C>
Balances as of December 31, 1995... $ 4,254
Net loss and comprehensive loss.... $(10,145) (10,145)
========
Issuance of Series C convertible
preferred ($2.00 per share)....... 6
Issuance of Series E convertible
preferred ($8.00 per share)....... 5,055
Conversion of Series A, B, C and E
preferred to common stock......... --
Issuance of common stock from
public offering, net of costs..... 20,755
Issuance of stock under employee
stock purchase plan............... 394
Issuance of common stock from
exercise of options............... 205
Common stock repurchased........... (21)
Deferred compensation on stock
options........................... --
Amortization of deferred
compensation...................... 513
--------
Balances as of December 31, 1996... 21,016
Net loss and comprehensive loss.... $ (7,373) (7,373)
========
Issuance of stock under employee
stock purchase plan............... 979
Issuance of common stock from
exercise of options............... 81
Common stock repurchased........... (10)
Amortization of deferred
compensation...................... 428
--------
Balances as of December 31, 1997... 15,121
Comprehensive income:
Net income........................ $ 4,039 4,039
Unrealized gain on equity
securities...................... 3,198 3,198
--------
Total comprehensive
income..................... $ 7,237
========
Issuance of common stock from
public offering, net of costs..... 53,745
Issuance of common stock for
long-term investments............. 1,322
Issuance of common stock from
exercise of warrants.............. --
Issuance of stock under employee
stock purchase plan............... 1,599
Issuance of common stock from
exercise of options............... 2,190
Common stock repurchased........... (2)
Deferred compensation forfeited due
to voluntary terminations......... --
Deferred compensation on stock
options........................... --
Amortization of deferred
compensation...................... 597
--------
Balances as of December 31, 1998... 81,809
Comprehensive income:
Net income (unaudited)............ $ 6,252 6,252
Unrealized gain on equity
securities (unaudited).......... 10,045 10,045
--------
Total comprehensive income
(unaudited)................ $ 16,297
========
Issuance of common stock under
employee stock purchase plan
(unaudited)....................... 1,709
Issuance of common stock from
exercise of options (unaudited)... 2,664
Income tax benefits from stock
options exercised (unaudited)..... 6,167
Amortization of deferred
compensation (unaudited).......... 166
--------
Balances as of June 30, 1999
(unaudited)....................... $108,812
========
</TABLE>

F-5
<PAGE> 66

BROADVISION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $(10,145) $(7,373) $ 4,039 $ 194 $ 6,252
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization......................... 753 1,613 2,947 1,316 1,921
Amortization of deferred compensation................. 513 428 597 180 166
Provision for doubtful accounts and returns........... 196 515 458 283 230
Revenue resulting from non-monetary transactions...... -- -- (2,917) (1,031) --
Amortization of prepaid royalties..................... -- -- 250 -- 167
Changes in operating assets and liabilities:
Accounts receivable................................... (917) (5,966) (7,036) (541) (6,348)
Prepaid expenses and other............................ (536) (194) (2,716) (514) (246)
Accounts payable and accrued expenses................. 2,996 547 3,145 348 3,472
Unearned revenue and deferred maintenance............. (1,238) 1,751 2,633 419 5,388
-------- ------- ------- ------- --------
Net cash provided by (used for) operating
activities...................................... (8,378) (8,679) 1,400 654 11,002
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment...................... (2,529) (4,878) (4,198) (2,074) (3,865)
Purchase of long-term investments....................... -- -- (3,000) (1,500) --
Increase in other assets................................ -- -- (237) (139) (90)
Purchase of short-term investments...................... (2,112) (796) -- -- (18,823)
Maturity of short-term investments...................... 196 2,112 796 796 --
-------- ------- ------- ------- --------
Net cash used for investing activities............ (4,445) (3,562) (6,639) (2,917) (22,778)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale/leaseback............................ -- 987 -- -- --
Net change in restricted cash........................... -- (1,400) 1,400 1,400 --
Proceeds from borrowings, net........................... -- 2,651 821 1,095 (324)
Payments on capital lease obligations................... (274) (378) (913) (425) (416)
Proceeds from issuance of common stock, net............. 21,333 1,050 57,532 55,455 4,373
Proceeds from issuance of preferred stock............... 5,061 -- -- -- --
-------- ------- ------- ------- --------
Net cash provided by financing activities......... 26,120 2,910 58,840 57,525 3,633
Net increase (decrease) in cash and cash equivalents...... 13,297 (9,331) 53,601 55,262 (8,143)
Cash and cash equivalents, beginning of period............ 4,311 17,608 8,277 8,277 61,878
-------- ------- ------- ------- --------
Cash and cash equivalents, end of period.................. $ 17,608 $ 8,277 $61,878 $63,539 $ 53,735
======== ======= ======= ======= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest.................................. $ 86 $ 108 $ 394 $ 172 $ 177
Cash paid for income taxes.............................. 66 156 428 84 431
Prepaids and other assets acquired through non-monetary
transactions.......................................... -- -- 1,250 -- --
Investments acquired through non-monetary
transactions.......................................... -- -- 4,025 1,250 --
Unearned revenue and deferred maintenance from non-
monetary transactions................................. -- -- 2,358 219 --
Equipment acquired under capital leases................. 380 1,165 316 215 --
Long-term investment acquired in exchange for common
stock................................................. -- -- 1,322 -- --
Deferred compensation on stock options.................. 1,510 -- 240 -- --
Deferred compensation forfeited due to voluntary
terminations.......................................... -- -- 693 693 --
Net unrealized gain on long-term investments............ -- -- 3,198 -- 10,045
Contributed capital -- income tax benefit from stock
option exercises...................................... -- -- -- -- 6,167
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 67

BROADVISION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998, AND JUNE 30, 1998 AND 1999
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTH PERIODS
ENDED JUNE 30, 1998 AND 1999, IS UNAUDITED)

NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

BroadVision, Inc. (the "Company") develops, markets and supports
application software solutions for one-to-one relationship management across the
extended enterprise. These solutions enable businesses to use the Internet as a
platform to conduct electronic commerce, offer online customer self-service and
support, deliver targeted information and provide online financial services.
Each of these capabilities can be provided to all constituents of the extended
enterprise, including: customers, suppliers, partners, distributors and
employees. The BroadVision One-To-One product suite allows businesses to tailor
Web site content to the needs and interests of individual users by personalizing
each visit on a real-time basis. The Company's applications interactively
capture Web site visitor profile information, organize the enterprise's content,
target that content to each visitor based on easily constructed business rules
and execute transactions.

BASIS OF PRESENTATION AND USE OF ESTIMATES

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The preparation
of consolidated financial statements in conformity with generally accepted
accounting principles requires management to make certain assumptions and
estimates that affect reported amounts of assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. The actual results could differ from those
estimates.

REVENUE RECOGNITION

The Company's revenue recognition policies are in accordance with Statement
of Position ("SOP") 97-2, Software Revenue Recognition, as amended by SOP 98-4,
which was adopted by the Company effective January 1, 1998. There was no
material change to the Company's accounting for revenues as a result of the
adoption of SOP 97-2, as amended. In general, software license revenues are
recognized when a non-cancelable license agreement has been signed and the
customer acknowledges an unconditional obligation to pay, the software product
has been delivered, there are no uncertainties surrounding product acceptance,
the fees are fixed and determinable, and collection is considered probable;
professional services revenues are recognized as such services are performed;
and maintenance revenues, including revenues bundled with software agreements
which entitle the customers to technical support and future unspecified
enhancements to the Company's products, are deferred and recognized ratably over
the related contract period, generally twelve months. Revenues recognized from
multiple-element software arrangements are allocated to each element of the
arrangement based on the fair values of the elements, such as software products,
upgrades, enhancements, post contract customer support, installation, or
training. The determination of fair value is based on objective evidence which
is specific to the Company. If such evidence of fair value for each element of
the arrangement does not exist, all revenue from the arrangement is deferred
until such time that evidence of fair value does exist or until all elements of
the arrangement are delivered.

The Company records unearned revenue for software arrangements when cash
has been received from the customer and the arrangement does not qualify for
revenue recognition under

F-7
<PAGE> 68
BROADVISION, INC. AND SUBSIDIARIES

the Company's revenue recognition policy. The Company records accounts
receivable for software arrangements when the arrangement qualifies for revenue
recognition and cash or other consideration has not been received from the
customer.

In December 1998, AcSEC issued SOP 98-9 Software Revenue Recognition, With
Respect to Certain Transactions, which requires recognition of revenue using the
"residual method" in a multiple-element arrangement when fair value does not
exist for one or more of the delivered elements in the arrangement. Under the
"residual method", the total fair value of the undelivered elements is deferred
and subsequently recognized in accordance with SOP 97-2. The Company does not
expect a material change to its accounting for revenues as a result of the
provisions of SOP 98-9.

RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS

Development costs incurred in the research and development of new software
products are expensed as incurred until technological feasibility in the form of
a working model has been established at which time such costs are capitalized,
subject to recoverability. Products are made available for limited release,
concurrent with the achievement of technological feasibility. Accordingly,
software development costs incurred subsequent to the establishment of
technological feasibility have not been significant, and the Company has not
capitalized any software development costs to date.

PREPAID ROYALTIES

Prepaid royalties relating to purchased software to be incorporated and
sold with the Company's software products are amortized as a cost of revenue
either on a straight-line basis over the remaining term of the royalty agreement
or on the basis of projected product revenues, whichever results in greater
amortization.

CASH EQUIVALENTS

The Company considers all debt securities with remaining maturities of
three months or less at the date of purchase to be cash equivalents. The
Company's cash equivalents consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30,
1996 1997 1998 1999
------- ------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Money market funds.............................. -- $7,708 $48,900 $30,790
Commercial paper................................ $16,729 -- 11,000 19,991
------- ------ ------- -------
$16,729 $7,708 $59,900 $50,781
======= ====== ======= =======
</TABLE>

SHORT-TERM INVESTMENTS

The Company's short-term investments consisted primarily of debt
securities. They have been classified as available-for-sale and carried at
amortized cost which approximates fair value. As of December 31, 1996,
short-term investments consisted principally of commercial paper. As of December
31, 1997, short-term investments consisted of a one-year certificate of deposit
maintained with the Company's commercial bank as a guarantee for a standby
letter of credit

F-8
<PAGE> 69
BROADVISION, INC. AND SUBSIDIARIES

issued by the bank in favor of the Company's landlord. As of June 30, 1999,
short-term investments consisted of $8,694,000 of debt securities with
maturities of approximately one year and $10,129,000 of mutual bond funds.

CONCENTRATIONS OF CREDIT RISK

Financial assets that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents,
short-term investments, and trade accounts receivable. The Company's cash, cash
equivalents and short-term investments are held with a commercial bank. The
Company markets and sells its products throughout the world and performs ongoing
credit evaluations of its customers. The Company generally does not require
collateral on accounts receivable as the majority of its customers are large,
well-established companies. The Company maintains reserves for potential credit
losses but historically has not experienced any significant losses related to
individual customers or groups of customers in any particular industry or
geographic area.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash equivalents, short-term
investments, accounts receivable, accounts payable and debt. The Company does
not have any derivative financial instruments. The Company believes the reported
carrying amounts of its financial instruments approximates fair value, based
upon the short maturity of cash equivalents, short-term investments, accounts
receivable and payable, and based on the current rates available to the Company
on similar debt issues.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated on a
straight-line basis over their estimated useful lives (two to five years).
Leasehold improvements are amortized over the corresponding lease term or their
estimated useful lives, whichever is shorter.

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

LONG-TERM INVESTMENTS

As of December 31, 1998 and June 30, 1999, the Company's long-term
investments consisted of investments in nonmarketable equity securities and an
investment in marketable equity securities. The Company currently has no plans
or intentions to dispose of the investments within one year of June 30, 1999.
Accordingly, the investments have been classified as long term. The Company
accounts for its investments in nonmarketable equity securities based on the
cost method as the Company does not have the ability to significantly influence
the operating and financial policies of the investees. Any decline in value,
which is other than a temporary decline, is charged immediately to earnings in
the period in which the impairment occurs. The carrying value of the investments
in nonmarketable equity securities amounted to
F-9
<PAGE> 70
BROADVISION, INC. AND SUBSIDIARIES

$3,000,000 at December 31, 1998. The Company classifies its investment in
marketable equity securities as available for sale. Accordingly, the investment
is recorded at its fair value with any unrealized gains or losses reported as
accumulated other comprehensive income in stockholders' equity and changes in
the unrealized gain or loss are reported as other comprehensive income. Any
decline in value, which is other than a temporary decline, is charged
immediately to earnings in the period in which the impairment occurs. As of
December 31, 1998, the Company's investment in marketable equity securities had
a fair value of $8,546,000, a cost basis of $5,348,000, and an unrealized gain
of $3,198,000. As of June 30, 1999, the Company's investment in marketable
equity securities had a fair value of $25,286,000, a cost basis of $5,348,000,
and an unrealized gain of $19,938,000.

INCOME TAXES

The Company utilizes the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are established to recognize the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply in
the years in which temporary differences are expected to be recovered or
settled. The effects on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

EMPLOYEE STOCK OPTION AND PURCHASE PLANS

The Company accounts for employee stock-based awards in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. As such, compensation
expense is recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. Pursuant to Statement of Financial
Accounting Standard ("SFAS") No. 123, Accounting for Stock-Based Compensation,
the Company discloses the pro forma effects of using the fair value method of
accounting for stock-based compensation arrangements.

PER SHARE INFORMATION

Basic earnings (loss) per share is computed using the weighted-average
number of shares of common stock outstanding. Diluted earnings (loss) per share
is computed using the weighted-average number of shares of common stock
outstanding and, when dilutive, common equivalent shares from outstanding stock
options and warrants using the treasury stock method.

Excluded from the computation of diluted earnings per share for the year
ended December 31, 1996, are options to acquire 1,522,000 shares of Common Stock
with a weighted-average exercise price of $1.13 and warrants to acquire 13,000
shares of Common Stock with a weighted-average exercise price of $2.00 because
their effects would be anti-dilutive. Excluded from the computation of diluted
earnings per share for the year ended December 31, 1997, are options to acquire
3,702,000 shares of Common Stock with a weighted-average exercise price of $4.41
and warrants to acquire 93,750 shares of Common Stock with a weighted-average
exercise

F-10
<PAGE> 71
BROADVISION, INC. AND SUBSIDIARIES

price of $6.16 because their effects would be anti-dilutive. The following table
sets forth the basic and diluted earnings (loss) per share computational data
for the periods presented.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -----------------
1996 1997 1998 1998 1999
-------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net income (loss) for basic and
diluted earnings (loss) per share... $(10,145) $(7,373) $ 4,039 $ 194 $ 6,252
======== ======= ======= ======= =======
Weighted-average common shares
outstanding utilized for basic
earnings (loss) per share........... 18,815 20,208 23,346 22,244 24,886
Weighted-average common equivalent
shares outstanding:
Employee common stock options.... --(1) --(1) 2,288 2,502 3,030
Common stock warrant............. --(1) --(1) 19 73 30
-------- ------- ------- ------- -------
Total weighted-average common
and common equivalent shares
outstanding utilized for
diluted earnings (loss) per
share....................... 18,815 20,208 25,653 24,819 27,946
======== ======= ======= ======= =======
Basic earnings (loss) per share....... $ (0.54) $ (0.36) $ 0.17 $ 0.01 $ 0.25
======== ======= ======= ======= =======
Diluted earnings (loss) per share..... $ (0.54) $ (0.36) $ 0.16 $ 0.01 $ 0.22
======== ======= ======= ======= =======
</TABLE>

- ---------------
(1) The Company incurred a net loss for the indicated period. Accordingly,
common equivalent shares are excluded from the diluted loss per share
calculation because they are antidilutive.

FOREIGN CURRENCY TRANSACTIONS

The functional currency of the Company's foreign subsidiaries is the U.S.
dollar. Resulting foreign exchange gains and losses are included in the
consolidated results of operations and, to date, have not been significant.

COMPREHENSIVE INCOME (LOSS)

The Company adopted SFAS No. 130, Reporting Comprehensive Income effective
January 1, 1998. SFAS No. 130 establishes standards for the reporting and
disclosure of comprehensive income (loss) and its components. Comprehensive
income (loss) includes all changes in equity during a period except those
resulting from investments by or distributions to owners.

The Company did not have any significant components of other comprehensive
loss for the years ended December 31, 1996 and 1997 and, thus, the comprehensive
loss is the same as net loss for those periods. Comprehensive income for the
year ended December 31, 1998 was $7,237,000. The Company's only component of
accumulated other comprehensive income and other comprehensive income as of and
for the year ended December 31, 1998, and as of and for the six months ended
June 30, 1999, related to the unrealized gain on available-for-sale

F-11
<PAGE> 72
BROADVISION, INC. AND SUBSIDIARIES

investments. As a result of unrecognized tax benefits represented by a valuation
allowance for deferred tax assets, no incremental tax effects were attributed to
unrealized gain for the year ended December 31, 1998. Accordingly, the
unrealized gain is the same on a pre-tax and net of tax basis. The unrealized
gain on available-for-sale investments for the six months ended June 30, 1999,
has been reported net of taxes in the amount of $6,695,000.

RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the
current period presentation.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, the accompanying
unaudited consolidated financial statements have been prepared on the same basis
as the audited consolidated financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for the fair
presentation of the Company's financial position as of June 30, 1999, and the
results of its operation and its cash flows for the six-month periods ended June
30, 1998 and 1999.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 137, effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. Accordingly,
the Company will adopt SFAS No. 133 beginning on January 1, 2001. SFAS No. 133,
as amended, establishes standards for the accounting and reporting of derivative
instruments and hedging activities, including certain derivative instruments
embedded in other contracts. Under SFAS No. 133, entities are required to carry
all derivative instruments at fair value on their balance sheets. The accounting
for changes in the fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
activity and the underlying purpose for it. The Company does not believe that
the adoption of SFAS No. 133 will have a significant impact on the Company's
consolidated financial statements or related disclosures.

NOTE 2 -- PROPERTY AND EQUIPMENT (IN THOUSANDS):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1996 1997 1998 1999
------ ------- ------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Furniture and fixtures........................... $ 539 $ 636 $1,001 $ 1,164
Computer and software............................ 3,210 5,458 8,662 12,263
Leasehold improvements........................... 138 2,780 3,725 3,827
------ ------- ------ -------
3,887 8,874 13,388 17,254
Less accumulated depreciation and amortization... (863) (2,407) (5,354) (7,276)
------ ------- ------ -------
$3,024 $ 6,467 $8,034 $ 9,978
====== ======= ====== =======
</TABLE>

F-12
<PAGE> 73
BROADVISION, INC. AND SUBSIDIARIES

As of December 31, 1996, 1997 and 1998, and June 30, 1999, leased equipment
totaled approximately $1,105,000, $2,256,000, $2,572,000, and $2,572,000,
respectively. Accumulated amortization for leased equipment totaled
approximately $355,000, $927,000, $1,750,000, and $2,070,000 as of December 31,
1996, 1997 and 1998, and June 30, 1999, respectively.

NOTE 3 -- ACCRUED EXPENSES (IN THOUSANDS):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1996 1997 1998 1999
------ ------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Employee benefits.................................... $ 254 $ 420 $ 678 $1,008
Commissions and bonuses.............................. 696 833 2,013 2,526
Taxes payable........................................ 129 366 785 1,173
Other................................................ 1,447 549 1,457 2,605
------ ------ ------ ------
$2,526 $2,168 $4,933 $7,312
====== ====== ====== ======
</TABLE>

NOTE 4 -- DEBT

As of December 31, 1998, and June 30, 1999, the Company has a credit
facility with a commercial lender which included outstanding borrowings of
$3,472,000 and $3,148,000, respectively, under a note payable. Borrowings bear
interest at the bank's prime rate (7.75% as of December 31, 1998 and June 30,
1999). Principal and interest is due in consecutive monthly payments through
maturity based on the term of the facility. Principal payments of $548,000 are
due annually from 1999 through 2004 with a final payment of $183,000 due in
2005. Available credit under the Company's credit facilities include a term debt
credit facility of $1,000,000 and a revolving line of credit that provides for
up to $2,300,000 of total borrowings (based on eligible accounts receivable).

During the six months ended June 30, 1999, the Company's commercial lender
increased its term debt and revolving line of credit facilities to provide for
total borrowings of up to $3,000,000 and $5,000,000, respectively. As of
December 31, 1998 and June 30, 1999, the Company has outstanding commitments
totaling $2,196,000 and $2,822,000, respectively, in the form of standby letters
of credit under its revolving line of credit facility (see Note 6).

The credit facility includes covenants which impose certain restrictions on
the payment of dividends and other distributions and requires the Company to
maintain monthly financial covenants, including a minimum quick ratio, tangible
net worth ratio and minimum cash reserves. The minimum cash reserves covenant is
replaced with a minimum debt service coverage ratio upon six consecutive
quarters of profitability. Borrowings are collateralized by a security interest
in substantially all of the Company's owned assets. The Company was in
compliance with all of its financial covenants as of December 31, 1998 and June
30, 1999.

F-13
<PAGE> 74
BROADVISION, INC. AND SUBSIDIARIES

NOTE 5 -- INCOME TAXES

Income before taxes includes losses from foreign operations of
approximately $986,000, $1,567,000 and $2,906,000, for the years ended December
31, 1996, 1997 and 1998, respectively. The components of income tax expense
(benefit) are as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------- ------- ------
<S> <C> <C> <C>
Current:
Federal................................................... $ -- $ -- $ 192
State..................................................... -- -- 13
Foreign................................................... -- -- 416
------- ------- ------
Total current..................................... $ -- $ -- $ 621
Deferred:
Federal................................................... -- -- (600)
State..................................................... -- -- (100)
------- ------- ------
Total deferred.................................... $ -- $ -- $ (700)
------- ------- ------
$ -- $ -- $ (79)
======= ======= ======
</TABLE>

The differences between the income tax expense (benefit) computed at the
federal statutory rate of 34% and the Company's actual income tax expense
(benefit) for the periods presented are as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------- ------- ------
<S> <C> <C> <C>
Expected income tax expense................................. $(3,449) $(2,507) $1,346
State income taxes, net of federal tax benefit.............. -- -- (58)
Foreign taxes............................................... -- -- 416
Alternative minimum tax..................................... -- -- 97
Utilization of net operating loss carryforwards............. -- -- (2,471)
Decrease in beginning of year valuation allowance........... (600)
Foreign losses not benefited................................ -- -- 988
Net operating losses not benefited.......................... 3,449 2,507 --
Other....................................................... -- -- 203
------- ------- ------
Income tax benefit.......................................... $ -- $ -- $ (79)
======= ======= ======
</TABLE>

F-14
<PAGE> 75
BROADVISION, INC. AND SUBSIDIARIES

The individual components of the Company's deferred tax assets and
liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Depreciation and amortization..................... $ 175 $ 401 $ 766
Accrued liabilities............................... 403 887 723
Capitalized research and development.............. 531 1,024 721
Net operating losses.............................. 5,093 6,408 6,737
Tax credits....................................... 431 1,258 2,180
------- ------- -------
Total deferred tax assets.................... 6,633 9,978 11,127
Less valuation allowance.......................... (6,633) (9,978) (9,153)
------- ------- -------
-- -- 1,974
Deferred tax liabilities -- unrealized gain on
marketable securities.......................... -- -- (1,274)
------- ------- -------
Net deferred tax assets...................... $ -- $ -- $ 700
======= ======= =======
</TABLE>

The total deferred tax assets as of December 31, 1998, include
approximately $1,900,000 relating to the tax benefit arising from the exercise
of stock options, which will be credited to stockholders' equity when recognized
in the form of a reduction of the valuation allowance. In addition, as a result
of the intraperiod income tax allocation provisions of SFAS No. 109, the
deferred tax liability related to the unrealized gain on marketable securities
decreased the valuation allowance for the deferred tax assets and was not
charged to accumulated other comprehensive income in stockholders' equity. The
Company has provided a valuation allowance for a significant portion of its
deferred tax assets as of December 31, 1998. The total valuation allowance
decreased $825,000 from December 31, 1997 to December 31, 1998, of which
$700,000 relates to a change in the beginning-of-the-year valuation allowance.

As of December 31, 1998, the Company had federal and state net operating
loss carryforwards of approximately $12,973,000 and $5,539,000, respectively,
available to offset future regular and alternative minimum taxable income. In
addition, the Company had federal and state research and development credit
carryforwards of approximately $790,000 and $666,000, respectively, available to
offset future tax liabilities.

The Company's federal net operating loss and tax credit carryforwards
expire in the years 2010 through 2012, if not utilized. The state net operating
loss carryforwards expire in the years 2000 through 2002. The state research and
development credits can be carried forward indefinitely. As of December 31,
1998, the Company's foreign subsidiaries had net operating loss carryforwards in
foreign jurisdictions of approximately $5,400,000 that can be used to offset
future foreign income. Of these losses, approximately $1,600,000 expire in the
years 2001 through 2003. Approximately $3,800,000 of these losses can be carried
forward indefinitely.

Federal and state tax laws limit the use of net operating loss
carryforwards in certain situations where changes occur in the stock ownership
of a company. The Company believes such an ownership change, as defined, may
have occurred and, accordingly, certain of the Company's federal and state net
operating loss carryforwards may be limited in their annual usage.

F-15
<PAGE> 76
BROADVISION, INC. AND SUBSIDIARIES

NOTE 6 -- COMMITMENTS

Leases

The Company entered into its headquarters facility lease during 1997. The
Company leases this and its other facilities under noncancelable operating lease
agreements expiring through the year 2007. Under the terms of the agreements,
the Company is required to pay property taxes, insurance and normal maintenance
costs. The Company also leases certain equipment under capital leases expiring
through the year 2000.

Subsequently, during March 1999, the Company entered into an operating
lease agreement through December 2007 for an additional 55,000 square feet of
office space adjacent to its corporate headquarters building in Redwood City,
California with annual rental payments of approximately $1,500,000.

A summary of future minimum lease payments is as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDED DECEMBER 31, LEASES LEASES
----------------------- ------- ---------
<S> <C> <C>
1999........................................................ $ 849 $ 2,236
2000........................................................ 330 1,734
2001........................................................ -- 1,297
2002........................................................ -- 1,346
2003........................................................ -- 1,426
Thereafter................................................ -- 6,018
------ -------
Total minimum lease payments................................ 1,179 $14,057
=======
Less amount representing imputed interest................... 200
------
Present value of net minimum capital lease payments......... 979
Less current portion........................................ (709)
------
Capital leases, excluding current portion................... $ 270
======
</TABLE>

Rental expense relating to operating leases was approximately $571,000,
$1,161,000, and $1,101,000 for the years ended December 31, 1996, 1997 and 1998,
respectively. Total minimum sublease payments to be received in the future under
noncancelable subleases total $1,093,000 through May 2000.

Standby Letter of Credit Commitments

As of December 31, 1998, the Company had outstanding commitments in the
form of two standby letters of credit. A letter for $1,400,000 was issued in
favor of the Company's equipment leasing financier on November 12, 1997; with
provisions for automatic annual renewals not to extend beyond April 10, 2000. A
letter for $796,000 was issued in favor of the Company's corporate facility
landlord to secure obligations under the Company's corporate headquarters
facility lease.

Subsequently, during March 1999, a standby letter of credit in the amount
of $498,000 was issued in favor of the Company's corporate facility landlord to
secure obligations relating to a lease for additional facility office space.

F-16
<PAGE> 77
BROADVISION, INC. AND SUBSIDIARIES

NOTE 7 -- STOCKHOLDERS' EQUITY

Convertible Preferred Stock

All outstanding convertible preferred stock and warrants to purchase
convertible preferred stock were converted to common stock and warrants to
purchase common stock at the time of the Company's initial public offering in
June 1996.

Warrants

As of December 31, 1998 and June 30, 1999, there were warrants outstanding
to acquire 60,000 shares of common stock at $8.50 per share related to a
facilities lease. At the date these warrants were granted, the fair value of
these warrants was not significant.

Common Stock

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option and stock purchase plans. Accordingly, the
Company has recorded deferred compensation of $1,510,000 and $240,000 in the
years ended December 31, 1996 and 1998, respectively, for the difference between
the exercise price and the fair value of the common stock underlying options
granted. The deferred compensation is being amortized to expense over the
vesting period of the individual options, generally five years.

As of December 31, 1998, the Company had reserved 5,975,000 shares of
common stock for issuance under its Equity Incentive Plan. As of June 30, 1999,
the Company has reserved 6,875,000 shares of common stock for issuance under its
Equity Incentive Plan.

Under this plan, the Board of Directors may grant incentive or nonqualified
stock options at prices not less than 100% or 85%, respectively, of the fair
market value of the Company's common stock, as determined by the Board of
Directors, at the date of grant. The vesting of individual options may vary but
in each case at least 20% of the total number of shares subject to options will
become exercisable per year. These options generally expire ten years after the
grant date. When an employee option is exercised prior to vesting, any unvested
shares so purchased are subject to repurchase by the Company at the original
purchase price of the stock upon termination of employment. The Company's right
to repurchase lapses at a minimum rate of 20% per year over five years from the
date the option was granted or, for new employees, the date of hire. Such right
is exercisable only within 90 days following termination of employment.
Approximately 16,000 unvested shares were repurchased by the Company during the
year ended December 31, 1998. As of December 31, 1998 and June 30, 1999, 235,515
and 234,979 shares were subject to repurchase at a weighted-average price of
$0.44 and $1.01, respectively.

As of December 31, 1998, the Company's President and Chief Executive
Officer held an option to purchase 500,000 shares of common stock at an exercise
price of $4.00 per share. The shares subject to option vest ratably on a monthly
basis over a 60-month period commencing April 1, 1995. As of December 31, 1998
and June 30, 1999, 367,000 and 416,667 shares were vested, respectively. In June
1999, the Company's President and Chief Executive Officer was granted an
additional option to purchase 500,000 shares of common stock at an exercise
price of $60.00 per share. The shares subject to the second option vest ratably
on a monthly basis over a 60-month period commencing June 23, 1999.

F-17
<PAGE> 78
BROADVISION, INC. AND SUBSIDIARIES

Activity in the Company's stock option plan is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------- SIX MONTHS ENDED
1996 1997 1998 JUNE 30, 1999
------------------- ------------------- ------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE
FIXED OPTIONS (000'S) PRICE (000'S) PRICE (000'S) PRICE (000'S) PRICE
------------- ------- --------- ------- --------- ------- --------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period.... 1,924 $0.13 2,393 $2.75 2,907 $4.50 3,498 $ 8.66
Granted............................... 1,849 3.98 1,346 6.69 1,588 13.67 1,511 46.06
Exercised............................. (1,092) 0.18 (255) 0.31 (577) 3.62 (523) 4.64
Forfeited............................. (288) 2.83 (577) 4.19 (420) 5.73 (194) 12.64
------ ----- ----- -----
Outstanding at end of period.......... 2,393 $2.75 2,907 $4.50 3,498 $8.66 4,292 $22.13
====== ===== ===== =====
Options vested at end of period....... 309 $0.22 641 $2.64 803 $4.28 808 $ 6.22
====== ===== ===== =====
Weighted-average fair value of options
granted during the period........... $2.29 $6.70 $8.89 $38.84
===== ===== ===== ======
</TABLE>

The following table summarizes stock options outstanding as of December 31,
1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------- OPTIONS VESTED
WEIGHTED-AVG. -----------------------------
NUMBER REMAINING NUMBER
RANGE OF OUTSTANDING CONTRACTUAL LIFE WEIGHTED-AVG. EXERCISABLE WEIGHTED-AVG.
EXERCISE PRICES (000'S) IN YEARS EXERCISE PRICE (000'S) EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.06 - $ 5.31................ 646 7.15 $ 0.93 348 $ 0.65
5.50 - 6.94................ 788 7.40 5.99 206 5.90
7.00 - 7.81................ 762 8.25 7.42 192 7.24
7.88 - 12.63................ 623 9.05 11.28 48 8.25
12.94 - 27.81................ 679 9.57 18.09 9 24.18
----- ---
$ 0.06 - $27.81................ 3,498 8.25 $ 8.66 803 $ 4.28
===== ===
</TABLE>

The following table summarizes stock options outstanding as of June 30,
1999 (unaudited):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------------- OPTIONS VESTED
WEIGHTED-AVG. -------------------------------
NUMBER REMAINING WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING CONTRACTUAL LIFE AVG. EXERCISABLE AVG.
EXERCISE PRICES (000'S) IN YEARS EXERCISE PRICE (000'S) EXERCISE PRICE
--------------- ------------- ---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.06 - $ 6.50............ 925 7.22 $ 3.72 418 $3.02
6.63 - 11.00............ 938 7.97 7.90 284 7.50
11.63 - 23.88............ 864 8.94 15.40 97 14.49
24.00 - 42.75............ 979 9.71 37.19 9 26.47
51.88 - 60.00............ 586 9.98 58.73 -- --
----- ---
$ 0.06 - $60.00............ 4,292 8.67 $22.13 808 $6.22
===== ===
</TABLE>

F-18
<PAGE> 79
BROADVISION, INC. AND SUBSIDIARIES

The Company grants options outside of the Company's stock option plan. A
summary of options outside of the plan is presented below:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------ SIX MONTHS ENDED
1996 1997 1998 JUNE 30, 1999
-------------------- -------------------- -------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
FIXED OPTIONS (000'S) PRICE (000'S) PRICE (000'S) PRICE (000'S) PRICE
------------- ------- ---------- ------- ---------- ------- ---------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period................... 20 $0.20 711 $3.52 795 $4.07 739 $ 4.23
Granted.................... 727 3.46 154 5.50 -- -- 153 44.20
Exercised.................. (20) 0.20 -- -- (56) 1.87 (32) 6.74
Forfeited.................. (16) 0.80 (70) 0.80 -- -- -- --
--- --- --- ----
Outstanding at end of
period................... 711 $3.52 795 $4.07 739 $4.23 860 $11.26
=== === === ====
Options vested at end of
period................... 197 $4.35 395 $3.60 497 $4.01 539 $ 3.91
=== === === ====
Weighted-average fair value
of options granted during
the period............... $2.03 $5.50 $ -- $35.56
===== ===== ===== ======
</TABLE>

The 739,000 and 860,000 options outstanding as of December 31, 1998 and
June 30, 1999, respectively, have exercise prices ranging from $0.80 to $61.31
and a weighted-average contractual life of 6.22 and 5.88 years, respectively. As
of December 31, 1998 and June 30, 1999, no shares were subject to repurchase.

Employee Stock Purchase Plan

As of December 31, 1998, the Company had reserved 800,000 shares for
issuance under the Company's Employee Stock Purchase Plan (the "Purchase Plan").
As of June 30, 1999, the Company has reserved 1,100,000 shares for issuance
under the Company's Purchase Plan. The Purchase Plan permits eligible employees
to purchase common stock equivalent to a percentage of the employee's earnings,
not to exceed 15%, at a price equal to 85% of the fair market value of the
common stock at dates specified by the Board of Directors as provided in the
Plan. Under the Purchase Plan, the Company issued 242,000, 228,000 and 157,000
shares to employees in the years ended December 31, 1997 and 1998 and in the six
month period ended June 30, 1999, respectively.

Under SFAS No. 123, compensation cost is recognized for the fair value of
the employees' purchase rights, which was estimated using the Black-Scholes
option pricing model with no expected dividends, an expected life of 7 months,
and the following weighted-average assumptions:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------ SIX MONTHS ENDED
1996 1997 1998 JUNE 30, 1999
-------- -------- -------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Risk-free interest rate............. 6.50% 5.05% 4.48% 4.82%
Volatility.......................... 60% 67% 112% 104%
</TABLE>

F-19
<PAGE> 80
BROADVISION, INC. AND SUBSIDIARIES

The weighted-average fair value of the purchase rights granted in the years
ended December 31, 1996, 1997, 1998, and the six month period ended June 30,
1999, was $2.61, $2.16, $4.18 and $9.71, respectively.

Pro Forma Disclosure

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with no expected dividends and the
following weighted-average assumptions:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------- SIX MONTHS ENDED
1996 1997 1998 JUNE 30, 1999
--------- --------- --------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Expected life....................... 5.0 years 2.8 years 3.0 years 3.7 years
Risk-free interest rate............. 6.50% 5.91% 4.70% 5.75%
Volatility.......................... 60% 67% 112% 104%
</TABLE>

Had compensation cost for the Company's stock option plan and stock
purchase plan been determined consistent with SFAS No. 123, the Company's
reported net income (loss) and net income (loss) per share would have been
changed to the amounts indicated below (in thousands except per share data):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------- SIX MONTHS ENDED
1996 1997 1998 JUNE 30, 1999
-------- ------- ------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss):
As reported.......................... $(10,145) $(7,373) $ 4,039 $ 6,252
Pro forma............................ $(11,270) $(9,551) $(1,885) $(1,508)
Basic net income (loss) per share:
As reported.......................... $ (0.54) $ (0.36) $ 0.17 $ 0.25
Pro forma............................ $ (0.60) $ (0.47) $ (0.08) $ (0.06)
Diluted net income (loss) per share:
As reported.......................... $ (0.54) $ (0.36) $ 0.16 $ 0.22
Pro forma............................ $ (0.60) $ (0.47) $ (0.08) $ (0.06)
</TABLE>

NOTE 8 -- EMPLOYEE BENEFIT PLAN

In November 1994, the Company adopted a 401(k) employee retirement plan
under which eligible employees may contribute up to 20% of their annual
compensation, subject to a limitation of $10,000 in the year ended December 31,
1998. Employees vest immediately in their contributions and earnings thereon.
The plan allows for, but does not require, Company matching contributions. As of
December 31, 1998 and June 30, 1999, the Company has not made any such matching
contributions.

NOTE 9 -- GEOGRAPHIC, SEGMENT AND SIGNIFICANT CUSTOMER INFORMATION

The Company adopted the provisions of SFAS No. 131, Disclosure about
Segments of an Enterprise and Related Information, during 1998. SFAS No. 131
establishes standards for the reporting by public business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The method for determining what information

F-20
<PAGE> 81
BROADVISION, INC. AND SUBSIDIARIES

to report is based on the way that management organizes the operating segments
within the Company for making operational decisions and assessments of financial
performance. The Company's chief operating decision maker is considered to be
the Company's Chief Executive Officer ("CEO"). The CEO reviews financial
information presented on a consolidated basis accompanied by disaggregated
information about revenues by geographic region and by product for purposes of
making operating decisions and assessing financial performance.

The disaggregated financial information on a product basis reviewed by the
CEO is as follows (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Software licenses:
One-To-One Enterprise...................... $ 7,464 $14,479 $17,799 $ 8,354 $ 4,586
One-To-One Packaged Solutions.............. -- 4,494 18,268 6,943 23,681
Services..................................... 2,819 5,981 9,739 4,269 9,063
Maintenance.................................. 599 2,151 5,105 1,898 4,610
------- ------- ------- ------- -------
Total Company.............................. $10,882 $27,105 $50,911 $21,464 $41,940
======= ======= ======= ======= =======
</TABLE>

The Company sells its products and provides services worldwide through a
direct sales force, independent distributors, value-added resellers, and system
integrators. It currently operates in three primary regions, the Americas which
includes North and South America, Europe which includes Eastern and Western
Europe and the Middle East, and Asia/Pacific which includes the Pacific Rim and
the Far East. Information regarding the business operations of these regions are
as follows (In thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Americas................................... $ 4,406 $12,872 $29,330 $11,815 $29,746
Europe..................................... 3,280 10,850 16,944 6,804 7,637
Asia/Pacific............................... 3,196 3,383 4,637 2,845 4,557
------- ------- ------- ------- -------
Total Company.............................. $10,882 $27,105 $50,911 $21,464 $41,940
======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30,
1996 1997 1998 1999
------- ------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Identifiable assets:
Americas.......................................... $28,093 $25,362 $ 99,343 $134,748
Europe............................................ 366 822 1,754 1,880
Asia/Pacific...................................... 471 355 465 570
------- ------- -------- --------
Total Company..................................... $28,930 $26,539 $101,562 $137,198
======= ======= ======== ========
</TABLE>

F-21
<PAGE> 82
BROADVISION, INC. AND SUBSIDIARIES

During the year ended December 31, 1996, approximately 10% of the Company's
revenues were attributable to one customer. During the year ended December 31,
1997, approximately 11% of the Company's revenues were attributable to one
customer. During the year ended December 31, 1998, no customer accounted for 10%
or more of the Company's revenues. During the six months ended June 30, 1999,
one customer accounted for approximately 11% of the Company's total revenues.

F-22
<PAGE> 83

UNDERWRITING

BroadVision and the underwriters for the U.S. offering (the "U.S.
Underwriters") named below have entered into an underwriting agreement with
respect to the shares being offered in the United States. Subject to certain
conditions, each U.S. Underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., BancBoston
Robertson Stephens Inc., ABN AMRO Incorporated and Banc of America Securities
LLC are the representatives of the U.S. Underwriters.

<TABLE>
<CAPTION>
U.S. Underwriters Number of Shares
----------------- ----------------
<S> <C>
Goldman, Sachs & Co. .....................................
BancBoston Robertson Stephens Inc. .......................
ABN AMRO Incorporated.....................................
Bank of America Securities LLC............................
--------
Total...........................................
========
</TABLE>

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

If the U.S. Underwriters sell more shares than the total number set forth
in the table above, the U.S. Underwriters have an option to buy up to an
additional shares from BroadVision to cover such sales. They may
exercise that option for 30 days. If any shares are purchased pursuant to this
option, the U.S. Underwriters will severally purchase shares in approximately
the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the U.S. Underwriters by BroadVision. Such amounts
are shown assuming both no exercise and full exercise of the U.S. Underwriters'
option to purchase additional shares.

<TABLE>
<CAPTION>
Paid by BroadVision
-------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share................................................... $ $
Total....................................................... $ $
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial price to public. Any such securities
dealers may resell any shares purchased from the underwriters to certain other
brokers or dealers at a discount of up to $ per share from the initial price
to public. If all the shares are not sold at the initial price to public, the
representatives may change the offering price and the other selling terms.

BroadVision has entered into an underwriting agreement with the
underwriters for the sale of shares outside of the United States.
The terms and conditions of both offerings are the same and the sale of shares
in both offerings are conditioned on each other. Goldman, Sachs & Co. oHG,
BancBoston Robertson Stephens International Ltd., ABN AMRO Rothschild and Bank
of America International Limited are representatives of the underwriters for the
international offering outside of the United States (the "International
Underwriters"). BroadVision has granted the International Underwriters a similar
option to purchase up to an aggregate of an additional shares.
Shares sold by the International Underwriters will be priced in euros. The
initial price to public set forth on the cover of this prospectus will be
translated into euros at the rate of $1.00 = E , the noon buying rate in
The City of New York for cable transfers in foreign currencies certified by the
Federal Reserve Bank of New York for customs purposes (the "Noon Buying Rate").
On September 3, 1999, the Noon Buying Rate for the euro was E 1.00 = $1.0605.

U-1
<PAGE> 84

The underwriters for both of the offerings have entered into an agreement
in which they have agreed to restrictions on where and to whom they and any
dealer purchasing from them may offer shares as a part of the distribution of
the shares. The underwriters also have agreed that they may sell shares among
each of the underwriting groups.

BroadVision and holders of approximately shares of the common
stock have agreed with the underwriters not to dispose of or hedge any of their
common stock or securities convertible into or exchangeable for shares of common
stock during the period from the date of this prospectus continuing through the
date 90 days after the date of this prospectus, except with the prior written
consent of the representatives. This agreement does not apply to any existing
employee benefit plans, or shares issued in connection with certain acquisitions
or in conjunction with an agreement involving a technical manufacturing or
marketing collaboration, provided that such shares (i) do not represent, in the
aggregate, more than 15% of BroadVision's then outstanding shares of stock, (ii)
are issued in a transaction not requiring registration under the Act and (iii)
are subject to these same share transfer restrictions. In addition, BroadVision
and its Chief Executive Officer, who holds an aggregate of 6,375,000 shares of
common stock, will agree to a lock-up with the Deutsche Borse AG, pursuant to
the rules of admission of the Neuer Markt segment of the Frankfurt Stock
Exchange. Pursuant to this lock-up, BroadVision and its Chief Executive Officer
may not, for a period of six months from the date of this prospectus, offer or
sell shares of the Company's common stock, or take other measures economically
equivalent to a sale of the common stock. The Frankfurt Stock Exchange may grant
exemptions from the lock-up under certain circumstances.

In connection with the offerings, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offerings.
Stabilizing transactions consist of bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offerings are in progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market and on the Neuer Markt of the Frankfurt Stock Exchange, in the
over-the-counter market or otherwise.

BroadVision estimates that its share of the total expenses for the
offering, excluding underwriting discounts and commissions, will be
approximately $700,000.

BroadVision has agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.

This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the underwriters in the offering being made outside of the
United States, to persons located in the United States.

U-2
<PAGE> 85

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

No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 6
Special Note Regarding Forward-
Looking Statements................. 16
Use of Proceeds...................... 17
Price Range of Common Stock.......... 17
Dividend Policy...................... 17
Capitalization....................... 18
Selected Consolidated Financial
Data............................... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 20
Business............................. 34
Management........................... 49
Principal Stockholders............... 53
Description of Capital Stock......... 55
Legal Matters........................ 58
Experts.............................. 58
Available Information................ 59
Additional Information............... 59
Incorporation of Certain Documents by
Reference.......................... 59
Index to Financial Statements........ F-1
Underwriting......................... U-1
</TABLE>

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

750,000 Shares
BROADVISION, INC.
Common Stock
----------------------

[LOGO]

----------------------
GOLDMAN, SACHS & CO.

BANCBOSTON
ROBERTSON STEPHENS

ABN AMRO ROTHSCHILD
A DIVISION OF ABN AMRO INCORPORATED

BANC OF AMERICA
SECURITIES LLC

Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 86

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the common stock being registered. All the amounts shown are estimates,
except for the registration fee and the NASD filing fee.

<TABLE>
<S> <C>
SEC Registration fee........................................ $ 27,723
NASD filing fee............................................. 9,033
Nasdaq National Market Additional Listing Fee............... 15,250
Accounting fees and expenses................................ 175,000
Legal fees and expenses..................................... 300,000
Blue Sky fees and expenses (including counsel fees)......... 5,000
Printing and engraving expenses............................. 150,000
Transfer Agent and Registrar fees and expenses.............. 5,000
Miscellaneous............................................... 12,994
--------
Total............................................. $700,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
a court to award or a corporation's board of directors to grant indemnification
to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. The
Registrant's Restated Certificate and Restated Bylaws provide for mandatory
indemnification of its directors and permissive indemnification of officers,
employees and other agents to the maximum extent permitted by the DGCL. The
Registrant has entered into indemnification agreements with its directors. The
indemnification agreements provide the Registrant's directors with further
indemnification to the maximum extent permitted by the DGCL. The Company also
has obtained directors and officers insurance to insure its directors and
officers against certain liabilities, including liabilities under the securities
laws.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement*
5.1 Opinion of Cooley Godward LLP*
23.1 Report on Financial Statement Schedule and Consent of KPMG
LLP (included on page II-4)
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1)*
24.1 Power of Attorney (included on signature page)
</TABLE>

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

* To be filed by amendment.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a)

II-1
<PAGE> 87

or 15(d) of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 15 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) for purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 197(h) under the Securities Act shall be deemed to be a part
of this Registration Statement as of the time it was declared
effective.

(2) for the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

II-2
<PAGE> 88

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Redwood City, State of California, on September 3,
1999.

BROADVISION, INC.

By: /s/ PEHONG CHEN
------------------------------------
Pehong Chen
Chairman of the Board, President
and Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Pehong Chen and Randall C. Bolten and
each or any one of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments and registration statements filed pursuant to Rule
462) to this Registration Statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ PEHONG CHEN Chairman of the Board, President September 3, 1999
- ----------------------------------- and Chief Executive Officer
Pehong Chen (Principal Executive Officer)

/s/ RANDALL C. BOLTEN Vice President, Operations and September 3, 1999
- ----------------------------------- Chief Financial Officer (Principal
Randall C. Bolten Financial and Accounting Officer)

/s/ DAVID L. ANDERSON Director September 3, 1999
- -----------------------------------
David L. Anderson

/s/ YOGEN K. DALAL Director September 3, 1999
- -----------------------------------
Yogen K. Dalal

/s/ TODD A. GARRETT Director September 3, 1999
- -----------------------------------
Todd A. Garrett

/s/ KOH BOON HWEE Director September 3, 1999
- -----------------------------------
Koh Boon Hwee

/s/ CARL PASCARELLA Director September 3, 1999
- -----------------------------------
Carl Pascarella
</TABLE>

II-3
<PAGE> 89

REPORT ON FINANCIAL STATEMENT SCHEDULE AND
CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
BroadVision, Inc.:

The audits referred to in our report dated January 26, 1999, included the
related financial statement schedule as of December 31, 1996, 1997 and 1998, and
for each of the years in the three-year period ended December 31, 1998. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

We consent to the use of our reports incorporated by reference and included
herein and to the reference to our firm under the heading "Experts" in the
Prospectus.

KPMG LLP

Mountain View, California
September 2, 1999

II-4
<PAGE> 90

BROADVISION, INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
PERIOD EXPENSES DEDUCTIONS(1) END OF PERIOD
------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996................ $ -- $196 $ 5 $191
==== ==== ==== ====
Year Ended December 31, 1997................ $191 $515 $ 35 $671
==== ==== ==== ====
Year Ended December 31, 1998................ $671 $458 $341 $788
==== ==== ==== ====
</TABLE>

- ---------------
(1) Represents net charge-offs of specific receivables.

II-5
<PAGE> 91

EXHIBIT INDEX

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

* To be filed by amendment.